In a new twist to the Reliance Capital (RCap) saga, its Committee of Creditors (CoC) has decided to conduct another round of challenge mechanism targeting more than ₹10,000 crore of proceeds through the insolvency process. A number of bidders including Cosmea Financial, Piramal Group and Oaktree Capital would also be eligible to take part in the second round of e-auctions, apart from the existing bidders Torrent Group and Piramal Group.
The second challenge mechanism would be conducted with a reserve price of ₹9,500 crore, compared with the minimum threshold value of ₹6,500 crore in the first round that ended on December 21, 2022. This round would also mandate the bidders pay a minimum upfront cash payment of about ₹8,000 crore, sources close to the development said.
Under the new challenge mechanism, the participants will have an option to up the bid amount by a minimum ₹500 crore in the first round. This will increase the minimum bid amount to ₹10,000 crore.
RCap’s lenders will meet on Monday (January 9) to vote on the proposal to conduct the second round of challenge mechanism, which is likely to be held by January 20.
“The next round of e-auctions is being mulled as the lenders are not satisfied with the commercial viability of the existing bids it received from Torrent Group and Hinduja Group through the first round of the challenge mechanism. Further, the second attempt is also to maximise the value of the stressed assets and reduce the haircut the lenders would have to take,” one of the sources said.
According to the CoC, RCap’s liquidation value was pegged at about ₹13,000 crore and fair value was at ₹17,000 crore.
A number of bidders including – Torrent (the highest bidder in the first challenge mechanism), Hinduja (highest following the revised bid), Cosmea, Piramal and Oaktree – are eligible due to the Earnest Money Deposits they made at the timing of submitting applications. However, their participation would be only confirmed after the CoC deciding on the second round of e-auctions.
Last week, Torrent Group – which had secured an interim stay from the bankruptcy court on finalising the bids by Hinduja Group – had revised its earlier with an offer to pay the entire bid amount of ₹8,640 crore in upfront cash. This came as a surprise as Torrent had earlier termed Hinduja Group’s revised bid as a “blatant and arbitrary violation” of the challenge process.
Torrent had earlier placed a ₹8,640-crore bid through a group company, Torrent Investments, to acquire debt-laden RCap’s entire assets, and offered to pay ₹3,750 crore in upfront cash and balance in deferred payments.
Hinduja’s offer of ₹9,000 crores on a Net Present Value (NPV) with an upfront cash offer of ₹8,800 crore, which was revised from ₹8,110 crore after conclusion of the e-auctions, is still the highest.
On January 3, NCLT had directed the RCap’s lenders not to accept Hinduja Group’s revised offer till further orders. The Mumbai bench of the bankruptcy court is slated to hear the petition again on January 12. The tribunal had also asked the administrator to file a reply on Torrent’s petition. Following the order, the CoC has sought time to move the National Company Law Appellate Tribunal (NCLAT).
The present deadline to conclude the process is January 31, while the CoC is also planning to file an application with the National Company Law Tribunal’s (NCLT) Mumbai bench to extend the timeline to February 15.