Setback for RCap resolution process as 2 bidders back out

MUMBAI: In a big setback to the resolution process of Reliance Capital Ltd (RCAP), a consortium of Cosmea Financial and Piramal Group, which was the highest bidder for RCAP assets, has pulled out of the bidding process.

The planned e-auction for Reliance Capital, approved by the committee of creditors (COC), is scheduled to be held on Wednesday, and the exit of the highest bidder on the eve of the auction has come as a big jolt to the lenders of Reliance Capital.

As per sources, the Cosmea-Piramal consortium has decided to walk out of the resolution process as it believes that the contours of the bidding process have been significantly altered, whereby the base bid in the auction itself requires a significant increase of approx Rs 1,500 crore over and above the highest bid, to start participating in the process.

The COC has fixed a floor value of Rs 6,500 crore for the auction, which is Rs 1,500 crore more than the Net Present Value (NPV) of the Cosmea-Piramal resolution plan.

Further, the increments in the auction process for the second and third rounds have also been set at very steep levels of Rs 1,000 crore each.

To further aggravate the situation, Rs 500 crore for round four and Rs 250 crore for every subsequent round have been set. This would mean that the required bids would need to be at least Rs 7,500 crore, Rs 8,500 crore, Rs 9,000 crore, and Rs 9,250 crore, respectively.

The consortium feels it is not only unreasonable and arbitrary but also unrealistic and unworkable.