June 22, 2024
No Comments
Stock Market

Can His Companies Make a Comeback?

admin

Stock Market

Can His Companies Make a Comeback?

From being a Billionaire business tycoon to a fallen corporate titan, Anil Ambani’s story lays a cautionary tale of ambition and the perils of overleveraging. Once hailed as a rising star in India’s corporate world, Ambani’s meteoric rise was fueled by an aggressive expansion. This made him venture into a dizzying array of businesses, from telecommunications to infrastructure, power generation and shipbuilding.

At the pinnacle of his success, Anil Ambani’s net worth soared to a staggering 42 billion, making him one of the richest individuals in the country. However, his empire was built on a foundation of mounting debt, which eventually became an albatross around his neck. As his companies struggled to generate enough revenue and cash flows to service their burgeoning financial obligations, Anil found himself in a downward spiral.

Come let’s get to know what had happened to him and his group of companies.

Anil Ambani – Biography

Anil Ambani was born on June 4, 1959, in Mumbai, India. He is an Indian Businessman and the Chairman of the Reliance Group. Anil Ambani comes from a Gujarathi family from Junagadh district, Gujarat. He was born to Dhirubhai Ambani the founder of Reliance Industries Limited, and Kokilaben Ambani. During his early life, he was inspired by his father’s entrepreneurial spirit and developed his interest in business. He earned his Bachelor of Science from Kishinchand Chellaram College and completed an MBA from the Wharton School of the University of Pennsylvania in 1983.

Note: If you want to learn Candlesticks and Chart Trading from Scratch, here’s the best book available on Amazon! Get the book now!

Anil Ambani’s career started after he joined Reliance Industries Limited. After the death of Dhirubhai Ambani, Anil Ambani had a dispute with his brother Mukesh Ambani and demerged the family-owned businesses between them. Anil received parts of Reliance Group with interests in telecom, financial services, entertainment, infrastructure and power.

During his initial days as Chairman of Reliance ADA group, Anil Ambani performed well and achieved numerous awards and recognitions for his contribution to business and industry. He was conferred the Businessman of the Year 1997 award by India’s leading business magazine Business India.

Despite having significant achievements, Anil Ambani faced several challenges throughout his career. In February 2020, he announced that he was bankrupt in front of a UK court and claimed his net worth was zero. What made him bankrupt? What were the reasons for that? How was his group of companies performing? Come let’s get to know one by one.

Companies owned by Anil Ambani, What happened to them?

Reliance capital

Reliance Capital is a Non-banking financial company (NBFC). It provides loan products, general insurance among other financial services and asset management services. The company faced financial problems around 2018 due to rising debt levels and liquidity issues. Reliance capital asset quality deteriorated with rising non-performing assets (NPAs).

In 2019, the Reserve Bank of India questioned Reliance Capital’s board and initiated bankruptcy proceedings against the company. In 2023, Reliance Capital was acquired by Hinduja Group for Rs 9,650 crores, now the company is currently owned and controlled by Hinduja Group.

Reliance Communications

Reliance Communications was a prominent player in the telecommunication industry in India which provided wireless, broadband, wireline and direct-to-home services. During its peak days, Reliance Communications became the largest telecom operator in India which provided 3G across the nation. The company started facing troubles from 2010 onwards due to rising debt levels and stiff competition from rivals like Jio.

In 2017 Reliance Communications failed to merge its wireless business with Aircel due to regulatory delays and compounded problems. The company filed for bankruptcy in 2019 and entered insolvency under NCLT (National Company Law Tribunal). In 2022 Assets of Reliance Communications were acquired by Mukesh Ambani for 3720 crores.

Reliance Home Finance

Reliance Home Finance is a subsidiary of Reliance Capital which provides home loans and other loan products. During the initial years, the company had grown rapidly in the affordable housing loan segment. The company started facing asset quality issues with rising NPAs or bad loans in 2018 as a result it defaulted on several loan repayments and debt obligations in 2019. Aggressive lending practices and poor risk management led to a pile of bad loans.

In 2019, the company underwent a corporate insolvency resolution process (CIRP) under the insolvency and bankruptcy code. In January 2023, Reliance Home Finance was acquired by Authum Investment and Infrastructure for around Rs 2,900 crore and the bid was approved by NCLT. Now the company is wholly owned and controlled by Authum Investment.

Reliance Infrastructure

Reliance Infrastructure was a company which was involved in businesses across infrastructure sectors like power, roads, defence and metro rail. During its initial years, the company grew rapidly by bidding for and executing several large infrastructure projects. Reliance Infra started facing financial troubles from around 2015 onwards due to rising debt levels. Delays in completing projects and regulatory issues further impacted its financial performance.

Reliance Infrastructure Limited underwent significant restructuring efforts to address its financial challenges and debt burdens. In September 2018, R-infra sold its power transmission business to Adani Electricity Mumbai Limited for Rs 18,800 crore. In 2020 the company demerged its road and power assets into separate companies to reduce debt and improve financials.

Risee Infinity Private Limited a promoter group company acquired 8.88 crore warrants and equity shares of Reliance Infrastructure Limited and currently the company holds 16.31% of the total equity. Anil Ambani no longer holds significant control or ownership over the company. Reliance infrastructure has undergone significant restructuring and has new ownership structures in place.

Reliance Naval and Engineering

Reliance Naval and Engineering are engaged in the business of construction of vessels, rigs, repairs and refits of ships and heavy engineering. The company faced massive costs and time overruns in executing its early shipbuilding contracts. They got saddled with high debt levels and kept incurring losses year after year. In January 2020 the company was sent to the National Company Law Tribunal (NCLT) for debt resolution under bankruptcy code and insolvency.

In December 2022 Swan Energy-led Hazel Infra Ltd submitted a resolution plan and it was approved by NCLT. This plan included payment of Rs 2,040 crore to secured financial creditors and Rs 3 crore to operational creditors for the cancellation of shares held by existing shareholders. Reliance Naval and Engineering Ltd shares were suspended from trading on the National Stock Exchange (NSE) on July 14, 2023, due to a capital reduction under an NCLT order.

The company mentioned that Reliance Naval and Engineering is in the process of obtaining the relisting approval from the Stock Exchanges and has made the required payments as demanded by the Exchanges. The final listing agreement is under consideration by the Exchanges.

Reliance Power

Reliance Power is engaged in the business to develop, construct and operate power projects in India and International markets. Due to its overambitious bidding and acquisition of multiple power projects, it became difficult to execute it. The company failed to achieve projected operational efficiency and plant load factors (PLF) in some units.

Reliance Power faced significant financial challenges, including debt repayment issues. The company had outstanding debts to various banks like ICICI Bank, IDBI Bank, DBS Bank and Axis Bank. To address these challenges, Reliance Power signed multiple debt settlement agreements with these banks. Ultimately they were able to repay their dues to these banks, which significantly reduced its debt burden.

This debt settlement process was completed in March 2024, making Reliance Power debt-free on a standalone basis. Currently, the company is owned by various stakeholders, including financial creditors and operational creditors. Anil Ambani is no longer involved in the management of Reliance Power. He resigned his director position in 2020 and also his chairman position on March 25, 2022.

With a debt-free status now, Reliance Power is poised for future growth and development. The company’s financials are also expected to improve as it focuses on increasing its revenue and reducing its net loss.