Anil Ambani worth $1.6 billion is having a really bad week-- but it’s not the worst this year


  • PwC resigned as statutory auditors for Reliance Capital and Reliance Home Finance
  • Anil Ambani blamed rumour mongers as his group stocks had been falling
  • Ambani’s net worth has also dropped significantly in the last nine years
The Anil Dhirubhai Ambani Group has a total debt of over ₹1 trillion but that’s just a part of the problem.

Ambani’s net worth has dwindled from $13.7 billion in 2010 to $1.6 billion in 2019, according to Forbes. If it falls any further, he might lose the tag of a ‘billionaire’ which has been attached to his name for decades now. This is not just because group company Reliance Communications has become bankrupt.

There are many telltale signs of trouble across all of his companies. And they have become hard to miss, in the last few months.

Loss

Reliance Power posted a quarterly net loss of ₹35.58 billion for the quarter ended March 2019. The stock of Reliance Power share as on June 13 was at ₹5.71, and this year’s highest value it recorded was at ₹39.

This was the stock that was worth ₹430 at the time of the initial public offering (IPO) in February 2008, with only licences to build power projects but nothing on ground.

The company has since been generating as much trouble as electricity. And, it has also lost many of the flagship projects. For one, its profit margins for Sasan in Madhya Pradesh are very thin, though it is operating above optimum levels.

It had sold Tilaiya power project back to the state of Jharkhand and has been trying hard to surrender Krishnapatnam power project back to the state government for which the court ordered them to pay up ₹3 billion.

No show

At least, Reliance Power had something to show even if there were losses.

Yet another group company Reliance Infrastructure which runs the Mumbai Metro Line has deferred declaring its March ending quarterly results -- twice. It was supposed to declare them with Reliance Power on June 8, but now re-scheduled it to June 14.

It is uncommon for a board to inordinately defer quarterly statements – and that’s a blinking warning signal.

Copping out

Making matters worse for Ambani, PricewaterHouseCoopers (PwC) resigned as the statutory auditors for Reliance Capital and Reliance Home Finance on June 11.

The auditor raised grave concerns that include ‘prevention of exercising independent judgment’, ‘impairing its independence’ and ‘not in a position to complete the audit’. All these are indicators of tumult and disorder at the companies as well as the group.

More importantly, when auditors said they’d quit, ADAG threatened them with a lawsuit, which deepens the distress at the flagging group. This comes after rating agencies downgraded two entities of Reliance Capital in early May pointing to liquidity constraints.

“Incidence of defaults by Reliance Capital’s subsidiaries ‘Reliance Home Finance Limited’ (RHFL) and ‘Reliance Commercial Finance Limited’ (RCFL) are expected to further reduce the group’s financial flexibility and diminish Reliance Capital’s ability to raise funds from the markets, which might take a measured approach in extending any further funds to the group. This is likely to impact Reliance Capital’s ability to raise funds as being a part of the group,” the agency said in its rating on May 18.


Debt is also someone’s trust

It is not debt servicing which has come to question, it is other forms of value and trust loss that the group has suffered. “I don’t believe that Anil Ambani will not be able to service debt. He will, though bankers may have to write off some of it. But, it is the retail shareholders who will probably get nothing,” said an investment banker who had tracked the group company for years, and refuses to be quoted.

Recently, the group chairman Anil Ambani had addressed media on a conference call, trying to allay fears. However, he ended up blaming everyone else like courts, lenders and bear carters for his depleting fortunes.

“Unwarranted rumour mongering, speculation, and bear hammering of all Reliance Group companies shares over the last few weeks has caused grave damage to all our stakeholders,” he had said.

Anil Ambani, the younger son of one of India’s most iconic industrialists, is going through the worst test of his life. The last week or so has been bad for him but it wasn’t the worst. In April, he was hours away from an arrest for not having repaid a relatively small sum of ₹4.59 billion to Ericsson before he was bailed out by his less flamboyant elder brother and billionaire, Mukesh Ambani.

For now, lenders are watching the crisis unfold, while shareholders are on a selling spree.
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