RCom offers DAKC campus to foreign lenders

Anil Ambani-led Reliance Communications (RCom), which owes Rs 45,000 crore to banks, will reduce its debt to foreign lenders by Rs 10,000 crore by parting with its prime property at Dhirubhai Ambani Knowledge City (DAKC) in the Thane-Belpaur industrial belt in Navi Mumbai, a senior company official said.

RCom will work with the foreign lenders to sell and jointly develop the 125-acre campus at DAKC.

"We have reached an agreement with the foreign lenders for the DAKC property. This asset will be handed over to them for co-development over the next 5-6 years," Punit Garg, executive director and chief financial officer of RCom, told DNA Money.

For the domestic lenders, RCom is planning to raise Rs 17,000 crore through the sale of its assets including tower, spectrum, other real estate properties, media convergence nodes (MCN) and fibre.

The value of these assets, as vetted by third-party valuators, is Rs 36,000 crore, Garg said.

While the spectrum is worth Rs 19,000 crore, real estate properties (excluding DAKC) is Rs 10,000 crore, MCN is Rs 3,000 crore and Indian fibre Rs 4,000 crore.

"Out of these assets worth Rs 36,000 crore, we are only trying to raise Rs 17,000 crore. This is as per the plan presented to lenders," Garg said.

RCom has also proposed to convert Rs 7,100 crore of debt to 51% equity despite the market cap being at Rs 4,200 crore.

However, the bankers are yet to take a call on this proposal. "We are evaluating the proposal of the company and are yet to take a call on it," a senior banker who is part of the consortium said.

The debt-to-equity conversion value is as per the Reserve Bank of India's strategic debt restructuring (SDR) guidelines. "Since the SDR was invoked on June 2, 2017, the 10 days' average stock price prior to the reference date which comes to Rs 24.73 per share, or the break-up value which is Rs 85 per share, will have to be taken. If it's an unlisted company, it can be done at the face value of the share. We sent the lower price of these two options and which comes to Rs 7,100 crore," Garg said.

RCom shares fell 2.59% to end Friday at Rs 16.90 on the BSE.

As part of the SDR (the timeline for which will extend up to December 2018), the bankers will retain Rs 6,000 crore of debt in the company.

"We have given the banks a definitive timeline. The timeline given to lenders bankers is that all monetization initiatives will be concluded between December 2017 and March 2018. Advisors have been running the process. We will receive indicative offers for all our assets by the end of November. Binding agreements will be signed by December 2017. By the first quarter of the next calendar year, we should be able to finish off monetization and pay off all secured lenders," Garg said.

The sale of RCom's spectrum and tower business will face challenges over valuation, an analyst who tracks the telecom sector said. Incidentally, a couple of days back asset management company Brookfield Infrastructure called off its deal to acquire RCom's tower business for $200 million.

For the spectrum, Reliance Jio may be a buyer but the value is under question. "Spectrum sale may not bring in any big amount. The Tatas, after all, gave it for free to Bharti Airtel," the analyst said.

Garg, however, is optimistic. "Money will be coming in from sale of our vast spectrum reserves, including in the 850 MHz band, which is ideally suited for 4G LTE services, sale of wireless equipment sale and sale of the tower business," he said.