The board of directors of State Bank of India is understood to have voted in favour of accepting the resolution plan for Reliance Communications Limited, the now defunct company managed by Anil Ambani.
SBI had reportedly chosen Mukesh Ambani’s Reliance Jio that had bid for and is expected to win the bid to take over the tower and fibre assets of RCom. The other bidder whose bid also the SBI board has given the green signal to is UV Asset Reconstruction Company (UVARC) which will get the spectrum, real estate, enterprise and data centre businesses of RCom and Reliance Telecom.
It is understood that the final voting in the SBI board will happen on Wednesday, March 4, 2020 and then it will be over to the Committee of Creditors for their final approval for accepting the bids. SBI should be able to carry its weight at the CoC where SBI is heading the committee. Observers say at least 66% in the CoC will favour the proposal.
Interestingly, Mukesh Ambani’s Reliance Jio was to directly take over RCom earlier. However, the Department of Telecommunications imposed a condition that whatever past liabilities of RCom will have to be borne by Reliance Jio, which was not acceptable to them.
This is a NCLT-driven process where the lenders to RCom have constituted a Committee of Creditors and SBI being the lender with maximum exposure heads the CoC.
As per the reports, when the bids are all accepted and paid for, the lenders may get to recover around 35% of the amounts they were owed by the company. Some say this is far better scenario in the telecom sector when compared to another company that went under, Aircel. There the lenders could get hardly 1% of the dues, taking a 99% haircut. But then, this is only so far as the banks are concerned. It is not clear what will happen to the other creditors who have staked their claims. The total claim is said to be to the tune of ₹1.32 trillion.
Reliance Jio and UVARC will pay around 30% of their bid amount within 90 days. There may be a timeframe in place to deposit the rest. UVARC is likely to sell off the assets it takes over from RCom.