The deadline for submission of bids for debt-ridden Reliance Capital Ltd (RCL) ends on Monday amid concerns of investors over the company's most-valuable arm Reliance General Insurance Company.
IDBI Trusteeship Services Limited acting in its capacity as a debenture trustee on behalf of Credit Suisse, had invoked the pledge of Reliance Capital's 100 per cent shareholding in Reliance General in November 2019 and transferred the shares to its account.
The Administrator wants to include Reliance General as part of RCL's insolvency process, but the IDBI Trustee has refused to release the shares of the general insurance firm for resolution process under Insolvency and Bankruptcy Code (IBC), sources said, adding, this seems to have hit a roadblock.
As a result, investors are cagey about submission of bids in absence over clarity over Reliance General shares, sources said.
The Committee of Creditors (CoC) extended the deadline for the submission of bids five times in the past leaving only 4-5 interested entities including Piramal, Torrent, Yes Bank and IndusInd Bank for the resolution of RCL.
Due to a poor response, the CoC even waived the condition of paying Rs 75 crore Earnest Money Deposit (EMD) in the first submission date.
With regard to Reliance Commercial Finance (RCF), Reliance Home Finance (RHF), sources said, they had gone through a separate resolution process with Authum Investment and Infrastructure much before RCL was referred to NCLT.
To allay the concerns of the bidders regarding the RCF and RHF, sources said, the CoC has proposed that both the entities will be held in a separate Trust for the Authum Investment and Infrastructure's resolution.
According to sources, the CoC and the Administrator are more keen on receiving bids under Option-1 i.e. for the Reliance Capital as a CIC (Core Investment Company).
Under Option-2, bidders can bid for 8 different businesses/clusters of RCL including General Insurance, Life Insurance, ARC, Securities business etc.
The Reserve Bank of India (RBI) on November 29 last year superseded the board of RCL in view of payment defaults and serious governance issues.
The RBI appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the company.
This is the third large Non-Banking Financial Company (NBFC) against which the central bank has initiated bankruptcy proceedings under IBC recently. The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL).
The RBI subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the National Company Law Tribunal (NCLT).
In February this year, the RBI-appointed administrator had invited expressions of interest for sale of Reliance Capital.
