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Bidders for Reliance Capital and its subsidiaries have sought more clarity on the bidding process before raising their bids, while lenders who have frozen the assets want them to raise their bids first or expect the companies to go into liquidation.
Bidders asked lenders to provide more clarity on the process at Friday’s meeting, two people familiar with the discussions said on condition of anonymity. Lenders are disappointed that the bids were well below the liquidation value of Reliance Capital (RCap) and its subsidiaries, but hope that these bids may be raised.
“Everyone will increase their offer, but by how much is the question,” said the banker, one of the two mentioned above. “Everybody knows there’s going to be another round. Obviously, everybody’s going to keep something. Everybody’s bid. Nobody knows what the next step is. Is it going to be a Swiss Challenge or an e-auction, or a negotiation? Unless the process is clear , why would the bidders want to push the bid until we get a timeline? Are they trying to close by the end of December or the end of January?” asked the banker.
Lenders will meet again on Tuesday to discuss various options, including a sealed envelope bidding process, a reserve price auction or a reverse auction.
After the bidders submitted bids on Monday, two independent firms hired by the lenders on Wednesday submitted their estimates of the liquidation value of Reliance Capital and its subsidiaries to the board of creditors. From this, Duff and Phelps arrived at a liquidation value of ₹12,500 kroner, while RBSA has determined ₹13,200 crowns. However, the highest bid received was a mere one ₹5,231 crore—placed by Piramal-Cosmea Financial—and was followed by the Hinduja Group on ₹5,060 crore, Ahmedabad-based Torrent ₹4,500 crores and Oaktree at ₹4,200 crowns.
Bidders, however, claim that their bids are in line with India’s Life Insurance Corp. which sold Reliance Capital bonds ₹3,400 kroner Ares SSG Capital-backed Assets Care and Reconstruction Enterprise Ltd.
“Stress is present at the level of the key investment company (CIC). Both insurance companies are doing well. The offers are below both fair market value, which is a year old, and liquidation value,” said the banker, who is part of Reliance Capital’s board of creditors. “The sale of LIC is different because it is an open process, and bidders can buy the debt for 27 cents on the dollar. But this does not mean that the company is for sale at the same reference price,” added the banker.
Duff and Phelps also set the liquidation amount of Reliance General Insurance at ₹7,000 crores and the Reliance Life Insurance business at ₹4,000 crowns. RBSA gave a liquidation amount of ₹7,500 crores to Reliance General Insurance and ₹4,000 crores to Reliance Life Insurance.
Lenders did not receive separate bids for general and life insurance, even though both firms account for over 90% of the firm’s total value.
Lenders have received three bids for the rest of the business, such as Reliance Securities, property redevelopment and real estate firm Reliance Capital. The combined value of the offer of these companies is ₹120 million, but according to the valuation reports of Duff and Phelps and RBSA, the liquidation amount of the same is estimated at ₹280 million i ₹240 million, respectively.
In November 2021, the RBI referred RCap to receivership after it defaulted on payments ₹24,000 crore bonds. Two of its units — Reliance Commercial Finance and Reliance Home Finance — were, however, outside the resolution mechanism.
In September this year, the lenders closed a deal with Authum Infrastructure and Investment to sell Reliance Commercial Finance by taking a 75% cut. Reliance Home Finance has not yet found a buyer.
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