Reliance Capital executes a strategic move by divesting 45% stake worth Rs 54 crore in Reliance Home Finance, boosting recovery prospects for lenders. Amid corporate insolvency proceedings, Reliance Capital retains a mere 2.5% ownership in the subsidiary. Authum Investment & Infrastructure leads an innovative resolution process for both Reliance Home Finance and Reliance Commercial Finance, securing significant debt for a fraction of the value. Authum's decision for voluntary liquidation adds a twist, while a sequential share sale strategy aims to maximize lenders' recovery potential. The episode highlights regulatory effectiveness and the importance of protecting retail investors' interests.
In a strategic manoeuvre, Reliance Capital has divested a substantial 45 percent stake worth Rs 54 crore in its publicly listed subsidiary, Reliance Home Finance. This move, conducted via an open-market transaction, is poised to bolster lenders' prospects for recovery. In the present corporate insolvency proceedings, Reliance Capital, formerly under Anil Ambani's leadership, now holds a mere 2.5 percent ownership stake in Reliance Home Finance. Lenders collectively approved an elaborate Rs 9,660 crore resolution strategy devised by the Hinduja Group's brainchild, IndusInd International Holdings, for Reliance Capital.
The intriguing twist lies in the fact that the resolution process for Reliance Capital's offshoots, namely Reliance Home Finance and Reliance Commercial Finance, had already kicked off prior to the Reserve Bank of India formally acknowledging the corporate insolvency of the parent company. Notably, this entire process was executed beyond the jurisdiction of the National Company Law Tribunal (NCLT). Entering the scene with an alternative approach, Authum Investment & Infrastructure took charge of the financial assets of both entities through an innovative out-of-court resolution mechanism.
This ingenious resolution translated into Authum securing Reliance Home Finance's staggering Rs 11,540 crore debt for a significant Rs 3,351 crore while also obtaining Reliance Commercial's substantial Rs 9,000 crore loan portfolio for Rs 1,629 crore. Underpinning this labyrinthine resolution plan, the operations of Reliance Home Finance were amalgamated into the framework of Reliance Commercial Finance. Consequently, on the pivotal date of July 17, Authum embarked on a resolution to cease its housing finance operations and voluntarily surrender its registration as a certified housing finance entity to the esteemed National Housing Bank.
A twist in this narrative is Authum's affirmative decision to pursue voluntary liquidation, a facet that often sparks curiosity. The aftermath of this elaborate financial dance has seen Reliance Capital's ownership diminish to a modest 2.47 percent after the substantial 45.4 percent stake sale. Notably, in a strategic move, the appointed administrator orchestrated a sequential share sale, the timeline including August 4 (at a commendable Rs 2.80 each), August 9 (at an intriguing Rs 2.10), and finally, August 10 (at a compelling Rs 2.00).
Examining market dynamics, a perceptive equity market observer explained that the strategic decision to liquidate Reliance Home Finance shares was the optimal choice, primarily motivated by the objective of maximizing lenders' potential for recovery. An insightful perspective he shared was the underlying concern that these shares would fall into the hands of unsuspecting retail investors. This pointedly underscored the regulatory framework's efficacy and the need for the vigilant Securities and Exchange Board of India (SEBI) to proactively suspend trading upon any corporate liquidation decisions, thereby safeguarding the interests of retail investors.
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