Lenders vote in favour of Hinduja offer for bankrupt Reliance Capital
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Lenders to debt-ridden Reliance Capital have voted in favour of a resolution plan submitted by Hinduja Group firm IndusInd International Holdings Ltd (IIHL), which made the highest cash offer of Rs 9,661 crore and was the lone bidder in the second round of auction.
An overwhelming majority of 99.6 per cent votes supported the IIHL plan as voting concluded on Thursday, banking sources told Business Standard.
Taking into account the cash balance of Rs 500 crore in the books of Reliance Capital, the lenders are expected to receive nearly Rs 10,200 crore for distribution as against Rs 16,000 crore principal secured debt. This would mean about 65 per cent recovery for the lenders, said the sources.
The insolvency administrator for Reliance Capital plans to file the Hinduja group company’s resolution plan with the Mumbai Bench of the National Company Law Tribunal (NCLT) next week, they said.
The transaction, however, will depend on the Supreme Court’s decision on a petition filed by Ahmedabad-based Torrent Group, which objected to the lenders conducting a second auction for Reliance Capital. In the first auction held last December, Torrent was the highest bidder with an offer of Rs 8,640 crore.
In the past, the Supreme Court has given prominence to the “commercial wisdom” of banks in deciding such cases, said a corporate lawyer.
Reliance Capital, once owned by Anil Ambani, was sent for debt resolution by its lenders in November 2021 after the firm defaulted on loans worth Rs 24,000 crore. Several companies had expressed interest initially, but most of them did not make any binding offers.
The Hinduja offer is far below Reliance Capital’s liquidation value of Rs 13,000 crore. All lenders will get an equal amount from the offer. This decision is expected to mitigate any inter-creditor dispute among the lenders, thus ensuring a smoother resolution process.
A source in Torrent said it kept off the second auction because there was no clarity on the process and its concerns were not addressed. In a letter to Reliance Capital’s committee of creditors (CoC), Torrent reiterated its stand on the “illegality” of the second auction.
Reliance Capital owns a 51 per cent stake in Reliance Nippon Life Insurance and 100 per cent in Reliance Nippon General Insurance. It also owns a stake in stock-broking firm Reliance Securities, an asset reconstruction company, and a 20 per cent stake in the Indian Commodity Exchange.
Of these, the two insurance companies were making profits.
The Hindujas already have a presence in the financial services sector with stakes in IndusInd Bank and Hinduja Leyland Finance, a non-banking finance company owned by its vehicle manufacturing firm, Ashok Leyland. The group also has a housing finance business, which remains core to its strategy to increase its presence in financial services.
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