Reliance Capital lenders vote to hold multiple rounds of auction

Reliance Capital’s lenders passed a resolution on Friday to hold multiple rounds of auction to identify the highest bidder among resolution applicants who had submitted a plan to acquire the financial services company and its units, two people aware of the development said. While launching the sale process, lenders had given applicants the option of bidding for the entire company along with all its units, or for one or more units.

ET reported on December 7 that lenders would hold an auction with a markup of Rs 1,000 crore over the highest offer received. A team of Piramal Enterprises-Cosmea Financial Holdings has emerged as the highest bidder with an offer of Rs 5,231 crore.

Others included the Hinduja group’s bid of Rs 5,060 crore, Torrent Investments with Rs 4,500 crore and Oaktree Capital’s Rs 4,500 crore offer. The base price will be derived from the net present value of the highest offer, Piramal-Cosmea team, the people said. The auction is likely to begin on December 19.


In the first round, bidders must offer at least Rs 1,000 crore more than the base price to remain in the fray, the people said. In the second round, the bidders will have to improve their offers by Rs 750 crore over the highest offer received in the first round.

In the third round, the bidders must offer at least Rs 500 crore over the highest bid received in the second round. The highest offer by PiramalCosmea is 60% below the liquidation value, which has been pegged at Rs 13,000-12,500 crore by Duff & Phelps and RBSA. Lenders are aiming to bridge the gap by holding an auction.

Banks and pension funds that have lent to Reliance Capital will find it difficult to approve any resolution plan that is significantly below the liquidation value. The administrator has admitted verified claims of Rs 23,666 crore from financial creditors. Life Insurance Corporation of India has the largest exposure to Reliance Capital, followed by Yes Bank. The Reserve Bank of India (RBI) superseded the board of Reliance Capital on November 30 last year, citing governance concerns.

Reliance Capital is a core investment company with 20 units under its fold, including insurance, broking, and asset reconstruction.