The bidders asked lenders to provide greater clarity about the process at a meeting on Friday, two people familiar with the discussions said on the condition of anonymity. The lenders are disappointed that the bids came in far below the liquidation value of Reliance Capital (RCap) and its subsidiaries but are hopeful that these offers may be raised.
“Everyone will up their bid, but by how much is the question," said a banker, one of the two people cited above. “Everybody knows there will be one more round. Obviously, everybody will keep something back. Everyone has put in bids. Nobody knows what the next step is. Is it going to be a Swiss Challenge or e-auction, or negotiation? Unless the process is clear, why would bidders want to push the bid until we have the timeframe? Are they trying to close it by December end or January end?" the banker asked.
The lenders will meet again on Tuesday to discuss different options, including a closed envelope bidding process, an auction with a reserve price, or a reverse auction.
After the bidders submitted their offers on Monday, two independent companies hired by lenders submitted their estimates on the liquidation value of Reliance Capital and its subsidiaries to the committee of creditors on Wednesday. Of these, Duff and Phelps arrived at a liquidation value of ₹12,500 crore, while RBSA pegged it at ₹13,200 crore. However, the highest bid received was a mere ₹5,231 crore—placed by Piramal-Cosmea Financial—followed by the Hinduja group at ₹5,060 crore, Ahmedabad-based Torrent at ₹4,500 crore and Oaktree at ₹4,200 crore.
Bidders, however, argue that their offers are in line with Life Insurance Corp. of India’s sale of Reliance Capital bonds worth ₹3,400 crore to Ares SSG Capital-backed Assets Care and Reconstruction Enterprise Ltd.
“Stress is there at the core investment company (CIC) level. Both insurance companies are well-performing. The bids are below both the fair market value, which is one year old and also the liquidation value," said a banker, who is part of Reliance Capital’s committee of creditors. “LIC’s sale is different as it is an open process, and bidders can buy the debt at 27 cents to a dollar. But that doesn’t mean the company is up for sale at the same reference price," the banker added.
Duff and Phelps also pegged the liquidation value of Reliance General Insurance at ₹7,000 crore and Reliance Life Insurance business at ₹4,000 crore. RBSA has given a liquidation value of ₹7,500 crore to Reliance General Insurance and ₹4,000 crore to Reliance Life Insurance.
Lenders have not received separate bids for the general and life insurance arms, though both firms account for over 90% of the firm’s total valuation.
Lenders have received three bids for the rest of the businesses, such as Reliance Securities, an asset reconstruction company and the real estate assets of Reliance Capital. The combined bid value of these businesses is ₹120 crore, but as per the valuation reports of Duff and Phelps and RBSA, the liquidation value of these is estimated at ₹280 crore and ₹240 crore, respectively.
In November 2021, RBI referred RCap for bankruptcy resolution after it defaulted on ₹24,000 crore bonds. Two of its units—Reliance Commercial Finance and Reliance Home Finance—were, however, kept outside the resolution mechanism.
In September this year, lenders closed a deal with Authum Infrastructure and Investment to sell Reliance Commercial Finance by taking a 75% haircut. Reliance Home Finance has not found a buyer yet.
