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Economy & Business

Reliance Capital resolution process suffers major setback as Cosmea-Piramal consortium withdraws from bidding

The Hawk
December20/ 2022

Mumbai (The Hawk): The highest bidder for RCAP assets, a partnership between Cosmea Financial and Piramal Group, has withdrawn from the bidding process, which is a big setback for the resolution process of Reliance Capital Ltd (RCAP).

The committee of creditors' (COC) planned e-auction for Reliance Capital is set to take place on Wednesday, and the highest bidder's withdrawal on the eve of the auction has shocked Reliance Capital's lenders.

The Cosmea-Piramal consortium, according to sources, has decided to withdraw from the resolution process because it believes that the parameters of the bidding process have been significantly changed, and that in order to begin participating, the base bid in the auction itself now requires a significant increase of roughly Rs 1,500 crore over and above the highest bid.

The Net Present Value (NPV) of the Cosmea-Piramal settlement plan is Rs 1,500 crore less than the floor value for the auction set by the COC, which is Rs 6,500 crore.

Additionally, the second and third rounds' increments in the auction process have each been set at extremely high values of Rs 1,000 crore.

The amount established for round four is Rs. 500 crore, and the amount set for each round after that is Rs. 250 crore. Accordingly, the minimum bid amounts would be Rs 7,500 crore, Rs 8,500 crore, Rs 9,000 crore, and Rs 9,250 crore, respectively.

The consortium considers it to be not just arbitrary and unreasonable, but also unrealistic and impractical.

The bidders believe that lack of transparency, such as failing to reveal the highest bidder or the order in which bidders placed after each round, is incompatible with the nationwide electronic auction that the Indian government and state governments held for spectrum for the telecommunications industry as well as for solar and wind energy projects.

Unfortunately, in this scenario, the best practises used by the governments are not being applied.

There are currently just three competitors left in the competition: Hindujas, Torrent, and Oaktree. Cosmea-Piramal has abandoned the event.

Cosmea-Piramal was the highest bidder for Reliance Capital CIC, with a total bid amount of Rs 5,231 crore (Core Investment Company). A 4,250 crore rupee down payment was included in the deal. The Cosmea-Piramal deal had a net present value (NPV) of Rs. 5,000 crore.

The second largest proposal was made by Hindujas, who offered Rs 5,060 crore along with an advance payment of Rs 4,100 crore. Hinduja's offer has an NPV of Rs 4,800 crore.

The price ranges offered by Torrent and Oaktree were 4,500 and 4,200 crores, respectively. They had each proposed a one-time payment of Rs. 1,100 crore and Rs. 1,000 crore. Torrent's resolution plan had an NPV of Rs 4,200 crore, whereas Oaktree's approach had an NPV of Rs 2,600 crore.

The Cosmea-Piramal bid's NPV value is Rs 1,500 crore or 30% higher than the auction's floor price of Rs 6,500 crore.

As a result of Cosmea-withdrawal, Piramal's Hinduja's second-highest bid of Rs 4,800 crore, which was previously the highest bid, is now the highest bid, with a Rs 1,700 crore gap between it and the auction floor price. As a result, the floor price is now 35% more than the highest offer.

Torrent and Oaktree's offer values are Rs 2,300 crore and Rs 3,900 crore higher than the auction floor price, respectively.

(Inputs from Agencies)