इस वजह से निकला Aircel का दिवाला | Aircel Bankruptcy Case Study - YouTube

Aircel which is the biggest company in the telecom sector and it had around 8.5 crore users, thus recently has signed for bankruptcy

Bankruptcy means the inability to repay the debt.

Aircel was started in 1999 by Chinnakannan Sivasankaran and in 2005 Malaysia’s Maxis Communications bought 74% stakes of Aircel from Sivasankaran.

In the early years, Aircel was growing rapidly and was quite active in TamilNadu, Odisha, Assam and North-East. M.S Dhoni at one point was also its brand ambassador

Earlier Aircel was one of India’s fastest-growing telecom companies, but what happened that a company that got a profit of 120 crores in 2016-17 Q1 filed for bankruptcy in the last quarter of 2017-18?

Telecom business is a very capital oriented business as it requires a lot of capital to run the business. That’s the reason why they need debt

Aircel problems increased due to 2 reasons one is Reliance Jio and the other is a lot of debt. Because of Reliance Jio, competition in the telecom industry grew.

This has impacted all the telecom industries. Before Reliance Jio everything was fine in the 2016-17 quarter 1 but as soon as Jio was launched and free services were given to the public, from then customers were leaving Aircel.

Then Aircel reduced its charges to half which in turn started hampering the financial conditions of the company. After the reduction in charges, the active users of the company declined rapidly.

For competing, Aircel reduced its charges more due to which financial conditions were hampered a lot

Before Reliance Jio, in 2016-17 Q1, Aircel made a profit of 120crores but in 2017-18 Q3 they have faced a loss of 120 crores

Among all this, Aircel had 15,000crores debt and due to all these losses debt repayment became tougher and they started defaulting loan repayments.

There was no hope for Aircel to improve its business and due to this Aircel’s parent company, Maxis Communications didnt thought of investing more money in Aircel.

To find a solution for these problems, Aircel planned to merge with Reliance Communications so that both companies together be in this competition.

But due to some legal and regulatory problems, the deal for this merger was cancelled and slowly the financial conditions of Aircel became more miserable and it stopped its services in Gujarat, Haryana, Himachal Pradesh, Maharashtra, Madhya Pradesh and Uttar Pradesh (west) in January.

And in this condition filing for bankruptcy seemed to be the only option. So Aircel, under The Insolvency and Bankruptcy Code, 2015 section 10 filed its bankruptcy petition at National Company Law Tribunal.

This petition was accepted by the NCLT

Now IRP (Insolvency Resolution Process) will be started and a decision will be made, whether to revive the company or to liquidate it.

To liquidate means to sell the assets of the company and gove the money to the creditors who had their money on it.

In many cases, liquidating a company often seems to be the best opt6ion.

If NCLT decides on liquidating the company then this is done on an immediate basis and creditors are given their money for the same.

Usually, when a company fails to repay its loans then banks take them to NCLT but here Aircel on its own filed for bankruptcy

As per World Bank’s report, to wind up a company in India it takes 4 years for that on an average, and due to this banks face losses because of the windup process they couldn’t recover their loan

To find a solution for this problem, The Insolvency and Bankruptcy Code, 2016 was brought in so that the windup process should be over within 1 year.

With this, the company will wind up early and banks would recover their money. As earlier this windup process used to go on and on which made the company’s condition more and more miserable

and till the time company was liquidated the value of the company would reach its lowest due to which banks would recover a less amount

In fact on average, banks could only recover 25% of the loan thus with The Insolvency and Bankruptcy Code,2016 this problem was solved

The Insolvency and Bankruptcy Code, 2016 was passed on 11th May 2016

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