ADAG - THE DAAG OF DEBT CONTINUES
Last year, on 18th Sept, 6 ADAG companies, owned by Anil Ambani held their AGMs – back-to-back. RCom’s AGM was followed by the AGMs of Reliance Infrastructure, Reliance Power and Reliance Capital. Anil Ambani is the chairperson for all the four companies. Next in the block were Reliance Home Finance and Reliance Nippon Asset Life Management.
And today, 30th Sept 2019, 5 ADAG companies are holding their AGM - Reliance Power, Reliance Infrastructure, Reliance Home Finance, Reliance Communications and Reliance Capital. Reliance Nippon AGM was held on 23rd Sept.
RCom now holds the distinction being the first company to have an AGM in India where it was addressed by a court appointed resolution professional. In June, the National Company Law Tribunal’s (NCLT) Mumbai bench had appointed Deloitte’s Anish Niranjan Nanavaty as the RP for RCom’s bankruptcy process. Rcom AGM is scheduled for 4 pm and the balance four AGMs were addressed by Anil Ambani.
The go-to place for most of the big-wig AGMs for corporate India, head quartered in Mumbai is the Birla Matushri Hall. The month of August and September is chalk-a-block with some 30-35 AGMs. But for the first time, breaking tradition, ADAG companies AGM was held at KC College auditorium as Birla Matushree was available.
Today, at the four AGMs, the underlying message which came across was Anil Ambani is working hard on reducing the debt –like always. Yet, despite his assurances, the stock prices of ADAG stocks tumbled down. Does it mean that people have no faith is his words or simply that ADAG stocks continue to remain out of favor despite the massive debt reduction exercises?
Well, the debt is beyond words and assurances. The ADAG group, as at 31st March 2019 was sitting on debt of Rs.93,900 crore. Of this the biggest chunk of debt is owed by Rcom at Rs.35,600 crore (NCLT case) , followed by Reliance Capital at Rs.38,900 crore, Reliance Power at Rs.30,200 crore, Reliance Infra at Rs.17,800 crore and Rs.7000 crore by Reliance Naval.
A debt pile up of $5 billion by one single group! This is something that the traders/investors cannot get over and as of now, no words of assurances to bring down the debt seem to matter. In fact stock price of Reliance Capital fell to 20 years low after Anil Ambani announced that the company will no more be in the lending business.
Year-after-year, Ambani has the same narrative for his shareholders at the AGM – selling assets to bring down debt. He has assured that he will bring down the group debt down by another Rs.15,000 crore by March 2020. Till 30th June 2019, ADAG group has repaid debt to the tune of Rs.35,000 crore. So if we believe Anil Ambani, by end of FY21, ADAG groups, debt pile would come down from Rs.93,900 crore to Rs. 43,900 crore. That’s a 47% reduction but the amount still looks pretty daunting.
Even when ADAG announces some major project win, there is little cheer. This is again because over the years, the various projects delays, be it the Metro or UMPP, all led to many in the market believing that Anil Ambani aspired to grow bigger, too fast and too soon. His over-ambition in many ways, became the death knell. Before buying into any of ADAG stock, the first thought which comes to mind – can the company deliver and will it make enough money to service the debt?
For all the negativity which the ADAG group currently faces, it did make one wonder as to why then did its Rs 1,540-crore IPO of Reliance Nippon Life Asset Management (RNAM) get overall subscribed 81.49 times? Maybe the Japanese connection diluted the negativity?
Maybe there is life for ADAG after Rcom. It could reinvent itself as a major defence or EPC play. But the question remains – will you trust your money with this Ambani?