The National Company Law Tribunal (NCLT) has granted approval for the proposal put forth by IndusInd International Holdings Ltd (IIHL), a subsidiary of the Hinduja Group, to acquire bankrupt Reliance Capital Ltd. This decision marks a crucial milestone in the protracted acquisition process that has been underway.
Reliance Capital’s insolvency proceedings have been closely monitored due to its significance in the financial sector. With the approval from NCLT, IndusInd International Holdings Ltd, a part of the Hinduja Group, gains a significant foothold in the acquisition process, signaling a potential turning point for Reliance Capital’s future.
Hinduja Group’s Bid for Reliance Capital Acquisition
The National Company Law Tribunal (NCLT) is yet to release its detailed order after reserving its decision on January 11th regarding the acquisition of bankrupt Reliance Capital by IndusInd International Holdings Ltd (IIHL), a part of the Hinduja Group.
Last July, IIHL, the promoter of IndusInd Bank, submitted a bid of ₹9,861 crore to acquire Reliance Capital, which was endorsed by the administrator. The bid garnered significant creditor support, with 99% of them voting in favor. However, Hinduja Group encountered a legal dispute with Ahmedabad-based Torrent Investments concerning bid submissions during the corporate insolvency resolution process (CIRP).
Despite the legal hurdles, the acquisition process is in progress, awaiting the detailed order from NCLT, which will shed light on the next steps and implications for both parties involved.
Reliance Capital’s Bidding Saga
In December 2022, Torrent Investments took the lead in bidding for Reliance Capital during its insolvency auction, offering ₹8,640 crore. However, IndusInd International Holdings Ltd (IIHL) raised the stakes with a higher bid of over ₹9,000 crore after the auction. This prompted lenders to seek a second auction or an extended challenge mechanism to ensure the best recovery for the insolvent company.
Torrent Investments, feeling aggrieved, approached the NCLT in January 2023, which ruled in Torrent’s favor, stating that the second auction breached CIRP norms. Lenders contested this decision at the National Company Law Appellate Tribunal in March 2023, which allowed the second auction to proceed, aiming to maximize the recovery value from Reliance Capital.
In August 2023, Torrent Investments appealed to the Supreme Court, seeking to halt NCLT’s consideration of IIHL’s settlement plan. However, the Supreme Court declined to interrupt NCLT proceedings, indicating that the acquisition process was set to move forward despite legal challenges.
Reliance Capital’s Governance Crisis
In November 2021, due to payment defaults and severe governance concerns, the Reserve Bank of India (RBI) took action by superseding the board of Reliance Capital. This move highlighted the seriousness of the financial and management issues plaguing the company.
Reliance Capital found itself burdened with a secured debt totaling ₹16,000 crore, while the admitted claims against it amounted to over ₹23,666 crore. These figures underscored the magnitude of the financial challenges confronting the company, signaling the urgent need for intervention to address its mounting debt and governance issues.
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