Rel Cap lenders for equitable distribution of proceeds

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The majority of Reliance Capital lenders on Monday agreed on equitable distribution of proceeds among assenting and dissenting creditors, a move aimed to discourage negative voting on the plan, said people aware of the development. Lenders expect a recovery of about Rs 10,090 crore from the sale of Anil Ambani promoted financial services company, which is below the liquidation value pegged at Rs 12,500-13,000 crore.

The auction for Reliance Capital was held on April 26 in which the Hinduja group emerged as the highest bidder with Rs 9,650 crore. The bidding process was involved in controversy as Torrent Investments emerged as the highest bidder at Rs 8,640 crore in the first auction. But later Hinduja raised the bid after the auction was over to Rs 8,950 cr. After which the creditors wengt in for a second auction. Torrent then moved the NCLT which approved the second auction, but it was overturned by NCLAT. But later the Supreme Court allowed the second auction.

As per the Insolvency and Bankruptcy Board of India, dissenting creditors are entitled to receive pro-rata payment as per the liquidation value while the assenting creditors are entitled to receive money from proceeds based on the approved plan. This rule is aimed at discouraging lenders from voting against a plan.

In the case of Reliance Capital, since the liquidation value is higher than the offer, most lenders would prefer to vote against the plan since they would receive higher distribution as dissenting creditors. Nearly 99% of lenders voted for equitable distribution of proceeds, as per reports.

The voting on the resolution plan will be held next month. Meanwhile, Reliance Capital, reported consolidated net loss narrowing to Rs 1,488 crore in the fourth quarter ended March 2023. The company posted a net loss of Rs 4,249 crore in the January-March quarter of the last fiscal. Its total consolidated income decreased to Rs 4,436 crore from Rs 4,770 crore YoY.