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The committee of creditors of Reliance Capital will meet on Friday to take a decision on the newly introduced ‘challenge mechanism’ in the final bidding process for resolution of the company.
Bidders in the running have objected that such a clause was not part of the original RFRP (request for resolution plan) document issued to the applicants.
KPMG, the advisor to Reliance Capital’s CoC and the legal advisor Luthra & Luthra, have proposed multiple options towards the ‘challenge mechanism,’ according to sources.
The first and the most likely option is the Swiss Challenge Process where the highest bidder will be declared as the anchor bidder and offered the Right of First Refusal, and the other bidders can participate. The second option is a bilateral negotiation between the CoC and each bidder. The third option is an electronic auction for bidders to participate and declare the highest bidder, and the fourth option is a combination of all the above.
Queries sent to the administrator were unanswered at the time of this publishing.
‘Challenge clause not specified earlier’
Bidders such as Piramal Group, Hinduja, Torrent Capital, Zurich, Oaktree Capital, and Advent International have reportedly written to the RBI appointed administrator, Nageswara Rao, expressing concerns regarding insertion of the ‘challenge mechanism’ in the final stage of the bidding process.
They have also argued that there was no such clause in the bidding process of Dewan Housing Finance — the largest resolution undertaken through the NCLT, and the winner was selected purely on the basis of the NPV (net present value).
Similarly, there has been no challenge mechanism introduced in the resolution process for Srei Group companies, where binding bids need to be submitted by November 15, bidders have argued.
Under the initial bidding process, Reliance Capital’s CoC received 14 prospective bids, of which six bids — Torrent Capital, IndusInd Group, Oaktree Capital, Cosmea Financial, Authum Investment, and B Right Group — were for all the Group’s assets.
Piramal Finance, Zurich Re and Advent International submitted individual bids for the general insurance arm, Jindal Steel and Power and UV Asset Reconstruction Company for the asset reconstruction business and Choice Equity, Global Fincap and Grand Bhawan for Reliance Securities and other assets. Later, Aditya Birla Capital also joined the bidding process for the life insurance arm.
The deadline for submitting binding bids for Reliance Capital has been extended to November 28.
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