Bankruptcies, jail and even death: The year was bad for some Indian tycoons

For many Indian tycoons, 2019 turned woeful as lenders—empowered by the nation’s recent bankruptcy law and desperate to clean up soured debt from their books—started seizing assets of delinquent firms or dragged them into insolvency.

Indian banks wrote off a record $39 billion of loans in the 18 months through September in a bid to repair their balance sheets as they battled the world’s worst bad debt pile. Making matters worse, a shadow banking crisis led to a funding squeeze, crushing debt-laden businesses that were critically dependent on rollover financing.

“Life has come a full circle for tycoons that had enjoyed debt-fueled growth,” said Nirmal Gangwal, founder of distress and debt restructuring advisory firm Brescon & Allied Partners LLP. “Many firms collapsed like a house of cards. The downfall was rather unprecedented.”

The government has also been cracking down on economic crime to assuage public anger over absconding businessmen. It’s even barred some from traveling overseas if they were deemed a flight risk.

Here are some of the country’s biggest and most-storied businessmen who saw their fortunes fade. Spokespersons for these tycoons didn’t immediately reply to emails and text messages seeking comments.

Anil Ambani

The chairman of Reliance Group, which makes movies to metro lines, had a close shave with jail time in March before his elder brother and Asia’s richest man, Mukesh Ambani, bailed him out at the last minute. The woes of the ex-billionaire came to the fore when India’s top court asked him to pay Ericsson AB’s India unit about $77 million of past dues or go to jail since Anil Ambani, 60, had given a personal guarantee. His telecom carrier slipped into insolvency this year, while unprofitable Reliance Naval & Engineering Ltd. faced a cash crunch. Reliance Capital Ltd. is selling assets to pare debt. Ambani is also fending off Chinese lenders in a London court.

Malvinder and Shivinder Singh

Karma caught up with ex-billionaires and brothers Malvinder Singh, 47, and Shivinder Singh, 44, and how. Scions of a prominent business family, they once helmed India’s top drug maker and second-largest hospital chain. In October, the two were arrested on charges of fraudulently diverting nearly $337 million from a lender they controlled. India’s market regulator found in 2018 that the brothers had defrauded their hospital company of about $56 million. The collapse of the $2 billion empire turned brother against brother, prompting their mother to broker a peace deal that was short-lived. In February, Malvinder accused Shivinder and their spiritual guru of fraud.

Shashikant and Ravikant Ruia

After a hard-fought battle to keep their flagship steel mill, the first-generation entrepreneurs finally saw the bankrupt Essar Steel India Ltd. pass on to ArcelorMittal last month. The $5.9 billion takeover was almost two years in the making with multiple legal wrangles. The group, controlled by Shashikant Ruia, 76, and Ravikant Ruia, 70, were also reprimanded by a U.K. judge in March this year for concealing documents. Started in 1969 as a construction firm, Essar Group diversified, investing about $18 billion between 2008 and 2012, and piled on debt. In 2017, the group had sold another prized asset, Essar Oil.

V G Siddhartha

Before jumping off a bridge into a river in July in an apparent suicide, the founder of India’s biggest coffee chain Cafe Coffee Day had penned a letter that spoke of pressure from lenders, a private equity firm and harassment by tax officials. He had spent much of the last two years pledging ever more of Coffee Day Enterprises Ltd. shares to refinance loans for ever shorter periods, at ever higher interest rates. “I would like to say I gave it my all,” V.G. Siddhartha, 60, wrote in the letter. “I fought for a long time but today I gave up.”

Naresh Goyal

The former ticketing agent who built India’s largest airline by value, stepped down as chairman of Jet Airways India Ltd. in March, caving in to pressure from banks who took over the company. Cut-throat price wars and surging costs pushed Jet deeper into loss. The airline stopped flying in April and went into bankruptcy two months later as lenders failed to find a buyer. In July, an Indian court barred Naresh Goyal from flying overseas after the government said it was investigating an alleged $2.6 billion fraud involving Jet Airways.

Rana Kapoor

The founder of Yes Bank Ltd., which became India’s fourth-largest non-state lender, tweeted in September 2018 that his shares were invaluable and requested his children never to sell them upon inheritance. But trouble was brewing. The nation’s banking regulator, which found the lender had repeatedly under-reported its bad loans, refused to extend his tenure as chief executive officer. This forced Rana Kapoor, 62, to step down by end-January. Kapoor, who has pledged some of his Yes Bank shares in July, sold almost his entire stake in the lender by October.

Subhash Chandra

The rice trader-turned-media mogul, 69, who brought cable television into Indian homes in the early 1990s with his ZEE TV, resigned as chairman of Zee Entertainment Enterprises Ltd. in November and lost control of his crown jewel. To help pay the debt of Essel Group, Subhash Chandra has been selling stake in Zee Entertainment in the past few months to repay group’s debt.

Gautam Thapar

A default by Gautam Thapar, founder of the paper mill-to-power transmission Avantha Group, on pledged shares made Yes Bank Ltd. the biggest shareholder in CG Power and Industrial Solutions Ltd. In August, the firm was hit by an accounting scandal forcing the board to remove Thapar, 59, from the chairman’s post. A month later, the market regulator ordered a forensic audit of the firm and barred Thapar from accessing securities market.

A question worth $ 680 mn: What did Anil Ambani know about the unpaid loan?

Anil Ambani, the younger brother of Asia’s richest man, faces a $680 million legal test to answer one and only one question: Just what did he know about what his employees were doing on his behalf? Other Indian tycoons will take an abiding interest in his defense.

The $680 million is the amount Industrial & Commercial Bank of China Ltd. is seeking to recover from the former Indian billionaire by invoking what they say is a personal guarantee he gave in 2012 to secure a $925 million loan for Reliance Communications Ltd., his mobile services firm that’s now in bankruptcy. Ambani, whose older sibling Mukesh controls Reliance Industries Ltd., India’s most valuable company, claims he never knowingly provided any guarantee.

In his version, he had only authorized his employees to furnish a non-binding “personal comfort letter” to lenders, including ICBC, China Development Bank and the Export-Import Bank of China. Somehow, that letter of comfort morphed into what the banks now argue to be an iron-clad guarantee under English law. “A truly remarkable feature of Mr. Ambani’s case,’’ London Judge David Waksman said in his order Monday, “is that he has himself proffered no explanation as to why he should have been deceived in this way.”As to how personal assets were put at risk unbeknownst to the boss until RCom defaulted in 2017, the order noted that Ambani’s lawyer had argued that his client's “position was that ‘he hasn’t got a clue’ how all of this came about.” Judge Waksman stopped short of awarding the summary judgment requested by ICBC, though not before characterizing Ambani's evidence as “inexplicably incomplete, implausible and highly unlikely.”

A trial will commence next year. Pending the verdict, the court may ask some or all of the claim to be deposited with it.Ambani’s representative focused on the the judge’s decision to dismiss the banks’ application for a summary judgment. “Mr. Ambani has contested the proceedings and put up a strong legal defense, and will continue to contest the proceedings and seek leave to defend, without any conditions as to making of deposits or payments being imposed,” the representative said in a statement, according to Bloomberg News.

This is the younger Ambani’s second brush with the pitfalls of personal guarantee. Earlier this year, he managed to avoid a three-month prison term when his elder brother showed up just in time to settle the $80 million claim of Ericsson AB. The Swedish telecom equipment maker had obtained a contempt-of-court order to put Ambani in jail if the payment – which he had personally guaranteed – wasn’t received by March 19.

Other Indian business families should treat Ambani’s travails as a cautionary tale.

When India’s economy was booming, and firms were greedy to use leverage to grow, many of their controlling shareholders liberally gave out personal guarantees to lenders. But the rosy assumptions behind aggressive, debt-fueled expansion have come unstuck for many borrowers in an economy that has slowed down sharply. The Ruia family recently lost its crown jewel — a 10 million-tons-a-year integrated steel plant in western India — to ArcelorMittal.

Even here, the former asset owners had backed their borrowings with personal guarantees, and State Bank of India, the main lender, had even made an attempt to enforce them. With Mittal’s $6 billion check in the bank, that recovery may have now become a moot point. But from Dec. 1, personal guarantees on corporate loans will be adjudicated under Indian bankruptcy law. That will put a healthy fear in the minds of Indian businessmen about borrowing too recklessly. Their own assets could end up getting liquidated together with those of their companies.

As for Ambani, he’ll get his day in an English court to prove his lack of awareness. The bar is high, though. “I consider it extremely unlikely that his role was really limited to simply chairing board meetings with little or no interest or role in what RCom was doing, especially in the context of a major refinancing which was needed urgently,” Judge Waksman noted .This has all the ingredients of an engaging courtroom drama.

Relief for Anil Ambani as UK court dismisses Chinese bank's $680 mn claim

UK High Court has dismissed a USD 680 million claim application filed by Chinese banks against Reliance Communications Chairman Anil Ambani, a spokesperson of Ambani said on Moday.

The hearing in the matter took place on November 7 and the order was issued on Monday, the spokesperson said in a statement.

UK High Court has dismissed "summary judgement application of Chinese banks against Anil Ambani" in which the "Chinese banks had claimed USD 680 million from Mr. Ambani against Chinese banks' corporate loans to Reliance Communications Limited (RCom)", it said.

"Mr Ambani's position that the claim made by Chinese banks in relation to his alleged guarantee for corporate loans availed by Reliance Communications Limited (RCom) could not be granted by way of a summary judgement has been duly upheld by the UK High Court," the spokesperson said.

At this stage of the proceedings, the evidence of the personnel of RCom who were dealing with the personnel of the Chinese banks could not be placed, which led to certain doubts being expressed in the judgement on account of the evidence being incomplete and thus appearing implausible.

Ambani contested the proceedings and put up a strong legal defence, and will continue to contest the proceedings and seek leave to defend, without any conditions as to making of deposits or payments being imposed, the statement said.

"Mr Ambani is confident that he will have an opportunity to place the necessary evidence before the UK High Court, in the course of the trial to establish that Chinese banks claim are without any merit," the statement said.

The spokesperson said that Ambani is confident that his position would be fully vindicated once all the facts and the entire evidence is before the Court.

RCom is currently undergoing through insolvency proceedings following a plea filed by Swedish telecom gear maker Ericsson after the company failed to clear its dues.

RCom's secured debt is estimated to be around Rs 33,000 crore. Lenders have submitted claims of around Rs 49,000 crore in August.

Bharti Airtel, Reliance Jio, Varde Capital and UV Asset Reconstruction Company have submitted bids to buy assets of debt-ridden Reliance Communications.

Anil Ambani, four others resign as Reliance Communications directors

Anil Ambani has resigned as director of Reliance Communications, the debt-ridden company said in a filing on Saturday.

According to the filing, Ambani along with Chhaya Virani, Ryna Karani, Manjari Kacker, Suresh Rangachar have resigned as directors of RCom.

"Your good office may also note that Shri Manikantan V., has also tendered his resignation as a director and Chief Financial Officer of the Company earlier. The aforementioned resignations shall be put up to the committee of creditors of the Company for their consideration," the filing added.

RCom, which is currently going through insolvency process, has posted a consolidated loss of Rs 30,142 crore for July-September 2019 due to provisioning for liabilities after the Supreme Court ruling on statutory dues.

Anil Ambani's RCap to exit lending business, stay focused on insurance

The annual general meetings (AGMs) of Anil Ambani group companies on Monday saw some shareholders raising concern on the significant fall in stock prices. The coming together of various factors, said Group Chairman Anil Ambani, had caused “collateral damage”.

Ambani said group companies have had to face challenges over the past six months due to a “combination of factors, whether it was the crisis in the financial services sector, irrational action by auditors and rating agencies or the now-recognised temporary slowdown” of the economy. “These events, aided and abated by reckless selling and rumour mongering by vested parties, (have) affected the general public psychology, especially shareowners like you,” he stated.

A shareholder in Reliance Power (RPower) questioned the company's board of directors on the fall in promoter shareholding, ‘default’ ratings and significant erosion in share price. At the end of Monday’s trade, the stock closed eight per cent lower at Rs 2.2. “We could even look at a class-action suit, if the affairs are not brought back to order,” he said. In the year-to-date, RPower’s stock is down 91.7 per cent.

RCap to exit lending

The AGM line-up began with Reliance Capital (RCap), where Ambani told shareholders the group’s financial services arm would no longer be in the lending business. Instead, it would focus on the life and general insurance businesses for creating value over the long term. “Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) are working closely with lenders to finalise the (loan dues) resolution plan, expected to be completed by December,” said Anil Ambani. RCap will only be a financial shareholder in both these companies. The move will effectively reduce debt by Rs 25,000 crore, Ambani said.

Ravindra Sudhalkar, RHF’s chief executive (CEO), said the company was looking to enter the resolution process under an inter-creditor agreement (ICA); it expected more of the lenders to sign it.

Auditor notes on RHF

The firm also disclosed some of the opinions of newly-appointed auditors Dhiraj & Dheeraj and the directors’ responses on these. While stating there were no violations under Section 143 (12) of the Companies Act (on reporting of fraud), the auditors had some opinions on the group exposure, “We draw attention to… the loan advanced under the ‘General-Purpose Corporate Loan’ product with significant deviations to certain bodies corporate, including group companies, and the outstanding amount as at March 31 aggregating Rs 7,849.9 crore, secured by charge on current assets of borrowers.” Also: “The majority of the company’s borrowers have undertaken onward lending transactions and end-use of the borrowings from the company, included borrowings by or for repayment of financial obligation to some of the group companies.”

To this, the directors’ response was: “All lending transactions by the company are in the ordinary course of business, the terms of which are at arms’ length basis, and these do not constitute transactions with related parties.”

They also said the company was in the process of increasing the housing loan portfolio, after the auditors raised concern on RHF continuing as a housing finance company due to “material shift in primary business of the company from housing finance to non-housing finance, which comprise more than 50 per cent of total loan portfolio”.

Power shift

Ambani said RPower’s foray in Bangladesh was likely to significantly help the company in its debt reduction plan. “RPower’s focus now is on the development of Phase-II of (the) 1,500 Mw (project) in Bangladesh, in line with the memorandum of understanding signed for development of 3,000 Mw in gas-based projects. With these developments, RPower will be able to completely retire the US EXIM debt of Rs 2,400 crore.”

These assets in Samalkot, Andhra Pradesh, were stranded due to lack of availability of gas. RPower is also undertaking capital expenditure of Rs 4,000 crore to install flue-gas desulfurisation in its coal-based plants.

Bid wins in Infra

On Reliance Infrastructure (RInfra), Ambani said over recent years, the company had transformed from one with more than 15 different businesses to focusing on a few, such as power distribution, transportation (highways, metro rail and airports), engineering and construction (E&C), and the defence sector. He informed shareholders about RInfra winning the bid for the Rs 7,000 crore Versova-Bandra Sea Link Project in Mumbai, awarded by Maharashtra State Road Development Corporation (MDRDC). The project would be under the build, operate and transfer (BOT) mode, protecting it from any traffic or toll-collection risk. He said he expected the project’s zero date (from which implementation begins) to be announced shortly, after the Maharashtra state elections.

Defence

Ambani said the company saw huge opportunity in the defence segment, with 98 per cent of India’s requirement here being met through import. “India’s defence budget is overRs 3.18 trillion, of which Rs 1.1 trillion is capital outlay for purchase of new weapons, platforms and military hardware,” he said.

Debt

On progress in reducing debt, Ambani said the group had repaid Rs 35,000 crore in the 14 months till May 2019, and wouldl be paying another Rs 15,000 crore by March 2020. Further, the group has over Rs 60,000 crore in receivables stuck in regulatory and arbitration matters, pending for five to 10 years.

Anil Ambani's Reliance Naval risks insolvency as banks say no to debt plan

The shipyard controlled by Anil Ambani (pictured) is facing the prospect of bankruptcy after failing to get creditors’ approval for restructuring Rs 70 billion ($970 million) of debt, people familiar with the matter said.

The bankruptcy tribunal will consider putting Reliance Naval & Engineering in bankruptcy on Wednesday as no new repayment plan was submitted after lenders, led by IDBI Bank, rejected an earlier offer in July, sources said, asking not to be named as the information is not public. The court can also defer the decision on bankruptcy.

Any court ruling favoring the banks would deal another blow to the tycoon’s stressed empire after his wireless carrier slipped into insolvency earlier this year.

The revival of the shipyard is crucial for the tycoon, who’s betting on potential cash flows from government defence deals as Prime Minister Narendra Modi plans billions of dollars in spending on national security. While IDBI had sought to move Reliance Naval into insolvency in September 2018, a decision was delayed after industry bodies representing power-generating companies, shipyards and sugar mills successfully challenged the RBI directive that required delinquent borrowers to be pushed into bankruptcy.

However, the risk of bankruptcy reemerged for the submarine maker after it failed to come up with a repayment plan even under the RBI’s relaxed norms.

Representatives for Reliance Naval and IDBI Bank didn’t respond to emails and phone calls seeking comments.

The warship maker’s loan-recast plan that was rejected in July proposed banks converting part of the debt into equity after the RBI eased rules to provide lenders more discretion in dealing with soured debt, the people said.

The plan didn’t involve any upfront payments and proposed a transfer of banks’ non-fund exposures such as guarantees and letter of credits from Reliance Naval to another Ambani firm Reliance Infrastructure, the people said.

Meanwhile, Anil Ambani’s wider conglomerate is planning to dispose of assets spanning roads to radio stations, aiming to raise about Rs 217 billion ($3 billion) to help pare debt that has ballooned to about Rs 939 billion at four of its biggest units — excluding the telecom business Reliance Communications.

NCLAT reserves order on admission of contempt plea against Anil Ambani

The National Company Law Appellate Tribunal (NCLAT) on Wednesday reserved its order whether the contempt proceedings should be initiated against Reliance Communication (RCom) Chairman Anil Ambaniand his officials for failing to pay minority investors such as HSBC Daisy Investments (Mauritius). HSBC Daisy had moved the appellate tribunal over alleged default of payment of Rs 230 crore by Reliance Infratel and stated that the company has not fulfilled an undertaking given by it.

Reliance Infrastructure auditors say unable to give view on annual results

Anil Ambani-promoted Reliance Infrastructure reported a net loss of Rs 3,301 crore for the quarter ended March 2019 compared with a net profit of Rs 134 crore in the corresponding period last year. The firm's auditors said they were unable to give an audit opinion on the annual results and also raised doubts about the company and some of its subsidiaries' ability to continue as a going concern.

The company took a one-time hit on exceptional expenses of Rs 8,481 crore, which was offset by a withdrawal of Rs 6,616 crore from general reserves and credited to the profit and loss account. In the absence of this transfer, the loss for the quarter and the full year would have been higher by Rs 6,616 crore.

The exceptional expense was related to defence business impairment, invocation of pledge shares, and loss at its power subsidiary, according to the company. The company wrote off its entire investment in Reliance Naval and Engineering, which was a non-performing asset when RInfra acquired it in 2016. RInfra sees potential to write back this investment upon debt resolution after the new Reserve Bank of India circular. 

Reliance Infrastructure auditors say unable to give view on annual results

“We were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone/consolidated annual financial results,” auditors BSR & Co and Pathak HD & Associates said.

The auditors referred to investments of Rs 7,083 crore comprising inter-corporate deposits, and other corporate guarantees of Rs 1,775 crore that the company has extended, including certain related parties to the company. They added, “According to the management, these amounts have been mainly given for general corporate purposes and towards funding of working capital requirements of the party which has been engaged in providing engineering, procurement and construction services primarily to the company and its subsidiaries and its associates.”

However, the auditors were unable to obtain sufficient appropriate audit evidence about the relationship between the two parties.

The auditors also flagged the depreciation policies of RPower’s subsidiaries, which was a departure from IndAS. If this were to be considered, the share of loss of subsidiaries would have gone up by Rs 166 crore. RInfra said RPower had been advised by reputed legal and accounting professionals that the IndAS norm was not applicable to RPower.

The auditors have further raised a going concern on RInfra, Reliance Naval and Engineering, the company’s Mumbai metro subsidiary, and a few other subsidiaries. On RInfra at the standalone level, the auditors added, “Relating to losses incurred during the year and certain loans for which the company is guarantor indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern.”

There existed a material uncertainty that might cast significant doubt on Reliance Naval's ability to continue as a going concern, they added. The auditors said the statutory auditors of the metro subsidiary had commented on the material uncertainty related to going concern in respect of the Mumbai metro company.

Others in the going-concern list include subsidiaries like TD Toll Road, GF Toll Road, Delhi Airport Metro Express, BSES Kerala Power, RPL Photon, RPL Sun Technique and RPL Sun Power. GF Toll Road was also classified as a non-performing asset in March.

In the company disclosures for the quarter, RInfra said it had terminated the concession agreement for its Kandla Mundra Road Project in May, on account of material breach and event of default under the provisions of the concession agreement by National Highways Authority of India (NHAI). The company expects a termination payment of Rs 1,205.47 crore.

The company said it was awaiting final adjudication orders on claims of over Rs 30,000 crore, of which Rs 8,000 crore had been won or were at an advanced stage.

Reliance Capital repays Rs 650 crore of NCDs due on Friday

Anil Ambani-led Reliance Capital has said it has repaid Rs 650 crore of non-convertible debenture that were due on Friday.

The disclosure comes at a time when Reliance Group companies and some others, are facing liquidity troubles.

At least two entities in the group, Reliance Commercial Finance and Reliance Home Finance, have witnessed rating downgrades on their borrowings earlier this month, which led to the Reliance Capital stock coming under pressure.

Reliance Capital in a brief note said, "Reliance Capital repays Rs 650 crore of NCDs that were due today (Friday)."

Meanwhile, in a separate filing Reliance Capital said that it has invited its partner, Nippon Life Insurance Co. Ltd, to make an offer to acquire up to 42.88 per cent stake held by it in Reliance Nippon Life Asset Management Ltd (RNAM).

Nippon Life Insurance Co. Ltd. already holds 42.88 per cent stake in RNAM.

"Further announcements shall be made at the appropriate time," the company said in a clarification to the exchanges.

BSE had sought clarification from Reliance Capital (RCap) earlier Friday regarding news reports related to the transaction.

Shares of Reliance Capital rose by over 2 per cent Friday after the company reiterated that it had invited Nippon Life Insurance to acquire up to 42.88 per cent stake in Reliance Nippon Life Asset Management.

Anil Ambani takes on Rahul Gandhi, calls him a 'malicious liar'

The Anil Ambani group on Sunday took Congress President Rahul Gandhi head on by calling the latter’s allegations of crony capitalism against its chairman as “calumny, disinformation, distortion, and malicious lies.”

In recent election-eve media interactions and rallies, Rahul has singled out Anil Ambani several times for winning the Rafale defence contract from the Narendra Modi government, alleging favouritism and corruption.

In a statement on Sunday, a Reliance Group spokesperson said it was during the 10-year Congress-led United Progressive Alliance regime between 2004 and 2014 that Anil Ambani-led Reliance Group was awarded projects of over Rs 1 trillion across diverse, key nation-building infrastructure sectors such as power, telecom, roads, Metro, by a government led by none other than Rahul’s own political party — the Congress.

“The Reliance group is proud to have made this contribution to our great country — India — creating the much-needed investments and jobs, a critical backbone for a vibrant, strong, and growth-oriented economy,” the spokesperson said.

The Reliance Group takes this opportunity to request (Rahul) Gandhi to clarify whether his government, for 10 long years, was supporting an alleged crony capitalist and dishonest businessman, to use his own words, it said.

Rahul has accused Prime Minister Modi of giving Rs 30,000 crore of Rafale offset contracts to Anil Ambani at the cost of government-owned Hindustan Aeronautics. The offset contracts were given by Rafale fighter jet maker Dassault Aviation of France in lieu of India buying aircraft worth Rs 1.26 trillion.

The spokesperson said Rahul, in his typical cavalier fashion, has continued his campaign and singled out Anil Ambani as allegedly “a crony capitalist and dishonest businessman — all obviously patently untrue statements”.

“As is by now, customary for all of (Rahul) Gandhi’s public statements, he has attributed no basis to these claims whatsoever, and neither has he provided any credible evidence at all to justify his derogatory and defamatory campaign,” said the statement.

“We, at the Reliance Group, have chosen to ignore (Rahul) Gandhi’s comments with continuing patience and restraint. We likewise dismiss his latest remark as yet another one of his multiple untruthful utterances, in the heat and dust of his electoral campaign, for which he has recently been facing contempt proceedings in the highest court of the land, the Supreme Court,” the statement said.

“The Reliance Group is a proud young Indian group, with over 100,000 employees and over 8 million strong shareholders, the largest in the world and completely dedicated to our great country,” the statement said.

In recent months, most of the Anil Ambani group companies are facing the heat on the stock market after two of its group companies — Reliance Communications and Reliance Naval — were referred to the National Company Law Tribunal for debt resolution.

As the operating companies defaulted on debt, lenders sold shares of Reliance Group entities in the market to recover part of their debt.

Once worth $55 bn, Anil Ambani just has a day to raise $80 mn, avoid jail

Once worth at least $55 billion, India’s Anil Ambani has about a day to piece together $80 million to settle long-pending dues with a vendor or go to prison.

The tycoon’s heavily indebted telecom business had promised to pay the local unit of Ericsson AB about Rs 5.5 billion ($80 million) for past maintenance services. 

The repeated failure to comply and Ambani’s personal guarantee landed him in trouble last month, with the nation’s top court holding him in contempt. His companies suffered a setback last week after a lower court refused to free up tax refunds withheld by lenders.

If the payment isn’t resolved by end-Tuesday, Ambani, 59, risks a three-month jail term.

Ambani’s net worth has shrunk to about $300 million from at least $55 billion in 2008, according to data compiled by Bloomberg, as his telecom to power and infrastructure ventures struggle to deal with debt by selling assets and fending off creditors. The stunning fall is in stark contrast to the success of his elder brother Mukesh Ambani, who’s Asia’s richest man with a net worth of $52.9 billion, according to the Bloomberg Billionaires Index.

A spokesman for the Anil Ambani group didn’t respond to an email seeking comments on plans to pay the Ericsson dues.

Anil Ambani lost the vast majority of his wealth as his businesses strained to generate revenue as they battled price competition, regulatory bottlenecks and high debt that led to a cash squeeze.

In court arguments, the lawyer representing Ambani’s telecom carrier Reliance Communications Ltd., or RCom, said the group firms have no money to settle, unless lenders released 2.6 billion rupees of tax refunds -- a proposal opposed by the banks. The National Company Law Appellate Tribunal, in a ruling March 15, said it can’t direct banks to release the amount.

The threat of a prison term to Ambani also came as a rare warning to some of India’s richest borrowers whose firms have turned defaulters. The nation’s policymakers and courts have been cracking down hard on delinquency to help banks saddled with the world’s worst bad-loan ratio.

The war on bad debt also allowed Ericsson’s local unit to leverage the nation’s new bankruptcy law to arm twist RCom on claimed dues of 16 billion rupees. The Swedish telecom equipment vendor started off with a bankruptcy petition and then played hardball to the point it extracted a personal guarantee from Ambani. That’s what eventually landed him a jail threat.

The Ambani brothers used to serve as executives at their father’s company. Following their father’s passing in 2002, the siblings got into a high-profile dispute over control of the sprawling conglomerate. In 2005, the two settled the feud by agreeing to carve up the empire into two. Anil Ambani got newer businesses such as telecom, power generation and financial services. Based on current foreign-exchange rate, his net worth would’ve been at least $31 billion in 2008.

As Mukesh Ambani’s oil and petrochemicals businesses flourished, he re-entered telecom with the creation of Reliance Jio Infocomm Ltd. The nationwide 4G network, which debuted with free services in 2016, disrupted the industry forcing rivals including RCom to bleed, merge or exit. The older sibling added $8.6 billion to his wealth this year alone.