Lenders will now take a call on whether they will accept Hinduja’s revised bid
Analysts say Hinduja offer of Rs 9,000 crore cash upfront trumps Torrent bid of just Rs 4,000 crore cash and the balance to be paid to lenders in three equal instalments in year 3/4/5 with zero interest.
Mumbai:
In an interesting development, Hinduja Group on Friday has opted for a higher bidding of Rs 9,400 crore to acquire debt-ridden Reliance Capital Limited(RCL) after Torrent Group with a price of Rs 8,600 crore had emerged as the highest bidder for the company in the first phase of the auction conducted as part of its resolution process of RCL.
Hinduja Group was the second highest bidder in the first phase of bidding that ended on the last Wednesday.
However, Torrent Group has protested the re entry of Hinduja group as it has made the bid after the auction process is over and has written to to administrator Nageswara Rao.
Analysts say Hinduja offer of Rs 9,000 crore cash upfront trumps Torrent bid of just Rs 4,000 crore cash and the balance to be paid to lenders in three equal instalments in year 3/4/5 with zero interest.
The objective of the IBC Code is to maximise value for creditors. As such, the Hinduja bid is best of execution compared to Torrent as it has no requirement of sharing security as the CoC will be concerned with any dilution of current security.
In repeated Supreme Court judgements, it has been held that maximisation of value is a key factor in any plan approval by CoC.
The only resolution done for a financial services company under special powers of RBI Section 227 was DHFL which was won by Piramal Group.
In that case Adani Group, which was not even a resolution applicant, was admitted by CoC as it offered highest value to the Piramal bid.
Legal observers see Torrent’s move to stall the RCap resolution and buy the company to the detriment of creditors who will be denied Rs 9,000 crore cash upfront.
As such, Torrent’s move, legal references claim could be a poison pill for the creditors undermining the IBC process.
Lenders will now take a call on whether they will accept Hinduja’s revised bid.
RCL owns 20 entities including Reliance General Insurance and 51 per cent stake in Reliance Nippon Life Insurance,
The Committee of Creditors (CoC) had fixed a floor value of Rs 6,500 crore for the auction.
This is the first time that an e-auction of this scale is taking place for the resolution of an NBFC (non-banking finance company) under the Insolvency and Bankruptcy Code.
The decision of ascending e-auction has been taken at the behest of LIC and EPFO, which together control 35 per cent of the voting rights in the CoC.
Kroll and Druff, the two companies appointed by insolvency administrators to value the company, estimated the liquidation value in the range of Rs 12,500 to Rs 13,000 crore.
The Reserve Bank of India (RBI) had on November 29 last year superseded the board of Reliance Capital in view of payment defaults and serious governance issues.
The RBI appointed Rao as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm.
As per an order of the National Company Law Tribunal (NCLT), lenders have to complete the resolution process of Reliance Capital by January 31, 2023.
with Inputs from IANS