Reliance Capital lenders to ask bidders to make all cash bids, form consortiums

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The Committee of Creditors (CoC) of Reliance Capital (RCap), which is undergoing a bankruptcy process, wants bidders to form consortiums and submit resolution plans for the entire firm. The lenders, led by Yes Bank, also want the investors to submit cash bids, rather than deferred payment structures.

This is likely to further delay the former Anil Ambani group company’s bankruptcy process. The administrator is yet to issue a Request for Resolution Plan (RFRP) document, the original deadline for which ended on April 5.

“As per a new plan, the COC has decided to direct all the bidders of the profit-making entities to form consortiums and place bids for the entire company. This is under the second option, bidding for one or more of its clusters, and the CoC intends to give 30 days’ time to the bidders to form consortiums,” a source close to the development said.

According to the earlier bankruptcy process of RCap, the bidders had two options – either to bid for the entire assets of the company or one or more of its clusters (subsidiaries). The subsidiaries are Reliance General Insurance, Reliance Nippon Life Insurance, Reliance Asset Reconstruction Company, Reliance Securities, Reliance Commercial Finance and Reliance Home Finance. The confusion arose as IBC norms prohibit calling bids for firms that are not under financial stress.

RCap’s creditors are seeking Rs 23,666 crore.

As per the new plan being formulated, the new consortiums will also have to bid on an all-cash basis. The administrator, appointed by the Reserve Bank of India, was not in favour of this, the source added, but did not provide details. The CoC will meet on Wednesday to take a final call on the RFRP document.

The administrator, CoC and their legal advisors have different opinions on inviting bids for these profit-making entities, even though it is legally tenable to accept financial bids for the entire assets of RCap. On his part, the administrator raised concerns on the methodology for setting up a consortium and pin-pointing responsibility for implementing the scheme.

RCap’s resolution plan is already delayed with the CoC planning to seek a 90-day extension to the June 3 deadline as the time-frame is not enough to complete the entire insolvency process. If approved, the lenders will get time till September 3 to close the process.

In March, an RBI-appointed administrator received 55 bids as part of RCap’s ongoing insolvency proceedings, of which 22 were for the entire company. The consortium bids will now have to compete with the 22 company-level bids, the source said.

The applicants included a consortium led by Piramal Group, Yes Bank, Zurich Insurance Company, IndusInd International Holdings, Jindal Power and Darwin Platform Group of Companies chairman Ajay Harinath Singh among others.

On November 29, 2021, the Reserve Bank of India superseded Reliance Capital’s board following payment defaults and governance issues, and appointed Nageswara Rao Y as the administrator for the bankruptcy process. The regulator also filed an application for initiation of Corporate Insolvency Resolution Process (CIRP) against the company before the National Company Law Tribunal’s (NCLT) Mumbai bench. In February this year, RBI appointed administrator invited EoIs for sale of Reliance Capital assets and subsidiaries.