Lenders to Reliance Capital (RCap) approved a proposal to conduct another round of challenge mechanism, from which they are targeting more than ₹10,000 crore, with 100% votes. This would result in the present bids by Torrent Group and Hinduja Group becoming “invalid”.
The proposal was wholly supported by RCap’s largest lenders – Life Insurance Corporation of India (LIC) and the Employees’ Provident Fund Organisation (EPFO) – who together have 35% of voting rights in the committee of creditors (CoC).
LIC’s debt in RCap stands at ₹3,400 crore, while that of the EPFO is ₹2,500 crore. Both the firms had earlier rejected proposals to liquidate the former Anil Ambani group company.
The voting process for approving the second round of e-auction started on Monday and had initially received 75% of votes in favour. The proposal needed to be approved by at least 51% of votes. The process ended on Tuesday.
The CoC’s decision to conduct another round of challenge mechanism was aimed at maximising proceeds from the insolvency process.
The second round would be conducted with a reserve price of ₹9,500 crore, compared with the minimum threshold value of ₹6,500 crore in the first round. This round, slated to begin by January 20, will mandate that the bidders make a minimum upfront cash payment of about ₹8,000 crore. The participants will have an option to raise the bid amount by a minimum of ₹500 crore in the first round. This will increase the minimum bid amount to ₹10,000 crore.
Approval of a second round of auction would mean that the existing bids – by Torrent and Hinduja – would be termed “null and void”.
Torrent had earlier placed a ₹8,640-crore bid through a group company, Torrent Investments, and offered to pay ₹3,750-crore upfront cash and balance in deferred payments. Later, Torrent Group revised its proposal with an offer to pay the entire bid amount of ₹8,640 crore in upfront cash, even as it secured an interim stay on declaring another bidder Hinduja as winner.
Hinduja’s offer of ₹9,000 crores on a net present value with an upfront cash offer of ₹8,800 crore, which was revised from ₹8,110 crore a day after the conclusion of e-auctions, is still the highest.
Apart from existing bidders – Torrent Group and Piramal Group – earlier aspirants such as Cosmea Financial, Piramal Group and Oaktree Capital will also be eligible to take part in the second round.
The National Company Law Tribunal’s Mumbai bench will on January 12 hear a petition filed by Torrent Group on the revised bidding by Hinduja Group and a petition on the second challenge mechanism.