Reliance Capital lenders plan another round of auction; target more than Rs 10,000 bid price
The battle between Torrent and Hinduja group for the acquisition of Reliance Capital has taken a new turn as the Committee of Creditors (COC) has decided to run a second round of Challenge Mechanism (e-auction) for the bidders.
The lenders are targeting upwards of Rs 10,000 crores from this proposed second auction.
The first round of auction has witnessed both, Hindujas and Torrent trying to outbid each other by continuously sweetening their bids and offering more upfront cash, even after the auction got over.
The second challenge mechanism round will be conducted with a reserve price of Rs 9500 crores, as against the minimum threshold value of Rs 6500 crores in the first round that concluded on 21 December 2022.
The second round of Challenge Mechanism is also likely to have a threshold of minimum cash upfront payment of around Rs 8000 crores for the bidders. This will give Torrent an advantage of Rs 640 crores, as the company has already made an all-cash offer of Rs 8640 crores.
The Reliance Capital COC will meet on Monday (9 January) to vote on the proposal of conducting a second round of Challenge Mechanism.
According to sources, the decision to run a second round of challenge mechanism has been taken as the commercial viability of the Torrent and Hinduja (IIHL) bids is not acceptable to the COC.
The bids submitted by Torrent and IIHL are far below the liquidation value and fair value fixed by the independent valuers. The Liquidation Value of Reliance Capital is pegged at around Rs 13,000 crores and Fair Value is Rs 17,000 crores.
COC has noted Torrent’s all cash bid of Rs. 8640 crores and IIHL bid of Rs. 8110 crores.
COC also noted an additional cash offer of Rs 900 crores by IIHL, but not part of the NPV, which has only 30% weightage in the overall evaluation.
As per the proposed plan, in the new round of challenge mechanism, with a floor value of Rs. 9500 crores, the participants will have to increase the bid amount by minimum Rs. 500 crores in the first round. That means the minimum bid amount in the round-1 has to be Rs. 10,000 crores.
In the subsequent rounds, bidders will have to increase the bid amount by minimum Rs. 250 crores each.
Also See: Now Torrent group revises bid for Reliance Capital
