Even as the Reserve Bank of India has started the insolvency process against Reliance Capital NSE -4.89 %, the pending resolution of two of its subsidiaries – Reliance Home Finance NSE 2.82 % Ltd (RHFL) and Reliance Commercial Finance (RCFL) – is set to cast a shadow on the process with the market regulator’s diktat and the insolvency rules working against each other.
Lenders selected the preferred bidder almost six months ago, but the debt resolution for the two subsidiaries is still hanging fire as Securities and Exchange Board of India (Sebi) rules say 100% debenture holders have to approve the resolution plan for a company, contrary to the trust deed signed by investors which expects only 75% to vote.
“It’s a very peculiar situation because both the lending subsidiaries, which owe the majority of the debt to creditors in financial services by the Anil Ambani group, have found a buyer before the NCLT (National Company Law Tribunal) process has started. But it’s stuck due to a regulatory clash. The matter is in court, and we have been waiting for a solution for months now,” said a person closely involved in the resolution of these companies.
In June, Authum Investment & Infrastructure was declared the preferred bidder by lenders to take over RHFL with 91% of the creditors voting in favour. Authum offered ₹1,724 crore in cash and another ₹300 crore through 8% non-convertible debentures payable within a year for the company which owed creditors ₹11,200 crore in a deal brokered by BoB Capital Markets.
However, bond holders who account for 41% of the debt, have not yet voted on the plan. IDBI Trusteeship, the main trustee for bond holders, has so far not conducted a voting as it is awaiting clarity on a Sebi rule, which was amended in September 2020 making 100% of debenture holders’ vote compulsory for a resolution plan.