Oaktree and Piramal seek more time for Reliance Capital bid

After four deadline extensions in the past, it looks like Oaktree and Piramal (two of the four final bidders for Reliance Capital), need more time for their due diligence. Reliance Capital went bankrupt and was referred to the NCLT for resolution. Prior to the bankruptcy, Reliance Capital had already sold its AMC business to Nippon Life Insurance. Now a clutch of lenders, including the LIC, have made demands for total claims worth Rs25,333 crore against Reliance Capital. This is only the dues of the parent company, and not its subsidiaries.

One of the reasons, these two bidders are asking for more time to come up with a bid for Reliance Capital is that they are unable to submit final offers as they grapple to identify the company’s assets. In fact, all the four final bidders viz. Piramal Capital, Torrent Group, Oaktree Capital and IndusInd Bank have written to the administrator to extend the deadline for submission of bids buy 35 days from 10th August to 15th of September. If it happens, then it would be the fifth time that this deadline is getting extended.

The final decision on the deadline extension will be taken by the Committee of Creditors (CoC) in the coming week, but they may really not have much of a choice if they want to recover even a part of their outstanding amounts. Liquidation of the company would only mean that they would virtually get nothing out of the company. Hence, for all practical purposes, the deadline may get extended. At the beginning there were several bidders for the assets of Reliance Capital but now only 4 bidders remain in the fray.

There are two parts to the outstanding amount story. On the one hand, the Life Insurance Corporation of India (LIC) and a clutch of other lenders like Yes Bank and Postal Life Insurance have submitted proofs of total claims worth Rs25,333 crore against Reliance Capital. IN addition, the total debt of its two subsidiaries, viz. Reliance Home Finance and Reliance Commercial Finance is estimated to be another Rs25,000 crore. That would mean a total of Rs50,333 crore of debt that needs to be sorted out by the winning bidders.

One of the reasons, the street is positive on a deadline extension is that there are not too many bidders left in the fray. In fact, at the start, there were a total of 54 companies, which had expressed their interest to make an offer. However, now just four companies remain viz. Piramal Capital, Oaktree, IndusInd Bank and Torrent Group. It may be recollected that Piramal Capital and Oaktree had fought a bitter battle for the assets of DHFL, which eventually went to Piramal. This time, both are bidding jointly for the assets.

It is not like the lenders are not exploring other options. Recently, LIC tried to sell its exposure in bonds worth Rs3,400 crore issued by Reliance Capital but, not surprisingly, it did not find any takers as the ARCs were also averse to committing themselves to such a transaction where the real value of the assets may continue to be elusive and, at times even intractable. Currently the bonds are trading at 70%, which is a very high chance of recovering almost nothing from the particular bond. 

For now, the lenders decided to place the equity of Reliance Commercial Finance and Reliance Housing Finance into a separate trust. This would mean that potential bidders can directly bid for Reliance Capital standalone rather than worry about its subsidiaries. Reliance Capital was referred for debt resolution by the RBI, since Reliance Capital had started defaulting on its loans and became a systemic risk. But finding willing buyers is really going to be a lot more tough than originally envisaged.