The Reserve Bank of India (RBI) has superseded the Board of businessman Anil Ambani-owned Reliance Capital Ltd, and will soon drag it to the bankruptcy court to kickstart a resolution process, the banking regulator said on Monday.
This would be the fourth non-banking financial services company (NBFC) - after Dewan Housing Finance Corporation Ltd (DHFL) (November 2019) and two Srei Group firms (October 2021) - to be pushed for bankruptcy by the central bank.
“…the Reserve Bank has today superseded the Board of Directors of M/s Reliance Capital Ltd (RCL) in view of the defaults by RCL in meeting the various payment obligations to its creditors and serious governance concerns which the Board has not been able to address effectively,” the RBI said in a statement.
Former Bank of Maharashtra Executive Director Nageswar Rao Y has been appointed Administrator, the statement added.
Last week, RCL disclosed in a regulatory filing that the “Company is unable to proceed with its asset monetisation resulting in delay in its debt servicing”.
Further, the central bank will shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy Code (IBC), and will also apply to the National Company Law Tribunal (NCLT), Mumbai, for appointing the Administrator as the Insolvency Resolution Professional.
This would likely be the third Anil Ambani-group firm to be under the bankruptcy process, following Reliance Communications (RCom) and Reliance Naval and Engineering (Reliance Naval).
US-based alternative asset manager Apollo Global Management Inc and SBI Life Insurance Company Ltd are among the bidders to enter the race to acquire different assets of debt-laden RCL alongside 60 other players to buy different assets of RCL.
In December 2020, VCCircle had reported that entities, including PE firms and asset reconstruction companies (ARCs) such as Blackstone, International Asset Reconstruction Company (IARC), KKR, Oaktree Capital, Bain Capital and JC Flowers were among the 60 players that had submitted Expressions of Interest for RCL’s assets.
Government-backed National Investment and Infrastructure Fund (NIIF), Arpwood Partners, Dabur Investments, Bandhan Bank and Multiples Alternate Asset Management were other interested players.
RCL has about seven subsidiaries, including Reliance Nippon Life Insurance, Reliance General Insurance, Reliance Health Insurance, broking arm Reliance Securities, Reliance Money, Reliance Home Finance, Reliance Commercial Finance and Reliance Asset Reconstruction Company (ARC).
SBI Life Insurance also bid for Reliance Nippon Life Insurance, in which RCL owns a 51% controlling stake.
While Life Insurance Corporation of India (LIC) held 2.98% in RCL, promoters Anil Ambani and his family own 1.51% shareholding in RCL as on September end 2021.
RCL’s business includes loans to small and medium enterprises (SME) through Reliance Money and also to home buyers via Reliance Home Finance. As per its website, RCL had over Rs 90,000 crore worth of assets under management (AUM) with 18,000 plus workforce.
As on September 2021, it reported a net loss of Rs 586.34 crore with a negative net worth of Rs -8195.90 crore. Its gross and net non-performing asset (NPA) ratio as a percentage of total loans was 99.60% and 96.49%, respectively.
Separately, Reliance Home Finance and Reliance Commercial Finance were running a process to sell the loan book on a ‘as is where is’ basis.
In June this year, Mumbai-based non-banking financial company Authum Investment and Infrastructure Ltd emerged as the highest bidder for debt-laden Reliance Home Finance.
A month later, the same NBFC received the nod to buyout a second Anil Ambani group firm Reliance Commercial Finance after the lenders’ conceded.
In May 2018, the NCLT admitted the insolvency petition filed by Ericsson against RCom and its subsidiaries Reliance Infratel and Reliance Telecom Ltd. RCom later challenged the NCLT’s decision but withdrew its petition in April 2019.
Last year in December, the a Mumbai bench of NCLT had cleared a proposal by brother Mukesh Ambani-owned Reliance Projects & Property Management Services Ltd to take over RCom’s telecom tower arm. However, another plan by Delhi-based UV Asset Reconstruction Company to acquire RCom’s other assets, approved by lenders in March 2020, is pending before the insolvency court following RBI orders.
Meanwhile, Reliance Naval has been undergoing insolvency proceedings at the Ahmedabad bench of NCLT since January 2020, with dues worth over Rs 43,500 crore.
In August this year, three firms including the Naveen Jindal group firm, Netherlands-based APM Terminals and a consortium of GMS, Dubai and BESIKTAS of Turkey, submitted final bids to acquire the firm under the IBC process. Meanwhile, a media report by Financial Express suggested that Reliance Naval’s assets will be transferred to the newly-formed government-backed National Asset Reconstruction Company (NARCL) to carry forward the resolution process.