The Ahmedabad-based Torrent group has won the race to purchase Reliance Capital after putting in an offer of Rs 8,640 crore in an auction held on Wednesday. The offer was made by the Torrent group’s promoter businesses. According to banking sources, the Hinduja group also bid in the auction with an offer of Rs 8,150 crore but was outbid by Torrent. Cosmea-Piramal and Oaktree did not compete in the race.
This would aid Torrent’s entrance into financial services, as it will buy a 100% share in Reliance General Insurance and a 51% investment in Reliance Nippon Life Insurance, among other assets. Torrent Pharmaceutical is the flagship company of the Torrent Group, which is one of India’s biggest pharmaceutical corporations.
Torrent’s bid is less than Reliance Capital’s liquidation value but higher than Cosmea-binding Piramal’s offer of Rs 5,231 crore. The lenders will now convene to plan the transfer of the company to Torrent and to analyze the bids based on an upfront cash offer and net present value.
Reliance Capital was committed to debt resolution under the Insolvency and Bankruptcy Code, 2016, in November last year. It started after defaulting on bank dues totaling Rs 24,000 crore.
The decision to hold an e-auction was made at the request of the Life Insurance Corporation and the Employee Provident Fund Organisation (EPFO), which control 35% of the voting power in the committee of creditors. Both lenders decided against liquidation and launched an electronic auction of the assets, which ended on Wednesday.
Reliance Capital’s creditors proposed two bid options. Companies had to bid for Reliance Capital as a whole, including its subsidiaries, under the first option. The second option allows bidders to go after individual Reliance Capital firms.
In a previous round, Reliance Capital got four binding proposals at the business level, with the highest bid coming from a partnership comprising Piramal Group and Cosmea Financial Holdings. Duff & Phelps and RBSA Advisors estimated Reliance Capital’s liquidation value at Rs 12,500 crore and Rs 13,200 crore, respectively. The liquidation value of Reliance Capital is significantly greater than the value of the bids received.
According to Duff and Phelps, the liquidation value of Reliance General Insurance alone is Rs 7,000 crore, while Reliance Nippon Life Insurance is Rs 4,000 crore. Samir Mehta, 56, leads the Rs 21,000-crore Torrent group. Under his leadership, the company embarked on a number of strategic initiatives. It includes ventures into new markets such as power and municipal gas distribution. Torrent is investing Rs 10,000 crore in the latter and expanding its network across 16 areas in India.
According to a PTI report, this is the first time an e-auction of this size has been held for the resolution of an NBFC under IBC. The decision to conduct an ascending e-auction was made at the request of LIC and EPFO, which control 35% of the voting rights in the CoC.
Following payment failures and governance difficulties, the RBI removed Reliance Capital’s board of directors on November 29 of last year. Nageswara Rao Y was then appointed as the firm’s administrator for the Corporate Insolvency Resolution Process (CIRP). The administrator requested expressions of interest for the sale of the distressed NBFC in February 2022.
About Reliance Capital
Reliance Capital Limited is an Indian diversified financial services holding firm sponsored by the Reliance Anil Dhirubhai Ambani Group. Reliance Capital is a subsidiary of the Reliance Group. It is a component of the Nifty Midcap 50 and the MSCI Global Small Cap Index. Also, it is one of India’s leading and most valued financial services organizations in the private sector. In the 2018 Fortune India 500 list, Reliance Capital was placed as the 77th largest corporation in India. Further, it got a fifth-place ranking in the ‘Non-Banking Finance’ category.
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