Reliance Capital Lenders Postpone 2nd Auction To April 11; Three Bidders Express Interest

Lenders of debt-ridden Reliance Capital (RCap) have postponed the second auction to April 11 for which three suitors have expressed interest to participate. Earlier, banks had fixed the second auction date as April 4.

According to sources, the bidders who have confirmed their participation in the second round of auction are IndusInd International Holdings Ltd (IIHL) of Hinduja Group, Torrent Investment and Singapore-based Oaktree. For a fresh round of bidding, the CoC decided to set the base bid at Rs 9,500 crore on a Net Present Value basis, with a minimum cash component of Rs 8,000 crore.

The second round of auction will take place even as the Supreme Court has fixed the next date for hearing on the RCap matter in August. The SC has permitted the lenders to go ahead with further action as per the National Company Law Appellate Tribunal (NCLAT) order, sources said.

The NCLAT order dated March 2, 2023, provides an option of auction or negotiation to lenders, which will be subject to its final order of the SC. Explaining the rationale behind the rescheduling of the second auction, sources said, earlier only IIHL had confirmed its participation but Torrent and Oaktree joined subsequently.

Therefore, sources said, the Committee of Creditors (CoC) has decided to give the bidders more time for preparation, as the competition has gone up. All the bidders have asked for the resolution plans to be compliant with the Insolvency and Bankruptcy Code (IBC) and Request for Resolution Plan (RFRP), as in the earlier auction held on December 21, the bidders' plans were found to be non-compliant, sources said.

Bidders want the lenders and administrator to ensure that their plans, once submitted, should not fail the compliance test, sources said, adding the CoC has also assured the bidders to consider their request that no bids outside the auction would be considered. This will ensure value maximisation for the lenders and transparency in the bidding process.

Earlier, the dispute around RCAP's bidding arose when Hindujas offered to pay Rs 9,000 crore in upfront cash to the lenders, a day after the first round of auction concluded on December 21. After this, lenders decided to go for one more round of auction to maximise their recovery from the RCAP assets.

Torrent, which made a bid of Rs 8,640 crore in the first auction, termed IIHL's post-auction revised bid of Rs 9,000 crore as invalid and challenged Hindujas' revised bid and the second round of auction in the National Company Law Tribunal (NCLT).

Torrent approached the Supreme Court against the NCLAT's order. The apex court admitted Torrent's appeal and issued notice but did not grant the requested interim relief to stay the tribunal's order. The Reserve Bank of India (RBI) on November 29, 2021, superseded the board of Reliance Capital 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 central bank subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the National Company Law Tribunal. In February last year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.