Reliance Capital lenders approve IIHL resolution plan with 99.6% votes
The long-drawn insolvency resolution process of Reliance Capital got further close to a closure on 29 June. The lenders of Reliance Capital have voted in favour of the resolution plan submitted by IIHL with a 99.6% votes. As per the resolution plan, the lenders will receive an upfront cash of Rs 9661 crores from Hinduja group-backed IIHL.
With Rs 500 crore cash in balance with Reliance Capital, lenders are likely to receive a total of Rs 10,200 crores for distribution as against Rs 16,000 crores principal secured debt, resulting in 65% recovery for the lenders.
The lender’s nod now allows the administrator of Reliance Capital to file the resolution plan of in the Mumbai bench of the NCLT, seeking its final approval on the matter. The Administrator is likely to file the matter next week.
It must be noted that the deadline to file the Resolution Plan with NCLT was 15 July 2023.
Once the resolution plan is filed with the NCLT, it will be reviewed by the tribunal. If the plan is approved by the NCLT, it will become binding on all stakeholders.
The resolution of Reliance Capital insolvency process will be a positive development for the Indian financial sector. It shows that the government’s Insolvency and Bankruptcy Code (IBC) is working effectively, and that it is possible to resolve large and complex insolvency cases.
Brief of the case
Hinduja Group firm IIHL emerged as the highest bidder with Rs 9,650 crore bid in the second round of the auction in April. Torrent Investments fought tooth and nail against the lenders holding the second round of auctions.
Both Torrent Group and Hinduja had revised their bid price after the first round of e-auction on 21 December 2022. Torrent group revised its bid and was offering Rs 8,640 crores as upfront cash. Earlier, the company was offering Rs 3,750 crores as upfront cash and balance in deferred payment.
Hinduja group revised its bid price for Reliance Capital to Rs 9,500 crore on 23rd December 2022, two days after the first round of the e-auction. Hindujas had earlier quoted Rs Rs 8,110 crore in the e-auction. As per Hinduja’s revised bid, they agreed to pay Rs 8,800 crore upfront.
However, the CoC decided to hold a second round of challenge mechanism as the bids submitted by Torrent and IIHL were 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.
Torrent had challenged IIHL’s revised bid and the second round of auction in the NCLT.
NCLT had ruled in favour of Torrent, but NCLAT overturned NCLT ruling and allowed the lenders of Reliance Capital to go ahead with the 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.
