InvestorQ : Why have Oaktree and Piramal Capital asked for more time to bid for Reliance Capital?
Neelam Naik made post

Why have Oaktree and Piramal Capital asked for more time to bid for Reliance Capital?

Anu Biswas answered.
1 week ago

It looks like the demands for extension in the Reliance Capital case are almost becoming perennial. Now after the deadline was extended 4 times, Oaktree and Piramal (two of the four final bidders for Reliance Capital), have asked for some more time for their due diligence. They think it is essential before they submit their bids since many of the assets still need to be traced and in many cases the audit trail is yet to be established. That would take time so the bidders have asked for more time.

It may be recollected that Reliance Capital had gone bankrupt and was referred to the NCLT for resolution as a special case of systemic importance by the RBI. Prior to the bankruptcy, Reliance Capital had already sold its asset management or the mutual funds business to Nippon Life Insurance of Japan and the name has also now been changed. Currently, a clutch of lenders, including LIC, have made total claims worth Rs25,333 crore as recoverable from Reliance Capital. The subsidiaries also have equivalent outstanding amounts.

Both the bidders admitted that they were grappling hard and racing against time to identify the company’s assets. This demand has come from all the four final bidders viz. Piramal Capital, Torrent Group, Oaktree Capital and IndusInd Bank. They have all written, jointly and severally, to the administrator to extend the deadline for submission of bids by another 35 days from the 10th of August to the 15th of September. This would be the fifth time that the bids are getting postponed but then the NCLT may not have much of a choice.

Of course, the final decision will be at the discretion of the Committee of Creditors (CoC) representing the banks and lenders. In reality, the lenders may not have much of a choice if they want to recover even a part of their dues. If Reliance Capital goes for liquidation, they would virtually get nothing out of the company. For all practical purposes, the deadline may get extended as it suits everyone. Interestingly, the deal started with several bidders for the assets of Reliance Capital but now only 4 bidders remain in the fray.

There are two parts to the loan dues of Reliance Capital as a group. LIC and a clutch of lenders like Yes Bank and Postal Life Insurance have submitted claims worth Rs25,333 crore against Reliance Capital. Apart from the parent company dues, the two subsidiaries viz. Reliance Home Finance and Reliance Commercial Finance also have dues worth Rs25,000 crore taking the total dues to Rs50,333 crore of debt. LIC had even tried to sell its exposure in bonds worth Rs3,400 crore of Reliance Capital to ARCs, but there were no takers.

There has been an interesting development in the last few days. Lendes have opted to place the equity of Reliance Commercial Finance and Reliance Housing Finance into a separate trust. As a result, the bidders would now be able to directly bid for Reliance Capital standalone rather than worry about the hidden risk in its subsidiaries. Reliance Capital had started defaulting on its loans and became a systemic risk. However, considering its history, finding willing buyers is really going to be a herculean task.