 "Reliance Capital")
Lenders of Reliance Capital (RCap) will begin voting on the resolution plan put forth by a Hinduja Group entity starting Friday, June 9. The plan offers a recovery amount of a little over Rs 10,000 crore. During a two-day meeting, the lenders discussed the plan and will now proceed with the voting process.
Once owned by Anil Ambani, the company defaulted on loans worth Rs 24,000 crore and consequently, was sent for debt resolution in November 2021.
Resolution plan
IndusInd International Holdings Ltd (IIHL), a subsidiary of the Hinduja Group, submitted a detailed resolution plan earlier this week. Other bidders, including Torrent Investments, Piramal Capital, and Oaktree Capital, did not submit detailed plans within the given deadline, according to a report by the Economic Times (ET).
The administrator of RCap, Nageswara Rao Y, has invited the committee of creditors to vote on IIHL's plan from June 9. If more than 66 per cent of verified creditors vote in favor of the plan, the administrator will file an application with the National Company Law Tribunal (NCLT) seeking approval for the IIHL plan.
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At the end of May, the lender of RCap had approved a plan to distribute funds received from the resolution plan based on their respective admitted claims, regardless of how they voted on the plan. Reportedly, this fund distribution will be different from earlier practices as the new plan requires equal treatment to all lenders and avoids litigation.
Separately, the Hinduja Group will seek consent from the Reserve Bank of India (RBI) for the plan. The RBI's approval is required for the acquisition of financial services companies in bankruptcy resolution processes.
Expected recovery amounts
Claims from lenders amounting to Rs 23,666 crore have been admitted by the administrator. However, lenders are expecting a recovery of about Rs 10,090 crore from the sale of RCap, which is below the liquidation value estimated at Rs 12,500-13,000 crore, reported ET. This implies a recovery of about 43 per cent for the lenders.
The Rs 10,090 crore recovery amount includes a final offer of Rs 9,660 crore from the Hinduja Group entity and a cash balance of Rs 430 crore, which will be distributed to lenders.
However, the sale of RCap is pending the (SC)'s decision on a suit filed by Torrent Investments regarding the extended auction deadline.
Previous auctions of RCap
The first auction was held on December 21, where Torrent Investments made the highest offer of Rs 8,640 crore. The Hinduja Group entity had initially offered Rs 8,110 crore, however, revised its offer to Rs 9,000 crore within 24 hours. This move was contested by Torrent. The next auction took place on April 26 in which IIHL was the sole participant, offering Rs 9,650 crore upfront.
The SC is scheduled to hear the case in August. The top three debtholders of RCap are Life Insurance Corporation of India, Employees' Provident Fund Organisation, and JC Flowers Asset Reconstruction Co. Yes Bank, an original lender to RCap, sold its debt to JC Flowers ARC.
Reliance Capital had reported a net loss of Rs 4,249 crore in the fourth quarter of financial year 2021-22. However, the company had managed to narrow its net loss to Rs 1,488 crore by the end of financial year 2022-23.
Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under the insolvency and bankruptcy code (IBC), reported PTI. Srei Group NBFC and Dewan Housing Finance Corporation (DHFL) were the other two.
