Differences between lenders and debt-ridden Reliance Capital’s process advisors on the resolution plan came to the fore at the Committee of Creditors (CoC) meeting on Tuesday to take a final call.
With binding bids coming in at extremely low prices, advisors and CoC members have differing views on what process they should follow for resolution. Sources said the choice is between liquidation and continuing with the ongoing bidding process.
Sources said Deloitte, process advisor to Reliance Capital Limited (RCL) administrator Y Nageswara Rao, is of the opinion that the bids are valued at about 70% less than the liquidation price of ₹13,000 crore.
Should Reliance Capital go for liquidation under Section 6(a) of the Insolvency and Bankruptcy Code (IBC), the company would realize close to ₹13,000 crore.
On the other hand, the CoC, advisor to KPMG, is of the view that they should go ahead with the ongoing process and finalize the resolution process by bidding to the highest bidder.
Sources said there is difference of opinion not only between the two process advisors but also among the CoC members on various options for resolution.
According to sources, a section of the CoC members have recommended a ‘closed cover option’ for the bidding process. Under the process, the prize would go to the highest bidder.
The second view within the CoC is that to maximize the recovery, the e-auction process should be adopted, which is a more transparent and fair system for price discovery and is the more preferred and prevalent process in India.
According to sources, the key to bridging the differences lies with LIC and EPFO, who collectively control 35 per cent voting rights in the CoC.
Debt-ridden RCL owes Rs 3,400 crore and Rs 2,500 crore to LIC and EPFO, respectively.
Sources said the decision of LIC and EPFO will play a key role in deciding the final resolution process. resolution process.
Consequently, Tuesday’s meeting of the CoC is significant in the view that all these divergent views and options will be discussed among the lenders, which will be acceptable to all stakeholders, sources said.
Reliance Capital received four binding bids on November 28, the last date for submission of bids.
The highest bid has been submitted jointly by Cosmea Financial and Piramal with a bid value of ₹5,231 crore. After this Hinduja made a bid of Rs 5,060 crore. The bid size of Torrent and Oaktree is ₹4,500 crore and ₹4,200 crore, respectively.
On the other hand, the valuation report by independent valuers pegs the liquidation value of Reliance Capital Limited (RCL) at ₹12,500 crore and ₹13,200 crore, respectively.
The Liquidation Value (LV) of Reliance Capital estimated by these two independent valuers is approximately 70% higher than the bids received by the Administrator.
RCL gave two options to the bidders. Under the first option, companies can bid for Reliance Capital Ltd, which comprises eight of its subsidiaries or clusters. The second option gave freedom to the bidders to bid for the subsidiaries individually or in combination.
Eight businesses of RCL are closed. These include general insurance, life insurance, health insurance, securities business and asset reconstruction, among others.
The Reserve Bank of India (RBI) had superseded the board of RCL on November 29 last year in view of payment defaults and serious governance issues.
The RBI appointed Nageswara Rao Y as the administrator in connection with 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 the IBC.
The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The RBI subsequently filed an application in the Mumbai bench of the National Company Law Tribunal (NCLT) for initiation of CIRP against the company.
In February this year, the RBI-appointed administrator had sought expressions of interest for the sale of Reliance Capital.