Battle for Reliance Capital intensifies as lenders bat for fresh auction

The new round of e-auction for Reliance Capital (RCap) has been postponed to January 23 as the National Company Law Tribunal (NCLT) is yet to conclude the hearing in the matter in which the lead bidder, Torrent Investments, objected to the lenders’ move for receiving a fresh bid. The new auction was planned for January 19 (today) in which the Hinduja group was expected to compete with Torrent.

Torrent had offered an upfront payment of ₹8,640 crore in the first bid and became the sole bidder. The Hinduja Group firm submitted their offer a day after the auction deadline on December 21. Their offer of ₹8,950 crore, including ₹8,110 crore as an upfront payment, was above the offer price quoted by Torrent. But the lenders claim that both offers are below liquidation value.

Ahmedabad-based Torrent group company had moved the NCLT Mumbai bench on January 12, for a stay on the lenders' proposal for 'challenge mechanism'. The 'Challenge Mechanism' gives lenders the power to oppose any resolution plan as and when they want. It was essentially for fetching a value that is acceptable for the majority of the lenders.

The administrator has admitted verified claims of nearly Rs 24,000 crore from financial creditors in RCap. LIC of India has the major exposure in the NBFC, followed by Yes Bank. The tribunal will hear the reply filed by the Hinduja group company before pronouncing the final order.

The RBI superseded the board of RCap on November 30, 2021, because of governance issues. The last date for the insolvency process is January 30, 2023. The bench comprising Justice Shyam Babu Gautam and Justice Pradeep Narhari Deshmukh is expected to expedite the hearing to complete the insolvency process in time.

Darius Khambata, the counsel for Torrent Investments, earlier said in the hearing that the minutes of committee of creditors (CoC) show that the challenge mechanism was concluded in a fair and transparent manner, with Torrent emerging as the highest bidder. So the new round of auction is not legally valid, he argued. But Kapil Sibal, senior counsel for the CoC, said that the lenders have the right to decide whether or not to go ahead with the offer.

The highest bidder in the auction will acquire 100% stake in Reliance General Insurance, and get 51% stake in Reliance Nippon Life Insurance among other assets. Reliance Home Finance and Reliance Commercial Finance are also its subsidiaries.

RCap is the third Anil Ambani group company that filed for bankruptcy after Reliance Communications, Reliance Naval and Engineering. Ambani had to step down from the board of group companies in March 2022 after the Securities and Exchange Board of India (Sebi) restrained him from associating with any listed company. It barred him and Reliance Home Finance from the securities market in February for allegedly siphoning off funds from the company. Ambani had to disassociate from two listed companies— Reliance Infrastructure and Reliance Power— which are also financially stressed.