The committee of creditors (CoC) Thursday discussed various concerns from potential bidders regarding the auction of the distressed financial services company that is undergoing a corporate insolvency process.
Torrent Investments, a Hinduja group entity and Oaktree Capital have indicated to the administrator Nageswara Rao Y that they will likely participate in the proposed auction scheduled on April 26.
The decision of lenders to negotiate only with the highest bidder will send out a message to potential buyers to put in aggressive bids at the auction if they are serious about acquiring Reliance Capital, said the people cited above.
The potential bidders had sought assurance from lenders that they would not hold a third round of auctions if the highest offer were to trail the liquidation value.
Lenders led by Life Insurance Corporation of India were uncomfortable giving such a commitment, said the people cited above.
In fact, lenders are holding a second round of auctions primarily because the offers in the first round were below the liquidation value of ₹12,500-13,000 crore. For the proposed auction, lenders have decided to retain ₹9,500 crore as the threshold price, including ₹8,000 crore as upfront cash.In the first auction held on December 21, Torrent Investments gave the highest offer of ₹8,640 crore, while the Hinduja Group entity offered ₹8,110 crore. However, within 24 hours, Hinduja gave a revised, improved offer of ₹9,000 crore, a development Torrent contested at the National Company Law Tribunal (NCLT) while questioning the sanctity of the auction process.
Torrent won a case at NCLT to bar lenders from holding an auction. However, the appellate authority overturned the tribunal order. Last week, the Supreme Court directed lenders to hold a challenge-mechanism auction, but also said it would again hear the matter in August.
“Lenders are hopeful of receiving improved offers in the second round,” said one of the persons cited above. “But if the offers are below the liquidation value, some of the largest lenders may not hesitate to vote against the plans,’ the same person said.
The administrator has admitted verified claims of ₹23,666 crore from financial creditors. Life Insurance Corporation of India has the biggest exposure, followed by JC Flowers ARC.
The central bank superseded the board of Reliance Capital on November 30 last year, citing governance concerns. It is a core investment company with 20 units under its fold, including insurance, broking, and asset reconstruction.