RCap resolution: Bidders prefer consortium approach

Surabhi | Updated on: Jul 06, 2022
The Committee of Creditors of Reliance Capital has decided to extend the date of submission of resolution plan by prospective bidders to August 10

The Committee of Creditors of Reliance Capital has decided to extend the date of submission of resolution plan by prospective bidders to August 10 | Photo Credit: cueapi

Large number of subsidiaries turning out to be a challenge for bidders as many want to acquire only the insurance arm

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 seem 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 it.

Too many subsidiaries

“There are too many subsidiaries, which makes it unwieldy for a resolution applicant unless they have deep pockets or they are looking to sell off the different subsidiaries post acquisition,” said the source.

Most bidders, including YES Bank, are understood to be keen on the insurance firms of Reliance Capital — Reliance General Insurance and Reliance Nippon Life Insurance. “Many of the bidders are keen on forming a consortium, as is possible under the second option,” the source noted.

Just a handful of companies, including the consortium led by Piramal Enterprises, YES Bank and Torrent Investment, Zurich Insurance and Cholamandalam Investment and Finance Company, are still engaged in discussions for the ongoing resolution of Reliance Capital from the initial 54 bids that were received.

Race still on

While the Piramal consortium, YES Bank and Torrent Investment had put in bids for both the options — the entire Reliance Capital — as well as business clusters of the group. Meanwhile, Zurich Insurance is understood to be interested in the general insurance cluster while Cholamandalam Investment and Finance Company is interested in the life insurance cluster.

Companies have the option to bid for either the full group level entity or various business clusters of subsidiaries. But the second option of a consortium is also challenging as it requires an upfront cash payment.

The Committee of Creditors of Reliance Capital has decided to extend the date of submission of resolution plan by prospective bidders to August 10. Previously, it had also decided to extend the timeline for the resolution process by another two months to November 2, 2022, due to tepid response from bidders.

Published on July 06, 2022
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