Reliance Capital staring at liquidation?

Is Reliance Capital staring at liquidation? Apparently, the RBI-appointed administrator is not happy with the bids received so far as for the corporate debtor. The bid prices are 60-70% lower than the liquidation value of Reliance Capital’s assets, and therefore, the administrator is in favour of liquidation rather than resolution.

Reliance Capital received four binding bids on 28 November 2022, which was the last date for submitting the bids.

The highest bid of Rs 5,231 crore has been submitted by a consortium of Piramal and Cosmea Financial followed by Hindujas, who have quoted Rs 5,060 crore for the company’s assets. Thr two other bidders Torrent Investment and Oaktree are offering Rs 4,500 crore and Rs 4,200 crore respectively.

On the other hand, the valuation reports by the independent valuers – Duff & Phelps and RBSA, have pegged the liquidation value of Reliance Capital at Rs 12,500 crore and Rs 13,200 crore, respectively.

However, the Committee of Creditors differs with the administrator, and it thinks that they should proceed with the ongoing process and bring finality to the resolution process by awarding the bid to the highest bidder.

According to the sources, the key to resolving the differences lies with the LIC and EPFO, who collectively control 35% of voting rights in the COC. LIC and EPFO have a debt of Rs. 3400 crores and Rs 2500 crores respectively in the Reliance Capital.

“The decision by LIC and EPFO will play a pivotal role in deciding the final resolution process. They have to decide whether they want the resolution or liquidation, and what option they want to choose in case they wish to go ahead with the resolution process,” says company sources.

The difference of opinion is not restricted to the two process advisors only. Even the members of the COC hold different views on the various options for resolution.

According to sources, a section of the COC members has recommended a “close cover option” for the bidding process.  Under the process, the award will go to the highest bidder.

The other view within the CoC is that in order to maximize the realization, the e-auction process should be adopted, which is a more transparent and fair system for price discovery and is a more preferred and prevalent process in India.

Hence, tomorrow’s CoC meeting is quite significant from the point of view that all these different opinions and options will be discussed amongst lenders to arrive at a solution that will be acceptable to all the stakeholders.

Reliance Capital has a consolidated debt of about Rs 38,000 crore, with nearly Rs 25,000 crore of claims admitted by the administrator. The Reserve Bank of India (RBI) In November has superseded the board of Anil Ambani’s Reliance Capital over defaults in payments and serious governance concerns.

RBI had appointed Nageswar Rao Y, the former executive director, Bank of Maharashtra, as the Administrator of the company. Reliance Capital is the third NBFC firm against which insolvency proceedings have been initiated. The others are Srei Group NBFCs and Dewan Housing Finance Corporation (DHFL).

Also read: 54 firms submit EoI for acquiring Reliance Capital; Tatas, Adanis among bidders