Authum awaits RBI nod to buy Reliance Housing and Reliance Commercial

The Reserve Bank of India (RBI) will be taking the final call on BSE-listed Authum Investment and Infrastructure Ltd plans to take over two key companies of Anil Ambani group, Reliance Commercial Finance and Reliance Home Finance Ltd. With a market cap of Rs 2,000 crore, Authum Investment, hitherto unknown in the market circles, plans to diversify into all financial sector businesses to become a large player, an Authum Investment official said

Bankers said the final call on whether Authum meets the regulator’s “fit and proper” criteria lies with the RBI and they have taken followed the due process while selecting Authum Investment and forwarded their recommendation to the RBI.  Indian banks will be taking a significant haircut in the debt restructuring of both companies while handing them over to Authum.

As of March this year, Reliance Home finance reported a debt of Rs 12,976.40 crore while Reliance Commercial Finance owed Rs 9,894 crore as of FY20.  Authum has offered Rs 1,585 crore for Reliance Commercial Finance Company and Rs 2,887 crore for Reliance Housing Finance, apart from the cash on RHFL's books worth Rs 1,800 crore. Of the Rs 2,887 crore offer for RHFL, 90 per cent will be paid upfront, and the rest, in a year.  Authum officials said they have enough liquidity to take over both companies without sharing details.

Mentor Capital, the parent  of Authum, and its promoter Sanjay Dangi received a clean chit from market regulator Sebi in March this year after almost a decade of the regulator starting an investigation against the company and Dangi for  indulging in fraudulent and unfair trade practices relating to securities market.

A senior executive of a public sector bank, having exposure to Reliance capital entities, said Bank of Baroda is the lead banker and it invited expressions of interest (EoI) and several companies made their proposals for both companies. Of this, the Authum’s plan was selected as the best offer for both RHFL and RCFL.

“We would require approvals from some retail NCD (non-convertible debentures) holders which we do not see as  a challenge. Now we are waiting for the RBI’s clearance for both the acquisition,” said a banker asking not to be quoted.

When contacted, Authum Investment officials said they see a lot of potential in the housing finance and NBFC business and hence have made their offers.

Before bidding for RHFL and RCFL, Authum itself has gone through a restructuring with its parent firm, Mentor becoming the Core Investment Company (CIC) and transferring its assets to Authum Investments. With this, Authum’s net worth increased to Rs 1,500 crore.

As per its filings, Authum’s revenue was Rs 255 crore and it made a profit of Rs 135 crore for the fiscal ending March 2021. The company was making losses till last year  (See chart).

Both RHFL and RCFL were sent for debt restructuring after both companies defaulted on their loans.