Reliance Home bond investors to meet Thursday

MUMBAI: Bondholders of Reliance Home Finance (RHFL) will meet this Thursday as the trustee or custodian of these instruments, IDBI Trusteeship, has raised concerns over non-maintenance of security cover and mandatory debenture-redemption reserves.

RHFL has an outstanding bond liability of about Rs 3,500 crore, with both institutional and individual ownership.

IDBI Trusteeship is seeking investor approval for taking the necessary steps to ensure that the interest of debenture holders is protected.

Some other points that may come up for discussions at the meeting include alleged related-party transactions entered into by the company without adequate disclosures, disposal of RHFL’s securities by its holding company of Reliance Capital, and gradual dilution of promoter shareholding in Reliance Capital.

IDBI Trusteeship has issued a notice to bondholders. ET has reviewed a copy of the notice.

“The resignation of Price Waterhouse & Co (PwC) as statutory auditors of the company and allegations of diversion of funds made by them (the company) would also be discussed in the presence of debenture holders,” a senior industry executive with investments in RHFL bonds told ET.

The meeting would take place at the headquarters of the State Bank of India (SBI) in Mumbai.

Reliance Capital did not reply to ET’s mail seeking comment on the matter until the publication of this report.

In September 2019, CARE Ratings downgraded RHFL’s long-term debt programme, market-linked debentures, subordinated debt, non-convertible debentures (NCDs), and upper tier-1 NCDs to 'D'.

CARE said the action is primarily due to the delay in servicing of principal on one of the NCDs.

RHFL, a subsidiary of ADAG group’s Reliance Capital Limited, made a public issue of non-convertible debentures (NCDs) in December 2016. It offered interest in the range of 8.90% to 9.40% to individual investors, for an investment period of 3 to 15 years and raised Rs 3,500 crores.

In this issue, 30% was reserved for Qualified Institutional Bidders (QIBs), 10% for Non-Institutional Investors (NIIs), 30% for High Net Worth Individuals (HNIs), and 30% for residential individual investors.

Reliance Home Finance NCD maturing in January 2022, with a face value of Rs 1,000 and paying an interest of 9.05% per annum, trades at Rs 275. That amounts to an annual yield of 76.44%.

However, trades in the secondary market are few due to low liquidity and are not indicative of yields.

“When an asset is secured, it means it is backed by a real asset that has market value. Since the bonds are trading at a deep discount, it means investors believe the security is not valuable enough,” said a fixed-income dealer.