DEFAULT OF RCOM – COULD THIS BRING THE BROTHERS BACK TOGETHER?

By Ruma Dubey

Anil Ambani would most certainly be having some sleepless nights. Or even if he manages to sleep well, the 17 banks who have lent him money would be tossing, turning and groaning.

That Anil Ambani is entrapped under a mound of debt is not new news; we all have been mute witnesses to the way he let his ambitions rise unbridled and went on taking money from the banks; the banks too felt that it was after all an “Ambani” whose name figures amongst the richest Indians, how could he be a risk at all? And that opening up of their tijoris, only because he was an Ambani will come to haunt them now.

Reliance Communication is right on the threshold of a default- it could happen any time now. As at 31^st March 2017, the company had total gross debt of Rs.45,733 crore of which Rs.20.141 crore is foreign currency and balance is rupee loan. The immediate “danger” is the Rs.6789 crore which is due this fiscal. To tide over, even after Rcom sells its tower and wirless units, only 55% of the payment till 30^th Sept will be taken care of; what after that? What more will Anil sell?

As usual the rating agencies, true to their habit, have cried foul only after Rcom reached this brink. These rating agencies, which pride themselves on being such vigilant watchdogs, issued a warning or downgraded to “junk” only after the fire had razed the house down. What’s the point of having such watchdogs who bark fiercely and gnash their teeth in rage after the looting is all over and the house is empty? It was their duty to downgrade before a default happens, to act on foresight and not hindsight. This has surely put a lot of mutual funds and many investors who rely on these rating agencies in serious jeopardy. It was only during the past three days that all the four agencies – ICRA, CARE, Moody’s and Fitch downgraded Rcom, one after the other.

Rcom defaulting will be very BIG news compared to a Videocon and Vijay Mallya will appear like loose change. Banks which have an exposure to Rcom are SBI, Punjab National Bank, IDBI Bank, Bank of Baroda, Yes Bank, Stanchart Bank, HDFC Bank, IFCI and Deutsche Bank. There are three Chinese banks too - China Development Bank, Industrial and Commercial Bank of China and Export-Import Bank of China from whom Rcom has borrowed $925 million and the term ends in 2019. Reportedly, Rcom has approached these Chinese banks, seeking a waiver on the interest payable on loans.

What strikes as very strange here is that Mukesh Ambani, the elder brother is still the richest man in India. In our mere mortal family lives, if a younger brother is going down, irrespective of the differences, the elder brother will step in to rescue. Here, to some extent, Mukesh through Jio has given a body blow to Rcom; in fact all the telecom operators are reeling as this rich man moves to increase his market share. Yes, it is not right for one to pay for the other’s over ambitions and over leveraging but that’s how families are, isn’t it? Not all fingers of the hand are same.

Forget what happens in families like ours; take the case of Dubai and Abu Dhabi – in 2009, in a dramatic turnaround, Dubai got a $10bn bail-out from its neighbour Abu Dhabi to pay off the immediate debts. The relationship, apart from that of being rulers of UAE, sharing a legacy, Sheikh Mohammed, ruler of Dubai is father-in-law to a brother of the ruler of Abu Dhabi. Imagine the helping hand which would have come had they been blood brothers!

Well, in case of these blood brother, if emotions have run dry, at least for the sake of protecting the “Ambani” reputation and the “Reliance” name, the elder brother could step in; after all not everyone abroad knows that the one who failed was not Mukesh but Anil, the estranged brother; for them, Ambani and Reliance means one and the same and brothers – well they are blood brothers, right? Thus internationally, they will say infer that “Reliance” defaulted.

Let’s see how this saga of the Ambani brothers unfolds; it is a sad story of how money ultimately corrupts and destroys everything; what you are left with is just paper to buy things not happiness.