Reliance Capitals Resolution Plan Gets NCLT Nod, IndusInd International Holdings to Pay Rs 9,650 Crore

The National Company Law Tribunal (NCLT) has approved the resolution plan submitted by IndusInd International Holdings, a Hinduja Group firm, for the debt-ridden Reliance Capital. The plan involves a massive 63 per cent haircut for creditors, with the winning bidder agreeing to pay only 37 per cent or Rs 9,661 crore of the admitted claims.

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Background of Reliance Capital's Financial Struggles

Reliance Capital, originally promoted by Anil Ambani, faced governance issues and payment defaults, leading the Reserve Bank of India (RBI) to supersede its board in November 2021. Subsequently, the central bank appointed Nageswara Rao Y as the administrator and invited bids in February 2022 to take over the company.

RCap Becomes Second NBFC Referred to NCLT by RBI

RCap became the second non-banking financial company (NBFC) to be referred to NCLT by the RBI after Dewan Housing Finance Corporation Limited (DHFL), which faced a series of scams and defaults. DHFL was later awarded to the Piramal group under the insolvency resolution process.

NCLT Approves IndusInd International's Resolution Plan

The NCLT, in its order approving IndusInd International's bid, noted that the resolution plan was approved by 99.60 per cent of the committee of creditors and meets all the conditions laid down in the Insolvency and Bankruptcy Code (IBC). Upon completion of the plan, the Hinduja Group firm will acquire a majority of shares in RCap, which will cease to be listed on stock exchanges.

Key Aspects of the Resolution Plan

IndusInd International's resolution plan involves a significant haircut for creditors, with only 37 per cent of the admitted claims being paid. However, 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.

The 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 receive the full repayment of Rs 481.88 crore, while nearly 96 per cent of the total claims made by other creditors and stakeholders have been rejected.

Selection of IndusInd International as the Winning Bidder

RCap had initially received bids from four applicants, but the committee of creditors rejected all plans due to lower bid values. A challenge mechanism was initiated, where IndusInd International Holdings (IIHL) and Torrent Investments participated. In June 2023, IIHL was selected for its bid of Rs 9,661 crore upfront cash, along with RCap's cash balance of an additional Rs 500 crore.

The approval of IndusInd International Holdings' resolution plan for Reliance Capital marks a significant development in the ongoing efforts to resolve the financial distress faced by the company. The plan, which involves a substantial haircut for creditors, aims to revive RCap and bring it back to financial stability.