Amid a standoff over the bidding process for debt-ridden Reliance Capital Ltd (RCL) and its subsidiaries, lenders have rejected the concerns raised by the RBI-appointed administrator and have decided to go ahead with their own proposal, an unprecedented development under the insolvency proceedings, sources said.

The Committee of Creditors (CoC) has also decided that all the bids will be on an all-cash basis, the sources said on Tuesday.

Multiple bidders for subsidiaries under the second option will be forced to form a consortium amongst themselves and bid for RCL as a company.

RCL had offered two options to all the bidders. Under the first option, companies could bid for RCL, including its eight subsidiaries or clusters. The second option gave the companies freedom to bid for its subsidiaries, individually or in a combination, the sources said.

The key clusters of RCL are Reliance General Insurance, Reliance Health Insurance, Reliance Nippon Life Insurance, Reliance Asset Reconstruction, and Reliance Securities.

Reserve Bank of India (RBI) on November 29 last year superseded the board of RCL in view of payment defaults and serious governance issues.

Nageswara Rao Y was appointed the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the company.

Around 22 bidders, out of a total of 55 EOIs received, have bid for the Anil Ambani Group firm as a whole company, while the rest have bid for different subsidiaries , individually or in combination, the sources said.

Adani Finserve, Piramal, YES Bank, IndusInd International Holding are some of the leading names that have bid for RCL at the company level under the first option.

The sources said the CoC has also decided to direct all the bidders of the second option, who have bid for different subsidiaries of RCL, to form a consortium and then bid at the company level.

The decision has been taken as all the businesses (subsidiaries/clusters) of RCL are profit-making entities and are well capitalised and management teams for each of the businesses are intact, they added.

Hence, there is no need for a turnaround since none of these entities face any stress and are well-run businesses.

Under the Insolvency and Bankruptcy Code (IBC), no compliant plan can be submitted for these subsidiaries as they do not face any stress and are well-run businesses, the sources said.

These consortiums have to bid on an all-cash basis like bidders under the first option; bidders under the second option will be given 30 days to form consortiums amongst themselves, they added.

This means a company which has submitted an EoI for the life insurance business or general insurance business or securities business alone will have to form a consortium with other companies that have bid for other businesses of the company. Then, that consortium would submit a financial bid for RCL at the company level.

This bid will also be an all-cash bid and will compete with the bids of the first option, the sources said, adding that this arrangement would reduce competition as the total number of bidders will come down substantially.

It may even get challenged by some bidders as it is not compliant with IBC norms, the sources said.

The total verified claims of RCL is at Rs 23,666 crore and the CoC is scheduled to meet on Wednesday to finalise the Request for Resolution Plan (RFRP) document.

The RFRP was to be issued by April 5 but was delayed due to differences between the CoC and the administrator over the bidding process under the second option.

The administrator and its legal advisors were not in favour of such a proposal as they felt it may be challenged legally by some bidders and this logjam had delayed the finalisation of RFRP document.

RCL is the third large non-banking financial company against which the central bank has initiated bankruptcy proceedings under the IBC. The other two are Srei Group NBFC and Dewan Housing Finance Corporation (DHFL).

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