Lenders may hold another round of auction for cash-strapped RCap

Lenders will meet on Monday to vote on the proposal

The Committee of Creditors (CoC) of Reliance Capital (RCap) has decided to go for a second round of e-auction for the bidders after it received upfront cash offers from both Torrent and the Hinduja group.
 

While Torrent, the highest bidder in the first round, made an all-cash upfront offer of Rs 8,640 crore, Hinduja had offered Rs 9,000 crore after the auction.
 

The post auction offer led to Torrent moving the National Company Law Tribunal (NCLT) and getting a stay on Hinduja’s offer. Hinduja had bid Rs 8,110 crore in the auction.
 

The second challenge mechanism round will be conducted with a reserve price of Rs 9,500 crore. This is against the minimum threshold value of Rs 6,500 crore in the first round that concluded on December 21.
 

The second round of challenge mechanism is also likely to have a threshold of a minimum cash upfront payment of Rs 8,000 crore for the bidders.
 

This will give Torrent an advantage of Rs 640 crore, as it has already made an all-cash offer of Rs 8,640 crore, said a source. The RCap CoC will meet on Monday to vote on the proposal to conduct a second round of challenge mechanism, the source said.
 

The decision on a second round has been taken as the commercial viability of the Torrent and Hinduja (IIHL) bids is not acceptable to the CoC, said a source.
 

The bids submitted by Torrent and IIHL are far below the liquidation value and fair value fixed by independent valuers. The liquidation value of Reliance Capital is pegged at around Rs 13,000 crore and its fair value is Rs 17,000 crore.
 

The CoC noted an additional cash offer of Rs 900 crore by IIHL, but not part of the net present value (NPV), which has only 30 per cent weightage in the overall evaluation.
 

In the new round of challenge mechanism, with a floor value of Rs 9,500 crore, the participants will have to increase the bid amount by a minimum of Rs 500 crore in the first round. That means, the minimum bid amount in round-1 has to be Rs 10,000 crore. In the subsequent rounds, bidders will have to increase the bid amount by a minimum Rs 250 crore each.
 

The bidders eligible to participate in the second round of e-auction are: Torrent, IndusInd International (Hinduja), Cosmea-Piramal, and Oaktree. 
 

All the bidders have a valid earnest money deposit (EMD), and were eligible participants for the previous challenge mechanism, too. The new e-auction round is likely to be held around January 20.
 

The current deadline to complete the resolution process of RCap is January-end but may be extended by another 15 days.
 

RCap was sent for debt resolution in November 2021 after it defaulted on its loans worth Rs 25,000 crore.