Reliance Capital stares at liquidation as lenders pull out auction process
Reliance Capital is staring at liquidation after all the bidders have shown reluctance to go ahead with the next round of auctions.
According to sources, Torrent Investments has conveyed to the lenders that the company is not willing to participate in the second round of auction, and IIHL of Hinduja Group has also told the lenders that it wants to withdraw its post auction revised bid of Rs 9000 crores and retain the old offer of Rs 8110 crores made in the first auction held on 21 December.
This has upset the lender’s plans to conduct a second round of auction, with a base price of Rs. 9500 crores, to maximise the recovery from the resolution process.
In a related development, Cosmea Financial and Piramal, who had submitted binding bids for Reliance Capital in November Last year, have written to the Administrator seeking refund of their Earnest Money Deposit (EMD) of Rs 75 crores each, as both the companies do not wish to further participate in the ongoing resolution process of RCAP.
With these latest developments, Reliance Capital is staring at liquidation, if lenders and bidders fail to reach a workable solution to end the stalemate.
Notably, RBSA and Duff & Phelps have pegged the liquidation value of Reliance Capital at Rs 13,000 crores, which is far higher than the Torrent’s highest bid of Rs 8640 crores in the first round of auction.
Last week, the Supreme Court, while denying a stay on the NCLAT order that allowed RCAP lenders to go ahead with the extended Challenge Mechanism, had allowed the lenders to go ahead with a second round of auction. The apex court listed the matter for further hearing in August.
According to bankers involved in the process, the meeting conducted by CoC on 25 March, Torrent suggested conducting a Swiss Challenge auction with their earlier bid of Rs 8640 crores as the threshold. If lenders agree to this, the Torrent will have the first right to match any counter offer from IIHL of Hinduja Group, the source said.
Though Reliance Capital administrator was not in favour of going the Swiss Challenge way, and suggested a closed envelope bid process, wherein both the parties submit a proposal in a closed envelope, but this, too, was rejected by the COC.
A lender involved in the process said that the Swiss Challenge or closed envelope bid process might go against the SC direction that allowed the lenders to go ahead with an extended auction.
The lenders are of the opinion that auction is the best way to go forward as it will help them maximise the value and recovery from the sale of assets, but with bidders withdrawing from the auction, Reliance Capital is looking at liquidation.
The dispute around the bidding arose when Hinduja’s IIHL offered to pay Rs 9,000 crores, in upfront cash, to the lenders of Reliance Capital, a day after the first round of auction concluded on 21 December.
After this, lenders decided to go for one more round of auction to maximise their recovery from the sake of the company assets.
Torrent, who made a bid of Rs 8640 crores in the first auction, termed IIHL’s post auction revised bid of Rs 9000 crores as invalid, and challenged IIHL’s revised bid and the second round of auction as well in the NCLT.
NCLT ruled in favour of Torrent, but NCLAT overturned NCLT ruling and allowed the lenders of RCAP to go ahead with a second round of auction. Torrent approached SC to seek stay on the NCLAT order, but the apex court did not offer any relief to the company.
Also See: SC gives a go-ahead to second round of auction for Reliance Capital
