Key Points of Torrent Investment to Skip 2nd Auction for Reliance Capital:
- Torrent Investments has declined to participate in the planned extended challenge auction to sell Reliance Capital’s financial services company.
- The decision by Torrent Investments could affect the lenders efforts to maximize returns from the distressed asset, as the Hinduja Group may become the only bidder.
- The Supreme Court recently allowed the committee of creditors (CoC) of Reliance Capital to proceed with an extended auction, which Torrent Investments opposed.
- However, Torrent Investments has stated that it would participate only if the Swiss challenge auction is held with their offer of Rs 8,640 crore as the anchor bid.
- The lenders are unlikely to hold a Swiss auction as it would not lead to value maximization.
- A closed envelope bid is an alternative option given by the administrator, but this would be against the Supreme Court’s directive to pursue a challenge mechanism auction.
- Legal experts have suggested that the lenders should follow the apex court’s direction and pursue the challenge mechanism auction.
- At the heart of the dispute is a bid from a Hinduja Group entity that was submitted after the auction deadline and trumped the offer made within the stipulated time by Torrent Investments. Both offers are below the liquidation value arrived at by third-party valuers.
Details of Torrent Investment to Skip 2nd Auction for Reliance Capital:
Torrent Investments has reportedly told lenders of Reliance Capital that it is not interested in participating in the planned extended challenge auction to sell the financial services company. According to sources, this move by Torrent Investments could hinder the lenders’ efforts to maximize returns from the distressed asset, since the Hinduja Group may become the only other bidder with no challengers in the fray.
Earlier this week, the Supreme Court had permitted the committee of creditors (CoC) of Reliance Capital to proceed with an extended auction, which Torrent Investments opposed. However, according to a lender, “Torrent Investments has not exited the fray. They informed the CoC that they would participate only if the Swiss challenge auction is held with their offer of Rs 8,640 crore (given in December auction) as the anchor bid.” In such a scenario, Torrent Investments will get the first right to match the counteroffer given by the Hinduja Group and take over the company.
However, the lenders are unlikely to hold a Swiss auction since it would not lead to value maximization. A closed envelope bid, wherein both parties submit a proposal in a closed envelope, is an alternative option given by the administrator. This, however, would be against the directive of the Supreme Court, which upheld the CoC’s decision to pursue a challenge mechanism auction, according to one of the lenders.
Legal experts have suggested that the lenders should pursue the challenge mechanism auction in line with the apex court’s direction. In the case of Lanco Amarkantak Power, lenders went ahead with the challenge mechanism auction despite two other bidders opting out, citing violations in the sale process. A PFC-REC-led consortium was declared the winning bidder.
At the heart of the dispute is a bid from a Hinduja Group entity that was submitted 24 hours after the auction deadline of December 21, 2022. This bid trumped the offer made within the stipulated time by Torrent Investments. While Torrent has offered to pay the whole Rs 8,640 crore upfront, Hinduja offered Rs 8,950 crore, including Rs 8,110 crore as an upfront payment. Both offers are below the liquidation value arrived at by third-party valuers.
About Reliance Capital:
Reliance Capital, a member of the Reliance Group, is a diversified financial services holding company based in India. It is promoted by the Reliance Anil Dhirubhai Ambani Group and is included in the Nifty Midcap 50 and MSCI Global Small Cap Index.
For More Latest News Click Here
