Questions remain over a plan by Mukesh Ambani, India’s richest man, to make his Reliance Industries debt-free by next year, six months after the move was announced.
The oil-to-telecom conglomerate is facing legal roadblocks put in place by the Indian government.
The company planned to sell a 20% stake in its refining and petrochemicals business to Saudi Aramco for US$15 billion and pare a major chunk of its debt, about $22 billion, in March last year.
Reliance announced last August that it would complete the Aramco transaction by March 2020, but now it appears it may be still a few months away.
Last December, the government filed an application in the Delhi High Court seeking to restrain Reliance Industries and its partner British Gas, now owned by Royal Dutch Shell, from disposing of assets, including the sale of a stake to Saudi Aramco.
It cited a failure by the two companies to honor their payment under a 2016 international arbitral award in Panna-Mukta and Tapti oil and gas fields production sharing contracts, which it claims is $3.5 billion.
The government has been fighting an arbitration with Reliance Industries and its partner since 2010, alleging the companies appropriated huge sums of money in violation of the production sharing contract in the Panna-Mukta and Tapti oil and gas fields.
Reliance Industries has decided to counter the government petition. The company claims the government’s plea is an abuse of process as no arbitration award has fixed any final liability of dues on the company. In a counter-affidavit, Reliance Industries said it was a “falsehood to say that the arbitration tribunal had passed an award requiring the company and its partners to pay $3.5 billion to the government.”
Ambani is aiming to slash Reliance Industries’ ballooning debt after spending as much as $50 billion to propel its telecom business to the top position in India within three years of starting operations, surpassing existing players Bharti Airtel Ltd and Vodafone Idea Ltd.
Its telecom unit Reliance Jio disrupted the industry by offering free voice calls and dirt-cheap data rates. Many existing players such as Tata Telecom, owned by salt-to-software conglomerate Tata Sons, and Reliance Communications, owned by Mukesh Ambani’s younger brother Anil, were forced to exit as they found no sense in continuing.
The price war left only two survivors – Bharti Airtel and Vodafone Idea – a merged entity of British telecom operator Vodafone Plc and home-grown company Idea Cellular.
Reliance Industries recently announced a consolidation of all its media and distribution businesses under a single brand called Network 18. Its TV18 Broadcast, which operates 56 channels, cable distributors Hathway Cable & Datacom and Den Networks would merge into Network18 Media & Investments.
The new integrated media and distribution company with a revenue of 80 billion rupees ($1.11 billion) will bring in better consolidation and economies of scale. It is also on the lookout for strategic investors to reduce its debt.