The Supreme Court on Monday stayed till April 18 an insolvency tribunal order that allowed a Reliance Communications unit to sell its towers and fibre assets, temporarily halting the troubled telco’s attempt to pare debt, causing its shares to fall over 5%.
The apex court stayed National Company Law Appellate Tribunal’s (NCLAT) interim order after hearing arguments by HSBC Daisy Investments and some other minority shareholders of Reliance Infratel, RCom’s tower unit, on how they will get hurt if the tower firm’s assets are sold to a third party.
On April 18, NCLAT will hear the case on Anil Ambani-led Reliance Infratel's assets sale to Mukesh Ambani’s Reliance Jio Infocomm and on allocation of proceeds.
The tribunal had last week allowed State Bank of India (SBI)-led lenders to sell any of the mortgaged assets of RCom to a third party. It, however, had directed that the funds be kept in an escrow account till the final ruling, expected on Wednesday.
HSBC Daisy-led minority shareholders, who have just over 4% stake in Reliance Infratel, challenged the ruling in Supreme Court, arguing that SBI-led lenders had no locus to sell Reliance Infratel assets. “They (the lenders) did not even file an appeal to NCLAT. So, how was an order passed allowing them to carry on asset sale?” a lawyer said, highlighting HSBC Daisy’s arguments.
RCom shares dropped 5.38% to close at Rs 21.10 apiece on the BSE on Monday, when the benchmark indices ended up marginally positive. The company had shut its wireless operations last year.
The Supreme Court decision, while stalling sale of towers and fibre housed under Reliance Infratel for a couple of days, doesn’t affect sale of RCom’s other assets such as spectrum, real estate and switching nodes, which were cleared by the top court last week.
“RCom remains confident of completion of its asset monetisation programme of approx Rs 25,000 crore within the next few weeks, in the best interests of its secured lenders,” the telco said in a notice to the stock exchanges on Monday.
In a bid to repay its 35 lenders, including SBI, and pare its Rs 45,000 crore debt, RCom had in December signed a pact to sell its wireless assets, including spectrum, nodes and tower and optic fibre assets, to Reliance Jio for about Rs 24,000 crore. The towers and optic fibre assets were valued at Rs 8,000 crore, with towers and land accounting for Rs 5,000 crore.
But, National Company Law Tribunal (NCLT) stayed the sale of towers and fibre till further orders after a challenge by the minority shareholders of Reliance Infratel on grounds their consent was not sought for the asset sale. They told NCLT last month that, if allowed, the sale would be an “oppression of a minority shareholder under Sections 397 and 398” of the Companies Act, as Reliance Infratel would become defunct.
RCom and its units then moved the Supreme Court to clear the sale. The apex court in turn asked the company and its units to move NCLAT as per procedure to get the stay on sale of towers and fibre vacated.
The telco immediately moved NCLAT, which in turn allowed sale with the condition that the funds be kept in an escrow account till April 18.
“NCLAT may determine the allocation, if any, of the sale proceeds to minority shareholders claiming an interest of approx 4% therein,” RCom said in its notice.
Based on legal advice, the company believes the claim of minority investors in the tower and fibre proceeds, which is disputed by RCom, can at best be Rs 200 - 300 crore, it said.