Anil’s guarantee landed him in trouble with India’s top court giving him a month’s notice to comply or face prison
NEW DELHI • Asia’s richest man Mukesh Ambani has helped his younger brother avert a stint in jail, stepping in to make an US$80 million (RM326.19 million) payment for his sibling whose telecom-to-infrastructure empire is struggling with debt.
The embattled former billionaire, Anil Ambani, thanked his brother Mukesh and sister-in-law after Anil’s Reliance Communications Ltd completed the required payment to a local unit of Ericsson AB for past maintenance services provided to his group.
Repeated failures to pay and Anil’s personal guarantee landed him in trouble in February, with India’s top court giving him a month’s notice to comply or face prison.
The last-minute twist shows family ties appear to have won out despite the brothers’ fraught relationship over more than a decade. The scions of one of India’s richest families have feuded over control of an empire left behind by their father.
After Mukesh and Anil carved up the conglomerate, the older brother’s oil and petrochemicals business flourished, while Anil’s businesses ranging from telecommunications to power and infrastructure strained under massive debt. He has fended off creditors in multiple court cases.
The younger brother’s net worth has shrunk to about US$300 million from at least US$31 billion in 2008 based on the current foreign- exchange rate, according to data compiled by Bloomberg. His stunning fall stands in contrast to the success of Mukesh, whose net worth is US$54.3 billion and has increased US$10 billion this year alone, according to the Bloomberg Billionaires Index.
Shares of RCom, as Anil’s telecommunications carrier is known, surged 10% as of 9:15am yesterday in Mumbai following the payment. Reliance Power Ltd shares gained as much as 8.6%, while Reliance Infrastructure Ltd jumped 8.2% and Reliance Capital Ltd gained almost 6%.
The bailout money was an outright grant from Anil’s elder brother, the Times of India reported, citing a person working for Anil’s group.
Thanking Mukesh and his wife Nita Ambani, Anil said he and his family were “grateful we have moved beyond the past, and are deeply grateful and touched with this gesture” and “timely support”, according to a statement issued by RCom.
RCom stock plummeted 60% in 2018 as Anil struggled to close a 2017 deal to sell spectrum, signal towers and fibre to Reliance Jio Infocomm Ltd, a new service provider controlled by Mukesh, for 173 billion rupees (RM10.23 billion).
RCom said on Monday that the two companies have mutually agreed to terminate the pact, adding RCom is committed to “a comprehensive resolution” of overall debt through India’s National Company Law Tribunal.
As regulations hindered Anil’s biggest deal, creditors such as Ericsson began demanding past dues. The Swedish equipment maker’s relentless legal pursuit led to a settlement under which RCom was to pay half of the past claims, or 5.5 billion rupees — an offer backed by a personal guarantee from Anil.
Failure to keep this promise after a personal guarantee from Anil saw the situation escalate into a contempt case, with the court eventually setting the payment deadline.
The threat of a prison term if Anil didn’t make the payment also came as a rare warning to some of India’s richest borrowers whose firms have turned defaulters over the past few years. The nation’s policymakers and courts have been cracking down on delinquency to help banks saddled with the world’s worst bad-loan ratio.
The Ambani brothers used to serve as executives at their father Dhirubhai Ambani’s company. In 2005, three years after their father’s death, the pair agreed to split the empire into two. Anil got newer businesses such as telecommunications, power generation and financial services.
But since then, Mukesh has also re-entered India’s now lucrative telecommunications sector with the creation of Reliance Jio Infocomm. His nationwide 4G network, which debuted with free services in 2016, has disrupted the industry, forcing rivals including RCom to bleed, merge or exit the business. — Bloomberg