PremiumThe insolvency resolution of debt-laden Reliance Capital is likely to take a new turn as the company's creditors are said to be looking for a second round of 'Challenge Mechanism' or e-auction for the bidders. Two groups namely Torrent and Hinduja both are in the race for acquiring the Anil Ambani-backed company and is said to be giving neck-to-neck bidding.
Sources told PTI that on Monday, the Committee of Creditors (CoC) will meet to decide on the second round of auction as it is expecting bids upwards of ₹10,000 crore from this.
Both Torrent and Hinduja Group have been outbidding each other in the first round of the 'Challenge Mechanism' taking a maximum bidding offer of ₹8,640 crore for the acquisition of Reliance Capital.
Sources told the news agency that the decision to run a second round of Challenge Mechanism has been taken as the commercial viability of the Torrent and Hinduja bids is not acceptable to the CoC. They also added that the bids submitted by Torrent ( ₹8,640 crore ) and Hinduja Group-backed IndusInd International Holdings Ltd.(IIHL) ( ₹8,110 crore) are below the liquidation value and fair value fixed by the independent valuers.
It is being said that the liquidation value of Reliance Capital is factored at somewhat ₹13,000 crore and its fair value is around ₹17,000 crore. As per the sources, the new second round of Challenge Mechanism is most likely to be held near January 20, 2023.
In its regulatory filing on January 4th, Reliance Capital revealed that the NCLT Mumbai bench issued an interim order after bids of Torrent Power and Hinduja Group in the first round.
Under the first 'Challenge Mechanism', the first round of threshold bids amounted to ₹6,500 crore, while the highest net present value (NPV) offered by applicants was ₹7,210 crore. By the time of the second round, the threshold was ₹7,500 crore and the highest NPV was ₹7,620 crore. In the third round, the threshold was ₹8,500 cr while the highest NPV was ₹8,550 crore. But by the end of the fourth round, the threshold which was ₹9,000 crore received the highest NPV of ₹8,640 crore.
Reliance Capital has a consolidated debt of about Rs40,000 crore. RBI had applied to initiate CIRP against the Reliance Group company at the National Company Law Tribunal (NCLT) Mumbai bench. Subsidiaries of Reliance Capital that are pushed for insolvency resolution are - Reliance General Insurance, Reliance Nippon Life Insurance, Reliance Securities, Reliance Asset Reconstruction Company, Reliance Home Finance, and Reliance Commercial Finance. RBI-appointed Nageswara Rao Y is the administrator of Reliance Capital's insolvency process.
Last week, on Friday, Reliance Capital shares closed at ₹10.71 apiece on BSE which is the 5% upper circuit.
The latest deadline to complete the resolution process of Reliance Capital is set at January 31, 2023.