Lenders to debt-laden Reliance Capital (RCap) on Tuesday decided to hold the second round of e-auction on April 26, while seeking a 90-day extension to complete the resolution process.
The committee of creditors (CoC) decided to postpone the extended challenge mechanism, slated on Tuesday, to ensure “enough time” is provided to verify that all the bids are compliant with insolvency rules, sources close to the development said.
The e-auction was pushed back after bidders sought “certainty” in the process.
Also Read: RCap lenders postpone e-auction ‘indefinitely’
This is because the Supreme Court is yet to give a final order. The delay is also to ensure that no further negotiations or bids take place after the second e-auction.
“If the final bid in the second round of auction remains below liquidation value, then the question is whether to accept it as the final offer or opt for liquidation of the assets. In such a scenario, the RCap’s largest lenders, Life Insurance Corporation of India (LIC) and Employees’ Provident Fund Organisation (EPFO), would be the key decision makers,” one of the sources said.
LIC has an admitted claim of Rs 4,909 crore and EPFO of Rs 3,309 crore, and they jointly have over 30% of the voting rights in the CoC. The beleaguered company’s total admitted claims are at Rs 25,434 crore.
Other public sector undertakings with admitted claims include Postal Life Insurance, General Insurance Corporation of India, Army Group Insurance Fund, New India Assurance Company and State Bank of India Employees Fund, among others. The minimum affirmative voting threshold to ensure approval of the Resolution Plan under Insolvency and Bankruptcy Code (IBC) is 66%, they said.
The CoC wants all the resolution plans to be compliant with the IBC and the Request for Resolution Plan rules before the commencement of the e-auction. This is to avoid further delays as at the time of the first auction held on December 21, 2022, many of the plans were found to be non-compliant.
Also Read: Reliance Capital lenders likely to push resolution deadline to May end
The second round of e-auction (or the extended challenge mechanism) has been postponed twice in the past due myriad reasons, including legal tangles.
Separately, the administrator moved an application before the National Company Law Tribunal’s Mumbai bench, seeking a 90-day extension for the completion of the resolution process. On April 7, RCap’s lenders had decided to postpone the deadline, which had been extended multiple times, to May-end from the present April 16.
The liquidation value of RCap’s assets conducted by two independent valuers — RBSA and Duff & Phelps — is pegged at at Rs 13,000 crore.
