Independent valuations 70% more than bankrupt Reliance Capital bids

The auction of bankrupt Reliance Capital has hit a roadblock with the independent valuation reports by Duff and Phelps and RBSA Advisors valuing the company at 70 per cent higher than the offers received from potential acquirers.

While Duff and Phelps estimated Reliance Capital’s valuation at Rs 12,500 crore, the RBSA has pegged the company's liquidation value at Rs 13,200 crore. These reports were submitted to the committee of creditors on Wednesday after the bidders submitted their offers on Monday.

In November last year, the Reserve Bank of India had sent the company to debt resolution after it defaulted on its loans worth Rs 24,000 crore. As many as 55 firms, including Tata, Birla, and Adani, had submitted expressions of interest for Reliance Capital, but only a few submitted binding bids.

The highest offer received by the lenders of Reliance Capital was Rs 5,231 crore from Piramal-Cosmea Financial. While Hinduja group offered Rs 5,060 crore to the lenders, Ahmedabad-based Torrent bid for Rs 4,500 crore, and Oaktree offered Rs 4,200 crore. The bids received by Reliance Capital lenders are therefore only 30 percent of the liquidation value fixed by the two Independent valuers.

Apart from valuing the entire Reliance Capital, Duff and Phelps’ valuation report has pegged the liquidation value of Reliance General Insurance at Rs 7,000 crore, and Reliance Life Insurance at Rs 4,000 crore. RBSA has given a liquidation value of Rs 7,500 crore to Reliance General Insurance and has valued Reliance Life Insurance at Rs 4,000 crore.

The Reliance Capital lenders have not received separate bids for profit-making general and life Insurance arms though both companies account for over 90 per cent of the firm’s total valuation.

The lenders have received three bids for broking firm Reliance Securities and the asset reconstruction businesses of Reliance Capital. The combined offers of these businesses is Rs 120 crore. But, according to the valuation reports, the liquidation value of these businesses, broking and ARC, is estimated at Rs 280 crore and Rs 240 crore, respectively.

Bankers said the CoC was likely to ask the bidders of the bankrupt company to sweeten their offers as the current bids were too low or else they have to send the companies for liquidation. The CoC will now make a detailed evaluation and have a discussion on all the bids made for the company in the next meeting.

In Numbers
 

Rs 12,500 cr: Reliance Capital valuation, according to Duff & Phelps    

Rs 13,200 cr: The company's liquidation value, claims RBSA

Rs 5,231 cr: Highest liquidation bid offered by Piramal-Cosmea Financial  

55 firms, including Tata, Birla, and Adani, submitted EoIs for RCap 

Rs 24,000 cr worth loans defaulted by RCap