Banks expecting good response as bidders to decide RCap's fate today

Lenders to Reliance Capital (RCap) are waiting with bated breath for the outcome of the auction of the company’s assets. The last date for submitting expressions of interest (EoIs) closes on Tuesday. 

In a note to BSE on November 27, the company had said it was unable to proceed with “asset monetisation resulting in delay in debt servicing” due to various legal barriers. It said it defaulted on interest payment on its Rs 690 crore of outstanding borrowings from HDFC and Axis Bank. The amount, include accrued interest up to October 31. RCap said it failed to pay interest of Rs 4.77 crore to HDFC and Rs 0.71 crore to Axis Bank.

The lenders have put all the assets of the company on the block, including the insurance ventures and mutual fund stakes, to recover their dues from the Anil Ambani-owned financial services company.

Bidders have the option to either buy the entire company or bid for the company’s individual assets.

“The response to the EoIs will give us a sense of whether the assets have any takers or not. If we don’t get a good response, we may have to extend the last date for the EoIs,” a lender to the company said. “But we are expecting a good response to the insurance ventures, which are doing quite well.” 

The insurance ventures that are up for sale include RCap’s 100 per cent stake in Reliance General Insurance — the fourth largest private general insurer — and 51 per cent stake in Reliance Nippon Life Insurance — a joint venture with Japan’s largest life insurer Nippon Life, which holds the rest of the stake. 

The sale of RCap’s assets comes at a time when the auction of DHFL is witnessing an intensive corporate battle among bidders such as the Adani and Piramal groups and US-based fund Oaktree.  

Bankers said while RCap had a debt of Rs 26,869 crore on a consolidated level, the standalone entity had a debt of Rs 17,446 crore on its books as of September.

RCap’s sale of assets also includes 100 per cent stake in its securities company, which is one of the largest, and 49 per cent stake in Reliance Asset Reconstruction Company. The company also holds 100 per cent stake in Reliance Health apart from holding stakes in other private equity and real estate investments.

RCap is not undergoing a debt resolution process alone. In March, rating firm CARE had placed Rs 11,726-crore of RCap’s subsidiary, Reliance Home Finance, in the default category. Lenders have entered into an inter-creditor agreement for a debt resolution plan in accordance with the RBI circular dated June 7, 2019. But, due to litigation in the Delhi High Court, the debt resolution is delayed.