NCLT Clears IndusInd International's Rs 9,650 Crore Bid For RCap; Lenders To Take 63% Haircut

The National Company Law Tribunal Tuesday approved the Hinduja Group firm IndusInd International Holdings' Rs 9,650 crore resolution plan for the crippled Reliance Capital Ltd.

IndusInd International Holdings had submitted its plan in June 2023 in the second round of bidding for the debt-laden company that was originally promoted by Anil Ambani.

Under the resolution plan cleared by the Mumbai bench of NCLT, creditors to the company will take a massive 63% haircut. Out of the total claims of Rs 38,526.42 crore, only Rs 26,086.75 crore were admitted by the tribunal.

The winning bidder has agreed to pay only 37% or Rs 9,661 crore of the admitted claims, which means a 63% haircut on the exposure of the creditors.

In November 2021, the Reserve Bank of India (RBI) superseded the board of Reliance Capital citing governance issues and payment defaults by the Anil Dhirubhai Ambani Group firm.

The central bank had appointed Nageswara Rao Y as the administrator, who invited bids in February 2022 to take over the company.

RCap was the second NBFC to be sent to NCLT by the central bank after the housing loan major DHFL, which went down under a string of scams and defaults to creditors.

This company was awarded to the Piramal group under the insolvency resolution process last year.

In the order approving IndusInd International's bid, NCLT's Justice Virendrasingh G Bisht (retd) and technical member Prabhat Kumar said the resolution plan was approved by 99.60% of the committee of creditors and meets all the conditions laid down in the Insolvency and Bankruptcy Code (IBC).

On the completion of the resolution plan, the order said the shareholding of the company will change whereby the Hinduja Group firm will acquire majority of shares and RCap will cease to be listed on stock exchanges.

Significantly, NCLT has allowed carry forward and set off of losses of RCap amounting to Rs 13,523 crore, overruling the Income Tax Commissioner's objection.

NCLT has pegged an average fair value of RCap at Rs 16,696 crore and an average liquidation value of Rs 13,158.46 crore.

Secured creditors will get the full repayment of Rs 481.88 crore while nearly 96% of the total claims of Rs 15,403.78 crore made by other creditors and stakeholders have been rejected.

Out of the claims of other creditors and stakeholders, only Rs 127.53 or 3.96% of the admitted claims will be settled.

RCap had a debt of over Rs 38,000 crore and four applicants had initially bid for the company. However, the committee of creditors rejected all the four plans due to lower bid values and a challenge mechanism was initiated where IIHL and Torrent Investments had participated.

In June 2023, the Hinduja Group firm, which also is the holding company of IndusInd Bank, was selected by the committee for its bid of Rs 9,661 crore upfront cash.

RCap's cash balance of an additional Rs 500 crore would also go to the lenders under the resolutions plan.