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The Indian Supreme Court's decision to allow Authum Investments and Infrastructure to implement its INR 2,887-crore ($385m) resolution plan for the takeover of Anil Ambani's Reliance Home Finance has brought relief to those associated with the company. The court also directed that opposing debenture holders should be given the option to accept the terms of the resolution plan or pursue other legal remedies to recover their dues.
The court's ruling is expected to benefit small investors, who have up to INR 5 lakh ($6,700) exposure, as they will receive 100% of their principal amount. In contrast, debenture holders with exposure exceeding INR 5 lakh will receive 23.24% of their principal amount. This ruling is consistent with the decision made in the case of Reliance Commercial Finance (Sebi versus Rajkumar Nagpal), and it provides dissenting debenture holders with the option to accept the terms of the resolution plan or stand outside the proposed plan framed under the lenders' inter-creditor agreement and pursue other legal remedies to recover their entitled dues.
The resolution will also benefit Yes Bank and Bank of Baroda, as the delay has caused loan recoveries in RHFL to increase from INR 1,600 crore ($214m) to INR 3,100 crore ($414m). The total value of the resolution plan is now INR 3,300 crore ($440m), out of which INR 3,100 crore is cash in the company. Shapoorji's INR 200 crore ($27m) will be adjusted from this amount, and Authum will put in another INR 200 crore. This means that the haircut that banks took has reduced due to the delay, and Authum's offer will increase to INR 3,100 crore or a 72% haircut for secured creditors, versus INR 2,887 crore or a 74% haircut to the total dues of INR 11,200 crore ($1.5bn) when the plan was agreed upon in 2021.
BoB Capital Markets and EY served as process advisors to lenders in the resolution. The administrator for RHFL's parent company, Reliance Capital, has called for an extraordinary general meeting of RHFL shareholders on 25 March to approve the resolution plan, which Authum has committed to completing by 31 March.
RHFL is one of the biggest companies in Anil Ambani's financial services portfolio, which includes commercial finance and insurance businesses. Lenders had started the resolution process for both RHFL and Reliance Commercial Finance before parent Reliance Capital was referred to the bankruptcy process by the Reserve Bank of India in late November 2021.
Overall, the Supreme Court's decision brings a significant resolution to a long-standing issue for Authum Investments and Infrastructure and RHFL, which has been in the resolution process for several years. The resolution provides small investors with significant benefits and may also help Yes Bank and Bank of Baroda to recover some of their losses. Moreover, it may set a precedent for future cases involving lenders and debenture holders in India's financial services sector.
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