RCap liquidation or negotiation? CoC to meet on Tuesday to take a call

While Deloitte, the process advisor to RCap's administrator, is said to be rooting for liquidation, CoC advisor KPMG hopes to close deal and award the firm to highest bidder

The committee of creditors of Reliance Capital is meeting on Tuesday to take a call on whether to send the company for liquidation or negotiate with the current bidders on the way forward.

The lenders are not happy with the low value of the offers even as the legal advisors of the CoC are split on whether to go for liquidation or continuing with the ongoing bidding process.

Banking sources said Deloitte, the process advisor to Reliance Capital's administrator, is of the opinion that the value of the bids is so low, that the firm should go for liquidation under section 6(A) of the IBC. But the advisor to the CoC, KPMG, has opined that they should proceed with the ongoing process and close the transaction by awarding the company to the highest bidder.

The lenders are also  divided, with a section of CoC members recommending a “close cover option” for the bidding process. Under the process, the award will go to the highest bidder.

Other lenders say that in order to maximise the realisation, the e-auction process should be adopted, which is a more transparent and fair system for price discovery.

The Life Insurance Corporation and the Employees' Provident Fund Organisation (EPFO), which collectively control 35 per cent of voting rights in the CoC, have a debt of Rs 3,400 crore and Rs 2,500 crore, respectively in RCap and will decide the firm's fate. LIC was in the process of selling its debt to ACRE, a stressed asset fund, but the transaction has not been finalised yet.

The highest bid for Reliance Capital of Rs 5,231 crore was submitted by a consortium of Cosmea Financial and Piramal. Hinduja made an offer of Rs 5,060 crore, while Torrent and Oaktree offered Rs 4,500 crore and Rs 4,200 crore respectively.  All the bids are far below the liquidation value of Rs 13,000 crore.