The decision was taken late Friday night at the committee of creditors (CoC) meeting to review offers received from the Hinduja Group and Torrent Investments. Lenders fixed the threshold price of ₹9,500 crore on a net present value (NPV) basis, which includes ₹8,000 crore as minimum upfront cash payment, the people said. This follows a row over the Hinduja Group bid that came in past the last auction deadline and was higher than the top offer that had been made within the stipulated time by Torrent Investments.
Bidders at the new auction will have to increase their offers by a minimum ₹500 crore in the first round and ₹250 crore in the second round, said the people cited above.
“After the previous auction (on December 21), Hinduja Group and Torrent Investments are trying to outbid each other, which implies that there is a possibility of getting offers above the liquidation value,” said one of the persons cited above.
All offers for Reliance Capital have thus far been below the ₹12,500-13,000 crore liquidation value.
At the previous auction, the minimum threshold price was fixed at ₹6,500 crore on an NPV basis. Torrent emerged as the highest bidder, offering ₹8,640 crore on an NPV basis, arrived at after discounting future cash flows. A day following the auction, with both bidders having submitted detailed resolution plans to the administrator, the Hinduja Group entity made a revised, improved offer of ₹9,000 crore, including an upfront payment of ₹8,750 crore. At that time (December 22), Torrent had offered an upfront payment of ₹3,750 crore, with the remaining payable over a few years.
Torrent Investments sent a protest note to administrator Nageswara Rao Y stating that the revised Hinduja offer violated auction terms. Subsequently, Torrent moved the National Company Law Tribunal (NCLT), asking that the administrator be stopped from presenting the improved Hinduja offer to lenders as it didn’t comply with the rules.
On January 3, the NCLT directed the administrator to only consider plans that were in line with the rules. The administrator said he would appeal against the order at the National Company Law Appellate Tribunal (NCLAT). Simultaneously, the administrator asked bidders to submit compliant plans.
Meanwhile, on Friday, January 6, the Torrent and Hinduja compliant plans were opened for review by lenders. Torrent Investments and the Hinduja Group offered an upfront payment of ₹8,640 crore and ₹8,110 crore, respectively.
The Hinduja Group also provided ₹850 crore as deferred payment, including payments to release the pledged shares of Reliance General Insurance. Before being admitted for insolvency proceedings, Reliance Capital had raised ₹600 crore in bonds by pledging shares of the general insurance company. After the company was admitted for insolvency, the debenture trustee was unwilling to release the share pledge until the bonds were redeemed.
Torrent and Hinduja structured their plans so that the NPV was aligned to the offer made at the auction, but changed payment terms, said one of the persons cited above.
“Voting on fresh round of auction will be held early next week – the bidders have been informed,” the person said.
The lenders will also give Piramal Enterprises and Cosmea Financial Holdings an opportunity to participate in the new auction. Cosmea had opted out of the race a day before the auction stating that the contours of the sale process had been significantly altered.
The administrator has admitted ₹25,334 crore in claims from secured and unsecured financial creditors. Reliance Capital, undergoing insolvency proceedings, houses about 20 financial services companies, ranging from insurance to broking.