MUMBAI: The Committee of Creditors (CoC) of Reliance Capital has decided to hold a second round of auction for the sale of company assets on March 20, in which lenders have asked bidders to offer a minimum of Rs 8,000 in cash upfront.
According to the rules of the extended challenge mechanism, the minimum threshold or the bid starting value has been pegged at Rs 9,500 crore, with the subsequent round rising to Rs 10,000 crore and by Rs 250 crore in any round that follows.
The minimum threshold value was kept at Rs 6,500 crore in the first round that concluded on December 21. The decision of the Committee of Creditors comes after the National Company Law Appellate Tribunal (NCLAT) last week allowed lenders of Reliance Capital to hold an extended challenge mechanism or second round of auction for the sale of the debt-ridden financial services company.
NCLAT’s verdict was a huge relief for Reliance Capital as it has paved the way for the lenders to hold another round of challenge mechanisms for the company to seek higher bids. “An amount of Rs 8,000 crore shall be the minimum upfront cash component for participating in round one and subsequent rounds of the Challenge Mechanism. Any revised Financial Proposal submitted by the Resolution Applicant irrespective of the threshold bid amount of the round shall comply with this requirement of a minimum Rs 8,000 crore of upfront cash,” said a source. Lenders are expecting to realise an upward of Rs 10,000 crore from the extended challenge mechanism.
The legal wrangle is unlikely to end soon in the insolvency case of Reliance Capital as sources say that Torrent is likely to move the Supreme Court against the NCLAT decision. In the first round of the challenge mechanism, Torrent had emerged as the highest bidder with a bid amount of Rs 8,640 crore, while Hinduja Group firm IndusInd International Holdings Ltd (IIHL) was the second highest with Rs 8,110 crore bid.
The first round of the auction ran into a legal tangle after IndusInd International Holdings made an all-cash bid of Rs 9,000 crore to the lenders after the completion of the auction process. Torrent challenged the IndusInd International Holdings’ bid in the NCLT, though the company itself revised its own bid of Rs 8,640 crore by offering the entire amount in cash upfront as against Rs 3,750 crore offered in the auction.
The NCLT ruled in favour of Torrent and stayed the second round of auction, but the Reliance Capital lenders challenged the NCLT decision in the appellate tribunal, which ruled in their favour and allowed them to go ahead with the second round of auction.
Bid starting value set at Rs 9,500 crore
According to the rules of the extended challenge mechanism, the minimum threshold or the bid starting value has been pegged at Rs 9,500 crore, with the subsequent round rising to Rs 10,000 crore and by Rs 250 crore in any round that follows