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RCom sinks 13% after NCLT admits Ericsson’s bankruptcy plea against co

Shares of Reliance Communication tanked 13% today following news that the National Company Law Tribunal (NCLT) has accepted a petition from the Indian unit of network-equipment maker Ericsson AB.

The NLCT has ordered that insolvency proceedings be initiated for Reliance Communications (Rcom), halting the company’s proposed Rs25,000cr asset sale to Reliance Jio Infocomm Ltd. The NCLT had accepted a petition from the Indian unit of Ericsson AB regarding recovery of Rs1,160cr in unpaid dues. The next step would be the formation of the Committee of Creditors, after which competitive bidding to take over the company.

The ruling is a big blow to the company which was attempting to monetize assets in order to pay down its debt.

Rcom had planned to sell its the Spectrum, Towers, Fiber, and Telecom Infrastructure assets to Reliance Jio. The plan has faced numerous setbacks with the Supreme Court and NCLT ordering stays on the process. However, with the initiation of the insolvency process, it looks unlikely that the asset sale will go through in the current form. The Insolvency and Bankruptcy Code places restrictions under section 29 A on bids from parties related to the existing defaulting promoter.

Reliance Communications told the exchanges that the company and two of its subsidiaries Reliance Telecom and Reliance Infratel, await the detailed orders of the National Company Law Tribunal (NCLT), Mumbai, allowing the Ericsson application for admitting the companies to debt resolution under IBC. The Companies will decide the next course of action after studying the orders, it added.

Reliance Communications is currently trading at Rs10.80 down by Rs1.65 or 13.25% from its previous closing of Rs12.45 on the BSE. The scrip opened at Rs11.25 and has touched a high and low of Rs11.95 and Rs10.65 respectively. So far 6,62,50,291 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs3,443.09cr.
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