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Anil Ambani’s two finance firms to undergo asset sale, bank consortium set to proceed

Value erosion of Anil Ambani's two finance companies due to debt default has made asset sale only viable alternative, say bankers. RBI disagreeable to resolution under IBC.

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Mumbai: Lenders to once-a-billionaire Anil Ambani’s two finance companies have decided to proceed with an asset monetisation plan for these firms, with the Reserve Bank of India (RBI) disagreeable to a proposal by commercial banks for a resolution under the Insolvency and Bankruptcy Code (IBC), ThePrint has learnt.

Bankers speaking to ThePrint on the condition of anonymity said the value of Reliance Home Finance Ltd (RHFL) and Reliance Commercial Finance Ltd (RCFL) has eroded significantly. These companies defaulted last year, which prompted the banks to proceed with the asset sale plan.

The process is being pursued by the Committee of Creditors (CoC) led by Bank of Baroda.

Separately, the debenture trustee of Reliance Capital Ltd (RCL), the holding company of both the firms, is pursuing a resolution plan for the Ambani firm, said the sources.

According to sources, the lenders’ decision to proceed with the asset sale of these companies comes as the RBI was not agreeable to the proposal of resolution of these companies through the bankruptcy courts under the IBC.

Under Section 227 of the IBC, the government and the regulator need to refer a financial service provider to the National Company Law Tribunal (NCLT) for resolution through this mechanism.

“Under these circumstances (of value erosion), monetisation of the assets of the companies under the bank-led and debenture trustee-led resolution appeared to be the best options available at the moment for maximising value,” said a source.

ThePrint reached Reliance Capital and Bank of Baroda via emails for a comment, but there was no response till the time of publishing of this report.

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How the resolution will work

The resolution of RCFL is being pursued by a change in management with the acquisition of 100 per cent stake, in accordance with RBI guidelines. The resolution can be achieved either by complete acquisition of the company by an investor, or of the company with one or more asset books, or only to acquire one or more asset books.

Similarly, the RHFL’s resolution plan is being pursued by change in management by acquiring majority or controlling stake. This plan also has three options — acquisition of the entire company by an investor, or of the company along with the retail asset book, or only of the retail asset book.

Earlier this year, the CoC called for expression of interest for RCFL and RHFL under the resolution process with the options involving change of ownership and management.

The CoC has already received bids from at least 13 investors, including JM Financial Asset Reconstruction Company and Edelweiss Asset Construction for RCFL. The process is being run by Deloitte as the resolution advisors.

The last date for submitting bids for RHFL is 15 September. BOB Capital Markets Ltd and EY Restructuring LL are the resolution advisors for RHFL.

For RCL, the debenture trustee has been working on monetisation of its assets through the holders under the Committee of Debenture. As secured creditors, the debenture holders can take possession of the secured assets of the company and also take over the management of the company under the provisions of section 13(4) of the SARFAESI Act.

The companies

Reliance Commercial Finance, a non-banking finance company now rebranded as Reliance Money, is a 100 per cent subsidiary of Reliance Capital. It was demerged from Reliance Capital in the March quarter of 2016-17.

The NBFC is primarily into secured lending with a focus on equipment and property backed small and medium enterprise loans, loan against property, short term infrastructure loans and loans to microfinance institutions. It has assets under management of Rs 11,000 crore, according to company data.

Reliance Home Finance is a listed mortgage lender with assets under management of Rs 14,500 crore and a total debt of around Rs 13,000 crore. The company reported a net loss of Rs 161.34 crore in the first quarter of the current fiscal due to fall in interest income, according to firm data.

Anil Ambani, the younger sibling of India’s richest business tycoon Mukesh Ambani, had told a London court earlier this year that his net worth has become zero after taking into account his liabilities, in response to a lawsuit filed by three Chinese state-run lenders seeking repayment of loans given to his firm Reliance Communications.

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  1. Difference between a person not going for loan and a person going for a loan is like a difference between a debt fund and a equity fund. The former will rise steadily but slowly, the latter will shoot up or down. As a nursery kid would say, like a snail and a rabbit.
    It is sad that a talented person like Anil Ambani has to face the situation that he is facing at the most crucial age in his life which is the ripe time to multiply It was only because he was at a wrong place at the wrong time. He will come up if he looks after his health. He will prove himself in time. This experience will be useful for his family and next generation of entrepreneurs.

  2. Wish you all the best anil ambani…aap ek baar phir se sabkuch theek karlenge
    God bless you always 🙏🙏🙏

  3. One should think 1000 times before taking loan from a bank. Banks are friend when you have lot of money but a real enemy when you don’t have money.
    Learn from here that these banks have shown red carpet when they were giving loan to Mr Ambani.
    I am with Mr Ambani that he has not a run away from the situation and facing the truth with courage.
    On the other hand I would personally suggest to all my readers and fellow people that do not take loan from banks in both the conditions you have money me or you don’t have money.
    When you are in good days banks are your friends and when you are in bad days these banks make your days worst.

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