Hinduja group not keen to make higher offer for Reliance Capital

26/03/2023

Mumbai, mar 26: The Hinduja group has backtracked from making an offer for bankrupt firm, Reliance Capital by informing lenders that it will not be able to offer Rs 9,000 crore for the firm as indicated earlier in December last year.
The revised Hinduja stand has put Indian lenders, with an exposure of Rs 24,000 crore, in a spot as it was the Hinduja's offer, which led to a call for second auction and litigation by the other bidder Torrent.
Torrent, the highest bidder for the company in the first auction, has moved the Supreme Court and plans to wait for the apex court verdict before participating in any fresh auction.
A banking source said there was an informal meeting of few lenders of Reliance Capital with the bidders Torrent Group and Hinduja Group on Friday where the Hindujas revised their stand. The full CoC meeting is scheduled for Monday.
"During the meet, the Hinduja group backtracked from its stand till now and informed that its bid in the previous round should be considered as Rs 8,110 crores instead of its revised bid of Rs 9,000 crores.
The Hindujas had submitted the offer after Torrent was declared as the highest bidder in the Challenge Mechanism," said a source close to the development.
"With this, the lenders are faced with the possibility of significant losses in interest cost due to the delay on account of the toppling bid," the source said.
The valuation of the company fell after the Union Budget-imposed fresh tax on expensive life insurance products above Rs 5 lakh.
The valuation of all life insurance companies are down since the Budget. Reliance Capital owns 51 over cent stake in Reliance Nippon Life Insurance and 100 per cent stake in Reliance General Insurance.
The SC has already issued notices to all parties in the appeal filed by Torrent and will hear the matter in August In the meanwhile, the SC has permitted the lenders to conduct a second Challenge Mechanism or conduct negotiations, which will be subject to its final order in the appeal filed by Torrent.
This also means that the lenders cannot hand over the company to any bidder till the SC passes a judgement on the Reliance Capital matter and none of the bidder are interested in the uncertainty, said the source.
With this, the Reliance Capital resolution process has almost stalled and has delayed the resolution which started in November 2021.
Interestingly, if a second auction is conducted, it will also be fraught with the same challenge of a toppling bid being submitted by the losing bidder post the auction.
Hence, lenders will have to come out with a fool-proof solution to give certainty to bidders and revive interest in the resolution, the source said.
Lenders of RCap had earlier submitted before the NCLAT (National Company Law Appellate Tribunal) that the CoC is being prevented from discovering the best price in the corporate insolvency resolution process and the NCLT has acted more than its jurisdiction at a stage where even signed plans were not placed before the CoC for consideration.
In its written submission before NCLAT, Vistra ITCL (India) RCap’s secured lender said, “The NCLT has us­urped the jurisdiction of the CoC by holding that the CoC has to vote on the Rs 8,640-crore plan of Torrent and the Rs 8,110-crore plan of IndusInd Inte­rnational Holdings (IIHL), a part of Hinduja Group and that CoC has no jurisdiction to negotiate even on the figures.”

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