Hinduja Group has made a Rs 9,000 crore cash advance offer for Reliance Capital. This offer beats Torrent's offer of just Rs 4,000 crore in cash by a margin of more than 200 percent. The balance to be paid to the lenders in three equal installments in years 3, 4 and 5 with zero interest.
Hinduja's offering is the best execution compared to Torrent as it does not have the requirement to share security as the Committee of Creditors (CoC) will be concerned with any dilution of current security. The goal of the Insolvency and Bankruptcy Code (IBC) with its CoC is to maximize value to creditors. This has also been established by multiple Supreme Court rulings, that value maximization is a key condition in the approval of any plan by the CoC.
The only resolution made for a financial services company under the special powers of RBI Section 227 was DHFL, which was won by Piramal Group. In that case, Adani Group, which was not even a resolution applicant, was admitted by CoC as it offered the highest value to Piramal's offer.
Legal observers see Torrent's move to halt RCap's resolution and buy the company to the detriment of creditors who will be denied Rs 9,000 crore cash up front. As such, the Torrent move, legal references claim, could be a poison pill for creditors undermining the IBC process.
