Cosmea-Piramal consortium pulls out from bidding process for Reliance Capital

The Reliance Capital insolvency resolution process hits another roadblock with the exit of the Cosmea-Piramal consortium from the e-auction scheduled on 21 December 2022.

The consortium of Piramal Group and Cosmea Financial Holdings, which had submitted resolution plans with highest bid at Rs 5,231 crore for assets of Reliance Capital, has decided to walk out of the bidding process citing arbitrary increase in the base price as well as impractical rules for auction laid down by the committee of creditors (CoC).

The CoC has fixed a floor value of Rs 6500 crores for the auction, which is Rs 1,500 crores more than the Net Present Value (NPV) of the Cosmea-Piramal resolution plan.

Also, the rules laid down for the e-auction require the bidders to increase the bid value by minimum Rs 1,000 crore each in the first and the second round.  This means the first bid has to be a minimum Rs 7,500 crore and second Rs 8,500 crore.

Subsequently, in the third and fourth rounds, the bid amount has to go up by Rs 500 crore and Rs 250 crore, respectively.

The consortium feels that the new base price and the e-auction rules make the pricing of Reliance Capital assets unreasonable and arbitrary. It feels the new base price and the e-auction rules are unrealistic and unworkable.

The exit of the highest bidder on the eve of the auction has come as a big jolt to the lenders of Reliance Capital.

The bidders are also of the opinion that non-transparency of not declaring the highest bidder and not providing the ranking of the bidders after every round, is contrary to the e-auction conducted throughout the country by the government of India and the state governments relating to spectrum in the telecom sector and solar and wind power projects.

With the exit of Cosmea-Piramal, there are now only three players left in the race – Hinduja Group, Torrent Investment, and Oaktree Capital.

Cosmea-Piramal, with a total bid value of Rs. 5231 crores, was the highest bidder for Reliance Capital. The offer included an upfront payment of Rs 4250 crore.  Hinduja’s bid value of Rs 5060 crores, including an upfront payment of Rs 4100 crores, was the second highest bid.

Torrent Investment and Oaktree had quoted Rs 4,500 crores and Rs 4200 crores respectively.

They had offered an upfront payment of Rs. 1100 crores and 1,000 crores respectively. The NPV of Torrent’s resolution plan was Rs 4200 crores and Oaktree’s plan was Rs. 2600 crores.

Hinduja’s bid of Rs. 5060 crores, including an upfront payment of Rs 4100 crores, was the second highest bid. The NPV of Hinduja’s offer was Rs 4800 crores.

The Torrent and Oaktree had quoted Rs  4500 crores and Rs 4200 crores respectively. They had offered an upfront payment of Rs. 1100 crores and 1,000 crores respectively. The NPV of Torrent’s resolution plan was Rs 4200 crores and Oaktree’s plan was Rs. 2600 crores.

Also Read: Reliance Capital base price for e-auction hiked to Rs 6,500 crore