Reliance Capital Lenders To Go For 2nd Auction On April 4 To Maximise Return

Lenders of debt-ridden Reliance Capital (RCAP) on Monday decided to go for a second auction on April 4 in their bid to maximise recovery as part of the resolution process, sources said. According to sources, IndusInd International Holdings Ltd (IIHL) of Hinduja Group on Monday told the Committee of Creditors (CoC) it will retain the earlier bid of Rs 9,000 crore upfront cash.

The 38th meeting of the CoC on March 23, 2023 was adjourned and the adjourned meeting was subsequently held today i.e. Monday, RCAP said in a regulatory filing. For a fresh round of bidding, 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.

Earlier, the Supreme Court on March 20, 2023, admitted the appeal of Torrent Investments -- the highest bidder with Rs 8,640 crore resolution plan -- against the lenders' decision to hold another round of auction. 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. The insolvency process of Reliance Capital (RCAP) has been going on for more than 450 days, which is much longer than the statutory time limit of 330 days.

In a related development, the sources said, a consortium of Cosmea Financial and Piramal, who had submitted binding bids for Reliance Capital in November, has written to the administrator, seeking a refund of their earnest money deposit (EMD) of Rs 75 crore each, as both the companies do not wish to further participate in the ongoing resolution process.

As per the estimates, lenders would fetch Rs 13,000 crore if they go for liquidation. 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.