Lenders to India’s RCom face struggle

Bloomberg

Lenders to embattled Reliance Communications Ltd. have bought themselves some time in taking provisions on $7 billion of debt, but still face an uphill struggle in turning around the phone company.
Last week, the carrier currently controlled by billionaire Anil Ambani proposed banks convert about 15 percent of the loans owed to them into a 51 percent stake, a move facilitated by the central bank’s Strategic Debt Restructuring programme.
The swap gives lenders an 18-month grace period during which they can try to revive RCom and avoid having to recognise losses on their loans. It’ll be a challenge, some analysts warn, given the competitive pressures in India’s telecommunications industry. “Keeping the business viable is going to be extremely difficult,” said Hemindra Hazari, an independent banking analyst in Mumbai. “It would have been advisable for the banks to take the provisions hit now and move on.” Rcom is now poised to hand over control to its lenders, which include Punjab National Bank and Bank of Baroda.