Updated: Jan 21
Ranging from complex asset pooling to low ball offers to fanciful e auctions, everything has been tried during this insolvency period auch that now the bod values are 60-70% lower than expected.
What is happening: After spending about a year under bankruptcy proceedings, Reliance Capital Ltd. is witnessing a tight race for its assets.
The main unresolved issue is that nobody is satisfied.
Bids for Reliance Capital, currently undergoing the corporate insolvency resolution process (CIRP), have been much lower than the liquidation value of Rs 13,000 crore leading to differences in opinions between the lenders and the Reliance Cap administrator.
Backdrop: In 2019, India’s banking regulator RBI took over the Board of Reliance Capital, the group’s non-banking finance company, and sent it to the dark corridors of bankruptcy courts.
In the race to grow at all costs, Companies in the Reliance Group took on enormous amounts of debt.
When the first entity Reliance Communications fell in 2017, Anil Ambani’s business empire came crashing down like a pack of dominos, the current victim being Reliance Capital.
The big picture: Reliance Capital was a financial services company that had its hands in many fields including asset management, life insurance, wealth management, commercial finance, and home finance.
Eventually post rhe chain reaction of debts, Reliance Capital couldn’t even pay its own creditors leading to March 2019 when it only had Rs 11 crores in cash.
Soon by June, its auditor PwC had resigned stating that it wasn’t satisfied by Reliance Capital’s response to financial issues it had flagged.
The numbers: On Nov 28, the last date for submitting bids, RCap received 4 binding bids.
The highest bid of Rs 5,231 crore has been submitted by a consortium of Cosmea Financial and Piramal.
Hindujas with Rs 5,060 crore emerged as the second highest bidder, followed by Torrent Investment (Rs 4,500 crore) and Oaktree (Rs 4,200 crore).
Valuation reports by independent valuer Duff & Phelps has pegged the liquidation value of RCap at Rs 12,500 crore while RBSA has valued the company’s assets at Rs 13,200 crore.
What next: At this point, it is necessary for relevant parties ro determine if they want the resolution or liquidation and what option they want to choose in case they wish to go ahead with the resolution process.
News in short: Reliance Capital, in poor condition since 2019 hit new lows with its bids dropping 60-70% lower than the expected rates, which in compilation with other disappointments results in Reliance Capital Insolvency basically being an elaborate mess.