After making an offer of Rs 8,640 crore for the company in an auction held on Wednesday, the Ahmedabad-based Torrent group has won the bid to purchase Reliance Capital.
The promotional organisations of the Torrent group presented the offer. Banking sources said that Torrent won the auction over the Hinduja group, which had entered with a bid of Rs 8,150 crore. The race was not taken part in by Cosmea-Piramal or Oaktree.With a 100% holding in Reliance General Insurance and a 51% share in Reliance Nippon Life Insurance, among other assets, this would aid Torrent's entry into the financial services industry. The flagship business of the Torrent Group, one of the top pharmaceutical firms in India, is Torrent Pharmaceutical.
Torrent's bid is higher than Cosmea-binding Piramal's offer of Rs 5,231 crore but lower than Reliance Capital's liquidation value. In order to decide how to transfer the company to Torrent, the lenders will now convene and consider each bid based on its upfront cash offer and net present value.After defaulting on bank loans totaling Rs 24,000 crore, Reliance Capital was referred for debt resolution in November of last year under the Insolvency and Bankruptcy Code, 2016.
The Employee Provident Fund Organization (EPFO) and the Life Insurance Corporation, which jointly hold 35% of the voting rights in the committee of creditors, requested that an electronic auction be held. Both lenders cast no votes in favour of liquidation, which led to the start of a Wednesday-ending electronic auction of the assets.Reliance Capital's creditors presented two possibilities for the auction: Companies had to submit bids for Reliance Capital as a whole, including its subsidiaries, under the first option. The second option would allow bidders to individually compete for each of Reliance Capital's businesses.At the corporate level, Reliance Capital had previously received four binding bids. The Piramal Group and Cosmea Financial Holdings consortium had submitted the highest bid.
Reliance Capital's liquidation value was estimated by Duff & Phelps and RBSA Advisors to be Rs 12,500 crore and Rs 13,200 crore, respectively. Reliance Capital has a far larger liquidation value than the bids that were submitted.Duff and Phelps estimate that Reliance General Insurance alone is worth Rs 7,000 crore and Reliance Nippon Life Insurance is worth Rs 4,000 crore in terms of liquidation value.
Samir Mehta, 56, is the chairman of the Rs 21,000 crore Torrent group. Under his direction, the company undertook a number of strategic initiatives, foraying into brand-new industries like power and municipal gas distribution. Torrent is investing Rs 10,000 crore on the latter and expanding its network across 16 locations in India.
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