Hinduja lone bidder for RCap in second auction, offers Rs 9,650 cr

Upfront payment proposed; Torrent, Oaktree skip

The Hinduja group was the sole participant in the second round of auction for bankrupt Reliance Capital (RCap), held on Wednesday. It made an offer of 9,650 crore as an upfront payment to the lenders to the debt-ridden comany — still far below the liquidation value of Rs 13,000 crore.

Torrent, which was the highest bidder in the first round with an offer of Rs 8,640 crore, did not participate in the latest auction. American financial powerhouse Oaktree also stayed away.

An industry source said Torrent kept off the auction because there was no clarity over the process and its concerns were not addressed. Torrent moved the Supreme Court in March after RCap’s lenders decided to go for a second auction to maximise the value of its assets.

If its offer is accepted, the Hinduja group — which has a stake in IndusInd Bank — will take over two profit-making insurance ventures currently owned by RCap. Torrent declined to comment on its future plans. An e-mail sent to the Hindujas did not elicit any response.

In the first round of auction, the Hindujas were the second-highest bidder with an offer of Rs 8,110 crore. But within a few hours of the conclusion of the auction, the group submitted a revised bid of Rs 9,000 crore, leading to the lenders seeking a second auction.

Torrent contested the Hindujas’ toppling bid and also the legality of the second auction and moved the court. The matter is currently pending before the Supreme Court, which permitted RCap’s lenders to conduct another auction but any outcome will be subject to its final judgment in the matter. The next date of hearing in the matter is scheduled for August this year.

In a letter to the committee of creditors (CoC), communicating its decision not to bid in the second auction, Torrent reiterated its stand on the “illegality” of a second auction, saying it was in gross violation of the current bankruptcy laws. Torrent said the process continues to be arbitrary and vague as the CoC decided not to freeze the resolution plans (except the financial proposal) before the extended challenge mechanism. This would permit a bidder to vitiate the process again by changing its submission outside of the auction.

Torrent said the CoC did not offer any finality in the process even after the second auction and that it has reserved the right under the auction to further negotiate with the resolution applicant making the best offer.

Such a right of negotiation only with the highest bidder was not provided to Torrent despite emerging as the highest bidder in the first auction that concluded in December last year.

Torrent further said such an open-ended process is only a breeding ground for more toppling bids by deviant bidders and consequent litigation leading to more delays.

RCap, earlier owned by Anil Ambani, was sent for debt resolution under the Insolvency and Bankruptcy Code, 2016, after the company failed to repay its debt worth Rs 24,000 crore.