The Hinduja Group has emerged as the lone bidder for the bankrupt Reliance Capital (RCap) on the second round of auction with an offer of Rs 9,650 crore.

This upfront cash offer brings the Hinduja Group a step closer to acquiring the Anil Ambani-led debt-laden company going under the insolvency process.  The bid was made through a group firm, IndusInd International Holdings (IIHL).

The two other prospective applicants – Torrent Group and Oaktree Capital – did not participate in the auction. They wanted the lenders to guarantee that this auction would be final. Since none came, they stayed outside the auction ring.

Lenders wanted multiple rounds of bidding to get the best deal but are disappointed that no other bidder has come forward.

The Committee of Creditors (CoC) had set a minimum bid amount of Rs 9,500 crore for the first round and Rs 10,000 crore for the second round, with an additional Rs 250 crore for subsequent rounds.

The second round of auction was held on Wednesday after the Supreme Court allowed the lenders to go ahead with the extended challenge mechanism in order to maximise the recovery from the sale of Reliance Capital's assets.

The Committee of Creditors (CoC) will hold a meeting soon to discuss the proposal. It will be submitted to National Company Law Tribunal (NCLT) for approval.

The SC will hear the matter in August, after the CoC submits the results of the auction. 

Resolution process complicated

In the first auction held in December 2022, Gujarat-based Torrent Investments had emerged as the highest bidder with an offer of Rs 8,640 crore. Hinduja Group’s bid was lower at Rs 8,110 crore but they later submitted a revised bid of Rs 9,000 crore. This was contested by Torrent Investments in the Supreme Court.

Torrent also challenged Hinduja Group’s revised bid and the lenders' decision to conduct second round of auction in NCLT Mumbai. 

With the NCLT ruling in favour of Torrent, the lenders of Reliance Capital challenged the order in NCLAT. NCLAT ruled in favour of the lenders and allowed them to go for a second round of auction to maximise their recovery from the sale of Reliance Capital. 

Torrent challenged the NCLAT order in the Supreme Court, which refused to stay the NCLAT order and allowed the lenders to go ahead with second round of auction. 

Meanwhile, the Mumbai-bench of National Company Law Tribunal (NCLT) has extended the deadline for completing the resolution process of RCap by three months to July 16.

Background

On 29 November 2021, the Reserve Bank of India (RBI) superseded the board of Reliance Capital in view of payment defaults and serious governance issues. 

The central bank appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm. 

Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under IBC. The other two were Srei Group NBFC and Dewan Housing Finance Corporation.

The central bank subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of NCLT.

In February last year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.

Bid price below liquidation value

Hinduja Group’s bid price still falls below the liquidation value of Rs 13,000 crore assessed by two independent valuers – RBSA and Duff & Phelps.