Reliance Capital lenders vote in favour of Hinduja Group firm

By Consultants Review Team Friday, 30 June 2023

Lenders of the heavily indebted Reliance Capital Limited (RCAP) anticipated to collect cash upfront of Rs 9,661 crore from the Hinduja Group entity with up to 99 percent of votes in favour of Hinduja Group firm IndusInd International Holdings Ltd (IIHL). In the second round of bidding, the Hinduja group submitted the highest cash offer of Rs 9,661 crore, which was accepted by the RCAP lenders.

In comparison to the main secured loan of Rs 16,000 crore, lenders are anticipated to receive about Rs 10,200 crore for distribution. This represents a recovery of 65% for the lenders, as well as the cash balance with Reliance Capital (RCAP) of over Rs 500 crore. The RCAP Administrator is likely to submit the IIHL resolution plan at NCLT Mumbai the following week because the deadline of July 16 is quickly approaching.

Voting on the IIHL resolution plan lasted nearly 20 days, beginning on June 9 and concluding on Thursday. A minimum bid amount of Rs. 9,500 crore for the first round and Rs. 10,000 crore for the second round (in April of this year) had been established by the Committee of Creditors (CoC), with an additional Rs. 250 crore for the second round.

The lenders' decision to organise a second round of auction on April 26 in order to maximise the proceeds from the sale of Reliance Capital assets prompted the extension of the deadline by 90 days. However, the outcome of the Supreme Court's ruling in the appeal brought by Torrent Investments will be a deciding factor in any decision the CoC makes about the resolution of Reliance Capital.

After the initial auction, Reliance Capital's resolution procedure became entangled in litigation. The Hinduja Group company filed the bid post-auction date after the first round was completed. Torrent Investments, which placed the highest bid in the first round of bidding, is contesting the post-auction bid before the Supreme Court.

On November 29, 2021, the Reserve Bank of India (RBI) replaced the Reliance Capital board due to payment failures and significant governance concerns. Nageswara Rao Y was chosen by the RBI to serve as the administrator for the company's Corporate Insolvency Resolution Process (CIRP). The third significant non-banking financial institution (NBFC) against which the central bank has commenced insolvency proceedings under IBC is Reliance Capital.

Srei Group NBFC and Dewan Housing Finance Corporation (DHFL) were the other two. At the Mumbai bench of the NCLT, the central bank later submitted an application for the initiation of CIRP against the corporation. The administrator designated by the RBI requested expressions of interest for the sale of Reliance Capital in February of last year.

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