In 2006, Forbes Magazine named Anil Ambani the sixth richest individual on earth. Little did they know that this individual would soon be courting a jail sentence. Anil Ambani has spent many years fighting off creditors and letting his debts accumulate. He’s also been suing anyone who criticizes his business methods. After ignoring the Supreme Court’s verdict to pay 77 Million USD to a local subsidiary of Ericson, Anil Ambani has received a warning from the court stating that he will be sentenced to three months of jail if the amount is not paid within 4 weeks. That’s a huge fall for someone who was once one of the richest men in India!
2018 has been quite a brutal year for the man. He’s seen some significant losses in this telecom business. However, this is a great indicator for India’s policies on cracking down the rich who have exponential debts to pay. Perhaps it is safe to say that authorities have learned their lesson after the Nirav Modi incident.
In 2005, after a very public dispute over controlling their businesses after their father’s death, Anil Ambani emerged with the telecom business while Mukesh Ambani got control of the oil refinery and petrochemicals business. In order to reach the same heights as his brother, Anil Ambani began borrowing large sums of money to grow his business. However, the telecoms industry in India has been brutal and this has manifested as significant loses in the business.
The success of Reliance Jio
Initially, there was a non-compete clause signed between the two brothers, due to which Mukesh Ambani stayed out of the telecommunications business all this while. However, this clause was rendered ineffective in 2010, and India soon saw the launch of RelianceJio. The brand has built India’s 4G network, and also led to the crash of other significant telecom brands. Bharti Airtel is seeing massive losses while BSNL is currently on a firing spree to save finances.
Of course, Mukesh Ambani’s success in telecommunications only rubbed more salt in Anil’s Ambani’s wounds.
While all of this was happening, Anil Ambani’s Reliance Naval and Engineering Ltd also saw its shares falling after continuous losses.
Inability to pay dues
After months of dodging collectors, the Supreme Court finally weighed in with the threat of jail. Anil Ambani’s problems with Ericson started when the latter came in to collect their overdue payments but were not given the same. Moreover, Ambani also failed to meet the deadlines for the payment, which is why the Swedish manufacturer took the matter to court.
In an effort to dodge the payments, RCom filed for bankruptcy earlier this month. However, the Supreme Court did not buy the excuse and asked Anil Ambani to pay his dues within four weeks. In order to comply with these rulings, RCom has asked its lenders for urgent approval for a sum of 2.6 Billion INR in order to pay back some of the debt. They have also asked Nippon Insurance to take total control of their joint venture.