Reliance Capital e-auction to kick off on Dec 19; base bid at Rs 5,300 cr

The electronic auction of Reliance Capital’s assets would begin on December 19, with the Rs 5,300-crore offer made by the Cosmea-Piramal combine taken as the base price.

The bidders will have to bid Rs 1,000 crore onwards over the base value in the first round, a person close to the development said. The auction is expected to end within two days.

In the second round of the auction, the bid value sought would be Rs 750 crore onwards above the best offer in the previous round. In the third round, the bidders would have to increase the bid price by a minimum by Rs 500 crore, while in the fourth round, they will have to offer a minimum of Rs 250 crore or more, the source said.

This is the first time that an e-auction of this scale would take place for a debt resolution under the Insolvency and Bankruptcy Code, 2016.

Reliance Capital was sent for debt resolution in November last year, after it defaulted on bank dues worth Rs 24,000 crore.

The decision in favour of an e-auction has been taken at the behest of Life Insurance Corporation and the Employee Provident Fund Organisation which control 35 per cent of the voting in the committee of creditors. Both lenders have voted against the liquidation and descending e-auction proposals.

Interestingly, the CoC did not take any decision on Reliance General Insurance’s demand for a Rs 600-crore capital infusion from Reliance Capital.

With the e-auction, the four final bidders — Piramal-Cosmea Financial Holdings, the Hinduja group, Torrent group, and Oaktree Capital — will have the option to outbid each other.

Reliance Capital had received four binding bids at the company level, with the highest bid from the Cosmea Financial and Piramal group combine. In the Cosmea-Piramal bid, the liability of the Piramal group is limited to Reliance General Insurance only.

The Hinduja group offered Rs 5,060 crore, while the Torrent group offered Rs 4,500 crore.

American financial powerhouse Oaktree offered Rs 4,200 crore for the entire company.

But the valuation reports by independent valuers – Duff & Phelps and RBSA Advisors — pegged the liquidation value of Reliance Capital at Rs 12,500 crore and Rs 13,200 crore, respectively. The liquidation value of Reliance Capital is far higher than the value of the bids received.

According to Duff and Phelps, the liquidation value of Reliance General Insurance alone is worth Rs 7,000 crore, and that of Reliance Nippon Life Insurance business is Rs 4,000 crore.

RBSA Advisors pegged the liquidation value of Reliance Nippon General Insurance and Reliance Life Insurance at Rs Rs 7,500 crore and Rs 4,300 crore, respectively.

As many as 55 companies, including top conglomerates like the Adani group and the Tata group, submitted expressions of interest (EoIs) for the company in February this year. But of these, only four made binding offers. No separate offers were received for the profit-making insurance companies. Reliance Capital owns a 100 per cent stake in Reliance General Insurance and a 51 per cent stake in Reliance Nippon Life Insurance.

The final countdown

• Interested parties will have to bid at least Rs 1,000 cr above the base in Round 1
• In Round 2, bidders to offer minimum of Rs 750 cr over the price quoted in Round 1
• In Round 3, the bids will have to be increased by a minimum of Rs 500 cr; and in Round 4, the bids will jump by Rs 250 cr at least
• Piramal, Hinduja, Torrent, Oaktree have qualified to bid for the whole company
• e-auction expected to get over in two days