Half a dozen top industry executives associated with rCap Investments told ET that some rCap investments in operating subsidiaries such as insurance, broking and asset reconstruction are likely to generate good value. Large institutional investors, including LIC and Employees’ Provident Fund Organization (EPFO), collectively own around 6,000 crore RCap bonds. A lot of recovery is also expected from him.
A person mentioned above said, “The plurality of lender/investor opinion was hindering this debt resolution. Now it will proceed in a time bound manner.” The total outstanding bonds is estimated to be around ₹15,000 crore.
Vistara in discussions
The quantum of loans placed through these instruments stood at Rs 16,273.53 crore as on September 30, 2019. Vistara ITCL The debenture for the bond is the trustee. It is in discussion with all stakeholders following Monday’s order from the Reserve Bank of India (RBI). These bonds are not often traded in the secondary market. In October, papers worth around Rs 490 crore with residual maturity of five years turned into three transactions. They gave a yield above 50%. Two distressed investors from Singapore are said to have taken those securities from local banks.
Bond yields and prices move in opposite directions. Higher yields point to a lower net asset value of the underlying bonds.
Meanwhile, RCap said in a statement, “The company will fully cooperate with the RBI-appointed administrator for expeditious resolution of its debt in the best interest of the stakeholders.” One of the top five mutual fund houses with an estimated investment of Rs 130 crore has already side-pocketed its investments in Rcap. Side-pocketing is an exercise in separating an asset and its associated liabilities. Any recovery from that exposure will now be added directly to the unitholders’ net asset value.
Reliance Capital is the fourth non-banking finance company (NBFC) to be taken to the administrators under the provisions of the Insolvency and Bankruptcy Code (IBC). “This proves that IBC for financial services is now a mainstream activity,” said a senior asset manager who managed thousands of crores.
In October last year, the committee of creditors had invited expression of interest for all or part of RCAP in major subsidiaries and assets. These include Reliance General Insurance, Reliance Nippon Life Insurance, Reliance Securities and Reliance Asset Reconstruction Company.
A group of local and global investors, including Oaktree, Jessie Flower and some asset reconstruction companies, sought to own these assets. But due to widespread disagreement, RCAP’s lenders and debt investors could not reach a conclusion.
“Through the formal process, the RBI administrator can reach out to old bidders who are still interested due to regulatory intervention,” said the head of a financial services institution.
Some private equity investments by RCap, such as Paytm E-commerce and Nafa Innovation Pvt, were also up for sale. Paytm investment was made at a very early stage and is expected to yield substantial returns.
Separately, some of RCAP’s secured and unsecured lenders have filed more than 10 cases in various courts and debt recovery tribunals. Litigation is believed to have delayed the resolution process.