Suitors worry about bidding process as Reliance Cap resolution enters final stage

Suitors have raised concerns about the bidding process, including the introduction of a ‘challenging mechanism’, as the debt-ridden Reliance Capital Ltd (RCL) resolution process enters the final stage.

According to sources, the decision of the Committee of Creditors (CoC) to introduce a new “Complaint Mechanism” clause in the bidding process has upset bidders.

The “challenge mechanism” gives lenders the power to object to any resolution plan as and when they wish.

Bidders have raised concerns about the introduction of this new clause at this late stage of the bidding process, sources said, adding that there was no mention of this mechanism in the tender. Request for resolution plan document (RFRP).

RCL had offered two options to all bidders. Under the first option, companies could bid for Reliance Capital Ltd (RCL), including its eight subsidiaries or clusters. The second option gave the company the freedom to bid for its subsidiaries, either individually or as a group.

RCL has eight companies that are on the block. These include general insurance, life insurance, health insurance, corporate actions and asset reconstruction.

According to sources, bidders like Hinduja, Oaktree and Torrent, who are bidding for Reliance Capital as CIC, have raised a red flag as to why a new clause is being introduced at this late stage in the tender process. offers.

Moreover, sources said that the lenders have not yet defined or detailed the outlines of this new clause, creating more confusion among bidders.

On the other hand, bidders from Reliance General Insurance Company (RGIC) have expressed concern over the shares, sources said, adding that the shares are currently held by IDBI Trusteeship Services (ITSL) and not in the possession of lenders.

Earlier this month, the National Company Law Tribunal (NCLT) for the third time extended the deadline for the RCL resolution process to January 31. The previous deadline was November 1, 2022.

Some other bidders believe that the condition of making all cash bids and then full payment within 90 days is short and have requested a deferred payment structure for successful bidders under the second option.

Foreign bidders have expressed apprehension regarding the rules governing the foreign equity cap and lock-up period in an Indian insurance entity.

As per government guidelines, foreign players cannot own more than 74% of the Indian insurance business. In addition, they must respect a lock-up period of five years for their investment.

On November 29, the Reserve Bank of India (RBI) replaced RCL’s board due to payment defaults and serious governance issues.

The RBI has appointed Nageswara Rao Y as administrator under the company’s Corporate Insolvency Resolution Process (CIRP). Reliance Capital is the third major non-bank financial company (NBFC) against which the central bank has initiated IBC bankruptcy proceedings.

The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The RBI then filed a CIRP application against the company at the Mumbai bench of the NCLT.

In February this year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.

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