Life Insurance Corporation of India (LIC) and Employees’ Provident Fund Organization (EPFO), who own Reliance Capital bonds estimated to be worth Rs 6,000-6,500 crore, are bound to hold or sell them as their present value is estimated to be less than a tenth of their . original investment.
Market insiders said efforts to sell those bonds have not progressed amid apprehension and confusion over whether such trades will be opened for scrutiny at a future date.
He said this in turn has made the resolution of a default of Rs 15,000 crore by the Anil Ambani-promoted financial services firm elusive.
Three people familiar with the matter told ET that both LIC and EPFO have made informal calls with distressed property buyers seeking to access these papers through the secondary market route. But no decision has been taken yet.
“Either you have to sell or act to solve. Nothing is happening for now,” said one of the persons.
Some dealers said that government intervention may be required to resolve the matter.
Last month, LIC attempted to sell Reliance Capital bonds worth around Rs 1,000 crore, which was part of a bigger kitty (about Rs 10,000 crore) on offer.
IDBI Capital Markets was mandated to execute the deal, but it failed.
A few global companies bid for the bond, but the insurer rejected all bids, citing “expectation mismatch”.
“We didn’t even know what to expect,” said one of the bidders. “At least, that could have told us that, rather than any arbitrary rejection.”
Reliance Capital is believed to have credit secured lending of around Rs 15,000 crore, mostly through bonds (or non-convertible debentures). The unsecured portion of the credit is estimated to be Rs 3,000 crore.
Deutsche Bank, axis BankAres SSG, Singapore-based Broad Peak Investments,
And some mutual funds have also invested small amounts in debt securities of Reliance Capital.
Some global investors, including SSG, have acquired Reliance Capital Bonds worth a few hundred crore rupees from the secondary market in the recent past. It approached both LIC and EPFO for acquisition of more securities but in vain.
SSG declined to comment on the matter.
Reliance Capital, LIC and EPFO did not respond to emails sent to ET on Saturday afternoon.
Presently there is no formal committee of creditors. Informal talks are on with Reliance Capital and some talks with the lenders themselves.
“The NCLT route is not viable for Reliance Capital as the authorities supporting DHFL stakeholders will not have strong support in this particular case,” said an executive, owner of certain securities of Reliance Capital.
Some of the smaller lenders are waiting for LIC and EPFO to either sell off their share of sticky loans or negotiate a resolution deal, which could pave the way for possible resolution of the papers they have.
A fund manager said that EPFO and LIC, both state-owned entities, cannot resort to any secondary market route for exit as it may require approval from the government.
Dealers said this required immediate attention of the government as it could set an example for the distressed asset industry, where India has emerged as a major player.