The auction for Reliance Capital has hit another roadblock as Torrent Investments has decided not to participate in the second auction to sell the financial services company.
The move is expected to dampen the auction process, leaving only the Hinduja Group as the sole bidder in the fray.
The decision by Torrent Investments comes after the company had earlier opposed the extension of the auction and sought directions from RBI Deputy Governor M. Rajeshwar Rao to the administrator of Reliance Capital, Nageswara Rao Y.
The challenge process had concluded on December 21, 2022, with the administrator’s email to Torrent Investments confirming its net present value (NPV) bid amount of Rs 8,640 crore as the highest bid amount.
However, Torrent Investments was later informed that a competing resolution applicant, the Hinduja Group, had submitted a revised financial proposal on December 22, after the challenge process had already been completed on December 21, and only after learning that Torrent Investments had emerged as the highest bidder.
Maximisation of value is a key factor in any plan approval by Committee of Creditors (CoC), as has been reiterated in several Supreme Court judgments.
This development raises questions on the legitimacy of the auction process and the CoC’s role in ensuring a fair and transparent process.
The resolution process for a financial services company under the special powers of RBI Section 227 was last seen in the case of DHFL, which was won by the Piramal Group.
However, the CoC had admitted the Adani Group, which was not even a resolution applicant, as it had offered the highest value to the Piramal bid.
This raises concerns about the role of the CoC in ensuring a level playing field for all resolution applicants.
The decision by Torrent Investments not to participate in the second auction is likely to hurt the process to maximise returns from the sale of Reliance Capital.
The Hinduja Group, as the sole bidder, will have an advantage in the negotiation process, which could result in lower returns for the creditors.
