The committee of creditors of Reliance Capital will meet on Tuesday to decide on the future course of action in the company’s ongoing debt resolution. While the lenders are unhappy about the bids received so far by potential buyers there is a difference of opinion on the way forward with some of the advisors in favour of liquidating the company.
“The bids received for the stressed assets of RCap is 70 per cent lower than the liquidation value. The question before the lenders is whether to go through with the insolvency process and try to get more from the bidders, or liquidate the company. The objective is to maximise the recovery for the lenders,” said a banking source.
Close cover option
Some CoC members are of the view that the ongoing insolvency process should continue but other options for the sale process could be explored. According to sources, a section of the COC members has recommended a “close cover option” for the bidding process. Under this process, the award will go to the highest bidder. But others have pushed for an e-auction process to make the bidding more transparent.
According to the sources, the key to resolving the differences lies with the LIC and EPFO, who collectively control 35 per cent of the voting rights in the COC.
“The decision by LIC and EPFO will play a pivotal role in deciding the final resolution process. They have to decide whether they want the resolution or liquidation, and what option they want to choose in case they wish to go ahead with the resolution process,” said another source.
Highest bid ₹5,231 cr
Reliance Capital received 4 binding bids on 28 November. According to sources, the highest bid was submitted by a consortium of Cosmea Financial and Piramal, with a bid value of ₹5,231 crore. Hinduja, with a bid value of ₹5,060 crore is the second highest bidder. Torrent and Oaktree have placed bids worth ₹4,500 crore and ₹4,200 crore respectively.
On the other hand, the valuation reports by the Independent valuers – Duff & Phelps and RBSA, have pegged the liquidation value of Reliance Capital at ₹12,500 crore and ₹13,200 crore respectively.