UV Asset Reconstruction Company Ltd has made the highest bid of Rs 16,000 crore to buy Anil Ambani group’s Reliance Communications and Reliance Telecom, which are in the National Company Law Tribunal (NCLT). Last year it was the highest bidder for taking over Aircel’s assets for an upfront payment of Rs 150 crore.
Surajeet Das Gupta and Dev Chatterjee dig deeper to find out more about this little known company.
Illustration: Dominic Xavier/Rediff.com.
A low-profile Delhi company has become a major player in bidding for distressed telecom assets that have ended up in insolvency litigation because of the cut-throat price wars unleashed by Reliance Jio.
Last Monday, UV Asset Reconstruction Company Ltd (UVARCL) is believed to have made the highest bid of Rs 16,000 crore to buy two companies, Reliance Communications (RCom) and Reliance Telecom, which are in the National Company Law Tribunal (NCLT). They house the spectrum, enterprise, data centre, and real estate assets of the Anil Ambani group.
UVARCL is willing to pay 30 per cent of the bid upfront in 90 days.
Last year, it was the highest bidder for taking over Aircel’s assets for an upfront payment of Rs 150 crore. Even here the plan was to sell its assets and recover value, especially as banks had outstanding dues of Rs 20,000 crore.
But according to bankers, UVARCL is waiting to take a final call on the Aircel sale as this would mean a haircut to banks of 99 per cent.
Set up in 2007, the company’s website says it was set up by professionals “with equity participation from six PSU banks and two insurance companies”. These include the Bank of Maharashtra, Union Bank of India, Bank of India, Central Bank of India, United Bank of India, and Allahabad Bank as well as United and National Insurance.
However, a closer look at the shareholding in its annual report of March FY 19 shows that the largest shareholder is one Shilpi Sharma, who is also a promoter with a 35.47 per cent stake. The banks together have a mere 7.7 per cent and the insurance companies only around 0.52 per cent.
Except for the Central Bank of India which holds 5.4 per cent, none of the banks or insurance companies is among the top 10 investors. A detailed questionnaire to Sharma on the company did not elicit any response.
So who is Sharma? Those familiar with her career say she is a chartered financial analyst who used to help companies raise syndicated loans before she set up UVARCL with the help of PSU banks.
She is also the executive vice chairman of the board and also, according to the website, a ‘whole time’ director. It further adds that she ran her own advisory firm to advise clients across industries on diversified regulatory and compliance matters relating to banking, finance and capital markets, among other things.
UVARCL is among the top 10 asset reconstruction companies in the country in terms of book building, with a CAGR of 109 per cent over the last three years. Its board comprises experienced executives who have worked mostly in PSU banks as well as the Reserve Bank of India.
Based on ROC data, the company says that in order to gain business, it acquired financial assets of Rs 410.68 crore in 2018-19 through bids and bilateral deals with banks and NBFCs and resolved financial assets of Rs 178.58 crore, taking the outstanding total financial assets to Rs 100.46 crore.
The assets listed in its annual report of 2017-18 are concentrated in the infrastructure sector (53.68 per cent in value), followed by food processing (9.44 per cent) and steel (5.53 per cent).
In 2018-19, UVARCL made an income of Rs 36 crore, that’s an increase of 121 per cent over the previous year, and its profit before tax soared by 134 per cent to Rs 13 crore. Its net worth in March 2019 stood at Rs 120 crore and it gave a dividend of Re 0.50 per share.
Yet, according to ROC filings in FY19, the indebtedness of the company went up from Rs 88 crore in the beginning of the financial year to Rs 150 crore at the end.
Will UVARCL’s bid for the Anil Ambani companies be accepted by the banks who are part of the Committee of Creditors?
- Set up in 2007, UV Asset Reconstruction Company Limited (UVARCL) claims to be among India’s top 10 ARCs in terms of book building
- Its largest shareholder and promoter is Shilpi Sharma, (pictured) who owns 35.47% of the company. She is also executive vice chairman and whole-time director
- Six PSBs and two insurance companies together hold 8.22% stake
- Other key investors are Anubhav Securities, Anubhav Buildtech, and Sanmati Trading and Investment, each holding 9.17%
- The firm has bid for stressed telecom companies such as RCom, Reliance Telecom, and Aircel
- The ARC saw its income go up by 121% and profit before tax by 134% in FY19 over the previous year
“Even the payment for the RCom offer is based on deferred payments which may not be accepted,” said one banker.
He pointed out that the low upfront money offered by UVARCL was one reason why the Aircel debt resolution has not been cleared. With the banks not getting much upfront cash as against the admitted claims of Rs 47,000 crore, getting the RCom deal to go through the respective bank boards will be difficult.
Even if the deal goes through, telecom analysts say it is unclear whether UVARCL will tie up with a telecom company which will use the spectrum housed in the two companies since the sharing and trading of spectrum is only allowed for the period of the licence.
RCom already has a spectrum sharing agreement with Reliance Jio for the latter to use the bulk of RCom’s valuable 800 Mhz spectrum which is key to 4G services.
A question sent to UVARCL on whether it plans to tie up with a telco also went unanswered.
In the same IBC process, Reliance Jio has offered to buy Reliance Infratel, which houses tower and fibre assets, for Rs 4700 crore.
But analysts say that if Reliance Jio were to bid for RCom, the rules require that it merge a non-listed Jio into the listed entity of RCom.
With Jio planning a mega public issue, that is clearly not possible.
Surajeet Das Gupta and Dev Chatterjee are journalists with Business Standard. They can be contacted at firstname.lastname@example.org.