Hinduja Group

This offer trumps Torrent’s bid of just Rs 4,000 crore cash by a margin greater than 200 per cent

Hinduja Group has placed an offer of Rs 9,000 crore cash upfront for Reliance Capital. This offer trumps Torrent’s bid of just Rs 4,000 crore cash by a margin greater than 200 per cent. The balance to be paid to lenders in three equal installments in years 3,4 and 5 with zero interest.

The Hinduja bid is the best of execution compared to Torrent as it has no requirement of sharing security as the Committee of Creditors (CoC) will be concerned with any dilution of current security. The objective of the Insolvency and Bankruptcy (IBC) Code with its CoC to maximise value for creditors. This has been stated by multiple Supreme Court judgments as well, that maximisation of value is a key condition in any plan approval by CoC.

The only resolution done for a financial services company under special powers of RBI Section 227 was DHFL which was won by Piramal Group. In that case Adani Group, which was not even a resolution applicant, was admitted by CoC as it offered highest value to the Piramal bid.

Legal observers see Torrent’s move to stall the RCap resolution and buy the company to the detriment of creditors who will be denied Rs 9,000 crore cash upfront. As such, Torrent’s move, legal references claim could be a poison pill for the creditors undermining the IBC process.