RCap debt resolution: Home finance and NBFC units may be parked into a trust

BL Mumbai Bureau | | Updated on: Jul 17, 2022

A consortium-led approach for the resolution of Reliance Capital seems to be turning into the preferred approach for many of the bidders

The Committee of Creditors (COC) of Reliance Capital has proposed to put Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) in a separate trust. The debts of these two entities will be dealt with separately.

The combined debt of these two entities—RCF and RHF—is around ₹25,000 crore. The proposed trust structure would ensure that the bidders of RCAP do not have to account for this debt, said a banking source. This will reduce the debt on RCAP’s books to around ₹20,000 crore. Last year, over 91 per cent of lenders to RHF and RCF voted in favour of the resolution plan of Authum Investment and Infrastructure. In July 2021, the lenders selected Authum Investment as the successful bidder for RCF and RHF, with a bid of ₹1,600 crore and ₹2,911 crore, respectively. Bankers said that the trust structure will enable RHF to go through with the offer from Authum and at the same time the bidders for RCap will have to deal with lower debt amount. Under the initial plan, bidders for RCap assets would have had to make an offer for debt worth ₹45,000 crore.

The CoC has also waived off the condition of paying an ₹75 crore Earnest Money Deposit (EMD) on the first submission date.

The move to waive off the EMD at the first submission date is yet another attempt by the COC to keep the resolution process going.

According to the banking sources, out of the 54 expressions of interest received initially, But only a handful of bidders, including Piramal Group and Yes Bank, are actively engaged in the resolution process of Reliance Capital.

Companies have the option to bid for either the full group level entity or various business clusters of subsidiaries.

A consortium-led approach for the resolution of Reliance Capital seems to be turning into the preferred approach for many of the bidders.

According to sources close to the development, the size of the Reliance Capital Group and its large number of subsidiaries seems to be turning into a challenge for many bidders. Most are understood to be interested in the profitable general and life insurance arms of the debt-ridden group and are finalising their approaches based on that.

Published on July 17, 2022
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