The Committee of Creditors (CoC) of Reliance Capital (RCap) has finalised the e-auction mode for the completion of its insolvency process, with Rs 5,300 crore – the highest bid by Cosmea-Piramal consortium – as the base price. The two-day e-auction will commence on December 19.
In the first round, bidders should quote at least Rs 1,000 crore more than base price. In the second round, the bid value should be increased by a minimum of Rs 750 crore, and another Rs 500 crore in the third round. This should be further increased by a minimum of Rs 250 crore in the fourth round, sources close to the development said.
RCap’s lenders had taken the decision at their meeting held today. This is the first time an e-auction of this scale and magnitude is taking place under the Insolvency and Bankruptcy Code, they added.
Earlier on Tuesday, RCap’s CoC favoured the auction mode to complete the insolvency process of the debt-laden firm, voting against the liquidation process.
The CoC had discussed two options – closed cover auction and an e-auction – but RCap’s largest lenders, the Life Insurance Corporation of India and Employees’ Provident Fund Organisation (EPFO), had voted in favour of the e-auction. LIC and EPFO, who had rejected suggestions of a liquidation, have 35% voting rights in CoC.
LIC’s debt in RCap stands at Rs 3,400 crore, while that of EPFO is at Rs 2,500 crore.
The e-auctions would be conducted in an ascending mode, they added.
However, the CoC did not take any decision on the Reliance General Insurance Company’s (RGICL) demand for Rs 600 crore capital infusion. RGICL, a subsidiary of debt-laden RCap, had sought the “urgent” capital infusion by December 31, 2022, from the parent firm to pursue growth plans.
The capital was required to preserve the business, enhance the value and take the company’s solvency (ability of a company to meet its long-term fixed expenses and accomplish long-term expansion and growth) to about 175% from the present 155%.
The process advisor to the RCap’s bankruptcy was in support of the liquidation process, while the advisor to the CoC wants to close the insolvency process by awarding the bid to the highest bidder. KPMG is the advisor to the CoC, while Nageswara Rao Y of Deloitte is the process advisor to RCap’s administrator.
Last week, a joint venture by Cosmea-Piramal had submitted a binding bid of Rs 5,231 crore, the highest for RCap as a core investment company, followed by Hinduja Group at Rs 5,060 crore. Torrent Group’s bid was at Rs 4,500 crore and that by Oaktree Capital was at Rs 4,200 crore.
According to Duff & Phelps, an independent valuator of RCap have pegged the liquidation value of the firm at Rs 13,000 crore, more than double the value of the binding bids it received, while that by RBSA stood at Rs 13,200 crore.