As per the rules of the extended challenge mechanism, the minimum threshold or the bid starting value has been pegged at Rs 9,500 crore, with the subsequent round rising to Rs 10,000 crore and by Rs 250 crore in any round that follows
The Committee of Creditors of Reliance Capital will hold a second round of auction for the sale of company assets on March 20, sources said. This follows the National Company Law Appellate Tribunal (NCLAT) last week allowing lenders of Reliance Capital to hold an extended challenge mechanism or second round of auction for the sale of the debt-ridden financial services company.
Sources with direct knowledge of the matter said the second round auction was aimed at getting the maximum value from the sale of assets. As per the rules of the extended challenge mechanism, the minimum threshold or the bid starting value has been pegged at Rs 9,500 crore, with the subsequent round rising to Rs 10,000 crore and by Rs 250 crore in any round that follows.
This compares the minimum threshold value of Rs 6,500 crore in the first round that concluded on December 21. The extended challenge mechanism will also have a threshold of a minimum cash upfront payment of Rs 8,000 crore for the bidders, sources said. According to the sources, the committee of creditors (COC) is expecting to realise an upward of Rs 10,000 crore from the extended challenge mechanism.
In the first round of the challenge mechanism, Torrent emerged the highest bidder with a bid amount of Rs 8,640 crore, while Hinduja Group firm IndusInd International Holdings Ltd (IIHL) was the second highest with Rs 8,110 crore bid. The first round of the auction ran into a legal tangle after the IIHL made an all-cash bid of Rs 9,000 crore to the lenders after the completion of the auction process.
Torrent challenged the IIHL bid in the NCLT, though the company itself revised its own bid of Rs 8,640 crore by offering the entire amount in cash upfront as against Rs 3,750 crore offered in the auction. The NCLT ruled in favour of Torrent and stayed the second round of auction, but the RCAP lenders challenged the NCLT decision in the appellate tribunal, which ruled in their favour and allowed them to go ahead with the second round of auction.
Sources said Torrent is likely to move the Supreme Court against the NCLAT decision. Corporate insolvency was initiated against Reliance Capital in November 2021 to recover about Rs 40,000 crore of unpaid loans.
An initial bid tender was issued on April 26, 2022, and four applicants -- Torrent Investments, IIHL, Cosmea Financial-Piramal Group and Oaktree Capital -- submitted their bids. The CoC opined that the bid values that have been received are not acceptable and a challenge mechanism process was initiated.
On December 21, 2022, a challenge mechanism process was conducted in which only two bidders -- Torrent and IIHL -- participated. IIHL participated until the third round of the challenge mechanism with a final NPV of Rs 8,110 crore and Torrent submitted a bid till fourth round with a final NPV of Rs 8,640 crore.
However, on December 23, 2022, a CoC meeting was conducted on the submission of the revised draft resolution plan as per the challenge mechanism with an email of IIHL which included additional payments totalling Rs 9,000 crore. This was objected to by Torrent and it moved NCLT, which had directed Reliance Capital's administrator not to submit any non-compliant plan to CoC.
Torrent gave a draft resolution plan with revised offer offering the entire amount of Rs 8,640 crore upfront, while IIHL gave its revised draft resolution plan including some additional payment. However, the CoC wasn't happy with the bids and wanted an extended round of bidding under the challenge mechanism with the existing bidders. This was challenged by Torrent before the Mumbai-bench of NCLT.