Torrent wins race to acquire RCap with Rs 8,640 crore offer to lenders

Set to foray into financial services sector with the acquisition

Ahmedabad-based Torrent group has won the race to acquire Reliance Capital after making an offer of Rs 8,640 crore for the company in an auction held on Wednesday.

The offer was made by the promoter entities of the Torrent group. According to banking sources, the Hinduja group also participated in the auction with an offer of Rs 8,150 crore but was beaten by Torrent. Cosmea-Piramal and Oaktree did not participate in the race.

This would help Torrent foray into financial services as it will acquire 100 per cent stake in Reliance General Insurance, and get 51 per cent stake in Reliance Nippon Life Insurance among other assets. Torrent Pharmaceutical is the flagship company of the Torrent Group which is one of the leading pharma companies in India.

The offer by Torrent is below the liquidation value of Reliance Capital but is more than Cosmea-Piramal's binding offer of Rs 5,231 crore. The lenders will now meet to strategise on handing over the company to Torrent and evaluate the bids on the basis of an upfront cash offer and net present value.

Reliance Capital was sent for debt resolution in November last year under the Insolvency and Bankruptcy Code, 2016, after it defaulted on bank dues worth Rs 24,000 crore.

The decision to have an e-auction was taken at the behest of the Life Insurance Corporation and the Employee Provident Fund Organisation (EPFO), who control 35 per cent of the voting in the committee of creditors. Both lenders voted against liquidation, and initiated an electronic auction of the assets which ended on Wednesday. 

Creditors of Reliance Capital had offered two options for the bidding: Under the first option, companies had to bid for Reliance Capital as a whole, including its subsidiaries. Under the second option, bidders could separately go for individual businesses of Reliance Capital.

In an earlier round, Reliance Capital had received four binding bids at the company level, with the highest bid coming from a consortium of Piramal group and Cosmea Financial Holdings.

Valuation reports by Duff & Phelps and RBSA Advisors had pegged the liquidation value of Reliance Capital at Rs 12,500 crore and Rs 13,200 crore, respectively. The liquidation value of Reliance Capital is far higher than the value of the bids received.

According to Duff and Phelps, the liquidation value of Reliance General Insurance alone is worth Rs 7,000 crore, and Reliance Nippon Life Insurance is Rs 4,000 crore.

The Rs 21,000-crore Torrent group is led by 56-year old Samir Mehta. Under his leadership, the firm took several strategic initiatives, including forays into new sectors such as power and city gas distribution. In the latter, Torrent is making an investment of Rs 10,000 crore, and rolling out its network across 16 areas in India.

The last lap

• Lenders to take a call on Torrent offer in next meeting
• Upfront cash, net asset value to decide its fate
• Hindujas’ offer second best at Rs 8,150 crore
• Cosmea-Piramal, Oaktree stay away from auction

What RCap owns

• Reliance General Insurance
• Stock broking firm Reliance Securities
• Reliance Asset Reconstruction Company   
• Reliance Health Insurance

51% stake in Reliance Nippon Life Insurance

20% stake in Indian Commodity Exchange