COC Asks IIHL to Implement Resolution Plan Before March 31, 2024

On March 04, 2024, the Committee of Creditors (CoC) of Reliance Capital Ltd asked Hinduja Group-backed Indusind International Holdings Ltd (IIHL) to implement the resolution plan, which is part of the debt resolution process, before March 31, 2024.

On February 27, 2024, the National Company Law Tribunal (NCLT) approved the proposal made by IndusInd International, which includes an upfront cash payment of ₹9,650 crore, which is 37.03% of the initial amount claimed. Reliance Capital’s lender accepted IIHL’s resolution plan in June 2023. However, another bidder, Torrent Investments, challenged the resolution plan, and the matter is pending at the Supreme Court.

In November 2021, the Reserve Bank (RBI) took precedence over the Reliance Capital board on governance issues and payment defaults by the Anil Dhirubhai Ambani Group company. RBI appointed Nageswara Rao Y as the administrator nominated requested bid to acquire Reliance Capital in February 2022.

Initially, four applicants submitted their bids with resolution plans for the debt-laden Reliance Capital. However, the COC rejected all four plans for lower bid values, and a challenge mechanism was initiated in which IIHL and Torrent Investments participated.

Impact On Shareholders

Following the resolution plan’s completion, Reliance Capital is scheduled to be delisted from stock exchanges and taken private by IndusInd International Holdings, which is led by the Hinduja Group.

As per the resolution plan, the shareholders of the company will not receive any payment from the delisting. The liquidation value of the equity shareholder of the company is nil. Hence, the equity shareholders will not be entitled to receive any payment, and no offer will be made to any shareholder of RCL.

The NCLT approval order proposes to cancel and extinguish RCL’s entire existing share capital for no consideration, leaving IIHL, the implementing entity, and its nominees as the only shareholders of the corporate debtor.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.