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Reliance Capital Lender to Vote on Hinduja Armed Resolution Plan from Today

Voting on resolution plan for Hinduja Group's Reliance Capital begins today.

Lenders of Reliance Capital (RCap) will begin voting on the resolution plan proposed by the Hinduja Group entity from Friday, June 9. The scheme offers recoveries of a little over Rs 10,000 crore. During the two-day meeting, the lenders discussed the plan and will now proceed to the voting process.

The company, once owned by Anil Ambani, defaulted on loans worth Rs 24,000 crore and was sent to settle debts in November 2021.

IndusInd International Holdings Ltd (IIHL), a subsidiary of Hinduja Group, submitted a detailed settlement earlier this week. Other bidders, including Torrent Investments, Piramal Capital and Oaktree Capital, did not submit detailed plans by the deadline, The Economic Times (ET) reported.

RCap administrator Nageswara Rao Y has invited the committee of creditors to vote on IIHL’s plans from June 9. If more than 66% of verified creditors vote in favour of the plan, the administrator will apply to the National Companies Tribunal (NCLT) seeking approval of the IIHL plan.

In late May, RCap’s lenders approved a plan to distribute funds received from the resolution plan based on their respective admitted claims, regardless of how they voted on the plan. According to reports, this distribution of funds will be different from past practice because the new plan requires equal treatment of all lenders and avoids litigation.

Separately, the Hinduja Group will seek the approval of the Reserve Bank of India (RBI) for the plan. The RBI’s approval is required to acquire a financial services company in an insolvency resolution process.

The administrator has admitted claims by the lenders totalling Rs 23,666 crore. However, lenders expect to recover about Rs 10,090 crore from the sale of RCap, lower than the estimated liquidation value of Rs 12,500 to 13,000 crore, ET reported. That means lenders get back about 43%.

The recovery amount of Rs 10,090 crore includes a final offer of Rs 9,660 crore from Hinduja Group entities and a cash balance of Rs 430 crore to be distributed to lenders.

However, the sale of RCap is pending (SC) ‘s decision on a lawsuit brought by Torrent Investments over the extension of the auction period.

The first auction was held on December 21, with Torrent Investments leading the bid at Rs 8,640 crore. The Hinduja Group entity had initially bid Rs 8,110 crore but revised its bid to Rs 9,000 crore within 24 hours. Torrents have questioned the move. The next auction was held on April 26, with IIHL being the sole participant, with an advance of Rs 9,650 crore.

The SC is scheduled to hear the case in August. RCap’s top three debt holders are Life Insurance Company of India, Employees Provident Fund Organisation and JC Flowers Asset Restructuring Company. RCap’s original lender, Yes Bank, sold its debt to JC Flowers ARC.

Reliance Capital reported a net loss of Rs 4,249 crore for Q4FY21-22. However, the company has narrowed its net loss to Rs 1,488 crore by the end of the 2022-23 financial year.

PTI reported that Reliance Capital is the third major non-banking financial company (NBFC) to be initiated by the central bank under the Insolvency Code (IBC). Srei Group NBFC and Dewan Housing Finance Corporation (DHFL) are the other two.

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