Eye on maximum value, lenders say no to Reliance Capital liquidation

Lenders to bankrupt financial services firm Reliance Capital on Tuesday ruled out the liquidation of the company, saying it would lead to value destruction.

“The liquidation option is not on the agenda for now. The focus is to get maximum value in bidding,” said a person close to the development. The lenders of Reliance Capital met in Mumbai on Tuesday to take stock of the various offers received by them.

The source said the agenda for negotiations with the current bidders is being firmed up and it will take another two-three days to finalise it.

"Lenders will decide on the further course of action, including the stance for negotiations on Friday," the source said.

Reliance Capital was sent for debt resolution in November last year, after it defaulted on its debt worth Rs 24,000 crore. 

The lenders have received four binding offers for the company but these offers are far lower than the valuation reports prepared by independent valuers appointed by the lenders.  

Among the four bidders for the company as a whole, the highest offer was submitted by Piramal-Cosmea Financial at Rs 5,231 crore. The Hinduja group offered Rs 5,060 crore. Ahmedabad-based Torrent Investments offered Rs 4,500 crore and Oaktree Capital offered Rs 4,200 crore.

But Duff and Phelps estimated Reliance Capital's valuation at Rs 12,500 crore, while another valuer RBSA Advisors pegged the company liquidation value at Rs 13,200 crore. These reports were submitted to the Committee of Creditors last week after the bidders submitted their offers.

Lenders are expected to negotiate with the bidders and initiate a Swiss Challenge, said another source. 

As many as 55 firms, including the Tata, Birla and Adani groups, submitted expressions of interest (EoIs) for Reliance Capital in February this year, but only a few submitted binding bids. 

Reliance Capital lenders did not receive separate bids for profit-making general and life insurance arms, though both companies account for over 90 per cent of total valuation of the company.

On sale

Insolvent financial services company Reliance Capital is on the block. Below are the key figures: 

The claim

Rs 24,000 cr worth of claims have banks made against RCap

The valuation

Rs 12,500 cr by independent valuer Duff & Phelps

Rs 13,200 cr by RBSA Advisors

The offers

Rs 5,231 cr by Piramal-Cosmea Financial

Rs 5,060 cr by the Hinduja group

Rs 4,500 cr by Torrent Investments

Rs 4,200 cr by Oaktree Capital