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Reliance Infrastructure signs ICA with 16 lenders; stock rallies

According to the RBI Circular, the Resolution Plan of Rel Infra is to be implemented within 180 days.

, ET Bureau|
Updated: Jul 11, 2019, 02.46 PM IST
Reliance Infrastructure has signed an Inter-Creditor Agreement (ICA) with all 16 of its lenders that gives the company 180 days to resolve its debt crisis, the Anil Ambani-led company said Thursday.

Reacting to the news, shares of the company rose 12.2% to Rs 51.60 on the Bombay Stock Exchange at 14:35 IST. The ICA sets the ground rules for resolution of stressed assets when the debtor is not in a position to pay dues.

“Reliance Infrastructure is confident of implementing its resolution plan well before the 180-days deadline based on advanced progress of its various asset monentisation initiatives,” the company said in a statement.

The Anil Ambani-led company reported its biggest ever quarterly loss in the fourth quarter of 2018-19 due to impairments and write-offs; with its auditors adding a disclaimer that they do not have sufficient audit evidence to determine if the result gives a “true and fair” view of the losses and income. Auditors, BSR & Co. LLP and Pathak H.D. & Associates raised questions about the company’s ability to continue as a going concern. Given this and the company’s exposure to other group companies which are facing financial stress, rating agencies have downgraded Reliance Infrastructure's ratings to the lowest level, indicating that default is imminent.

The cash-strapped Reliance Infrastructure Infrastructure hopes to conclude the sale of its ‘Delhi- Agra Toll Road’ to Cube Highways and Infrastructure III PTE by August end. The agreement, which pegs the enterprise value of the project to over Rs 3,600 crore, was signed between the companies in March. “With this single transaction, debt of Reliance Infrastructure will reduce by over 25% to just over Rs 4,000 crore,” the statement said.

The company is also planning to monetise its marquee 7 lakh square feet commercial property, Reliance Center in Santacruz suburb in Mumbai by way of a long-term lease, as first reported by ET on Jul 1.

“The company aims to be zero debt in 2020,” the statement reiterated.

Reliance Group companies have been battling financial stress, as its telecom company, Reliance Communications, is facing insolvency, while financial services arm Reliance Capital is struggling with liquidity issues. Reliance Power has reported losses due to impairments and write-offs.

PricewaterHouseCoopers (PwC) also resigned as the statutory auditors for Reliance Capital and Reliance Home Finance on June 11, citing ‘prevention of exercising independent judgment’, ‘impairing its independence’ and ‘not in a position to complete the audit’.

Group’s head Anil Ambani said on June 11 that the group was working to meet its debt obligations and creating shareholder value, while blamed financial institutions for not extending support, huge claims stuck in arbitration, and the “most challenging financial environment witnessed in the country in decades" for the challenges the group faced.
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