Torrent Investments won’t participate in second auction for Reliance Capital

Torrent Investments on Friday informed lenders of Reliance Capital that it is unwilling to participate in the planned extended challenge auction to sell the financial services company, people aware of the development said.

This would hurt the lenders’ effort to maximise returns from the stressed asset because Hinduja Group may become the only other bidder with no challengers in the fray.

Early this week, the Supreme Court had permitted the committee of creditors (CoC) of Reliance Capital to proceed with an extended auction – a move vehemently opposed by Torrent Investments.

“Torrent Investments has not exited the fray,” one of the lenders told ET. “They informed the CoC that they would participate only if the Swiss challenge auction is held with their offer of Rs 8,640 crore (given in December auction) as the anchor bid.” In such a scenario, Torrent Investments will get the first right to match the counteroffer given by Hinduja Group and take over the company.

The lenders, however, are unlikely to hold a Swiss auction since this would not lead to value maximisation, people in the know said. A closed envelope bid – wherein both parties submit a proposal in a closed envelop – is an alternative option given by the administrator.

This, however, would be against the directive of the Supreme Court, which upheld the CoC’s decision to pursue a challenge mechanism auction, one of the lenders said.

Challenge mechanism auction will also be a transparent process, giving both parties the equal right to submit the best bid, the same lender said. Senior officials from Torrent Investments declined to comment.

Legal experts said the lenders should pursue the challenge mechanism auction in line with the apex court’s direction. In the case of Lanco Amarkantak Power, lenders went ahead with the challenge mechanism auction despite two other bidders – Adani Power and Reliance Industries – opting out of auction, citing violation in the sale process. A PFC-REC-led consortium were declared winning bidders.

At the heart of the dispute is a bid from an Hinduja Group entity given 24 hours after the auction deadline of December 21, 2022, that trumped the offer made within the stipulated time by Torrent Investments.

While Torrent has offered to pay the whole Rs 8,640 crore upfront, Hinduja offered Rs 8,950 crore including `8,110 crore as an upfront payment. Both offers are below liquidation value arrived by third-party valuers.