Cosmea Pulls Out Of Race To Acquire Reliance Capital

Mumbai-based NBFC Cosmea Financial Holdings has pulled out of the race to acquire debt-ridden Reliance Capital Ltd (RCL) under an insolvency run bid process, sources said.
     
Cosmea combined with Piramal Group had put in a bid to acquire Anil Ambani Group's erstwhile company but sources said Piramal still continues to be interested in the auction process.
     
According to sources, the consortium had submitted the highest binding bid for Reliance Capital assets.
     
The planned e-auction for RCL, as approved by the committee of creditors (CoC), is scheduled to be held on December 21, and the exit of the highest bidder on the eve of the auction has come as a big jolt to the lenders.
     
The reason for the pull out, as per sources, is attributed to the contours of the bidding process being significantly altered, whereby the base bid in the auction itself requires a significant increase of approx Rs 1,500 crore over and above the highest bid, to start participating in the process.
     
The CoC has fixed a floor value of Rs 6,500 crore for the auction, which is Rs 1,500 crore more than the Net Present Value (NPV) of the Cosmea-Piramal resolution plan.
     
Further, sources said, the increments in the auction process for the second and third rounds have also been set at a very steep level of Rs 1,000 crore each. With the exit, there are now only three players left in the race—Hinduja, Torrent, and Oaktree.
     
Hinduja's bid of Rs 5,060 crore, including an upfront payment of Rs 4,100 crore, was the second-highest bid. The NPV of Hinduja's offer was Rs 4,800 crores. Torrent and Oaktree have quoted Rs 4,500 crore and Rs 4,200 crore respectively.
     
They have offered an upfront payment of Rs 1,100 crore and 1,000 crore respectively. The NPV of Torrent's resolution plan was Rs 4200 crore and Oaktree's plan was Rs 2600 crore.
     
The Reserve Bank of India (RBI) had on November 29 last year superseded the board of RCL in view of payment defaults and serious governance issues. The RBI appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm.
     
Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC).
     
The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The RBI subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the National Company Law Tribunal (NCLT). In February this year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.