Lenders of Reliance Capital to meet on Monday to consider bidders' concerns

Ahead of the second round of auction scheduled on April 26, lenders of debt-ridden Reliance Capital (RCap) will meet on Monday to resolve concerns raised by bidders, sources said.

Both the potential bidders, Torrent Investment and IndusInd International Holdings Ltd (IIHL) of Hinduja Group, have expressed multiple reservations on the proposed auction and its terms and conditions.

According to sources, both the bidders have made it clear to the Committee of Creditors (CoC) that unless the issues raised by them are duly resolved to their complete satisfaction, they are unlikely to participate in the second round of auction.

The COC is likely to meet again on Monday to address the concerns of bidders.

Both the bidders want finality, certainty, transparency, no negotiation in value or on terms and conditions, after the second round of auction is over, they said.

The two largest lenders of Reliance Capital -- Employees' Provident Fund Organisation (EPFO) and LIC are against giving any such undertaking in advance.

Both want to keep the room for further negotiations open in case the final bid value in the second round of auction is below the liquidation value of Rs 13,000 crore, sources said.

EPFO and LIC collectively hold over 30 per cent voting rights in the COC.

IIHL has also requested that the bidders who are participating in the auction should give an undertaking that they will not give a bid outside the Challenge Mechanism process. Similarly, bidders also want an undertaking from the CoC that no bid outside the Challenge Mechanism will be considered by them.

Both Torrent and IIHL have taken a strong position on this, sources said, adding they wanted the process to be Insolvency and Bankruptcy Code (IBC) compliant, and the number of bidders must be notified 24 hours before the scheduled auction on Wednesday.

Torrent has requested to declare after every round how many bidders are participating in the next round and the value of their bids, sources said.

CoC has set a minimum bid amount of Rs 9,500 crore for the first round and Rs 10,000 crore for the second round, with an additional Rs 250 crore for subsequent rounds. The CoC also has put a condition that all bids should have a minimum of Rs 8,000 crore upfront cash payment, sources said.

Meanwhile, the Mumbai-bench of National Company Law Tribunal (NCLT) has extended the deadline for completing the resolution process of RCap by three months to July 16.

The Reserve Bank of India (RBI) on November 29, 2021, superseded the board of Reliance Capital in view of payment defaults and serious governance issues.

The RBI appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm.

Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under IBC. The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL).

The central bank subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the NCLT.

In February last year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.