Tag: Anil Ambani

HDFC, Axis Bank sold Reliance Capital debt facilities to ACRE, BFSI News, ET BFSI

Banking & Finance

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A few months before the Reserve Bank of India (RBI) superseded the board of Reliance Capital (RCap), Ares SSG Capital-backed Assets Care & Reconstruction Enterprise (ACRE) acquired debt facilities from HDFC and Axis Bank at 27-28 paise on a rupee.

ACRE, an asset reconstruction company, purchased a ₹524-crore term loan from housing finance company HDFC Ltd and a ₹100-crore term loan and ₹490-crore non-convertible debentures (NCDs) from Axis Bank, the people said. Both trades were carried out on an all-cash basis, one of the persons cited above said.

HDFC and Axis Bank were the only two lenders that had provided term loans to RCap, according to the company’s annual report for the financial year March 31, 2021.

The Anil Dhirubhai Ambani Group-promoted finance company has total liabilities of ₹19,123 crore.

Axis Bank sold two 8.85% NCDs maturing in 2026 amounting to ₹488.2 crore and one 9% NCD maturing in 2026 of ₹1.85 crore to Assets Care & Reconstruction in the secondary bond market in October.

Default Category
The trade with HDFC was concluded in June, the people cited above said. HDFC had an outstanding loan of ₹524 crore and interest overdue of ₹79 crore as of March 31, 2021.

HDFC, Axis Bank and ACRE did not respond to the request for comment. The debt facilities of RCap were downgraded to D – indicating default category – in September 2019 by CARE Ratings, when it missed payments on NCDs.

RCap, having been in default for over two years, saw its board superseded on Monday. In a statement, RBI said it had done this given the “defaults by Reliance Capital in meeting the various payment obligations to its creditors, and serious governance concerns, which the board has not been able to address effectively.” The company’s total liabilities include NCDs of ₹16,260 crore, term loans of ₹625 crore and inter-corporate deposits of ₹561 crore. It has also issued a corporate guarantee of ₹1,677 crore.

In June last year, ET reported that Deutsche Bank had purchased ₹565 crore of Reliance Capital bonds at a discount of 70% in the secondary market through seven transactions.

RBI will approach the National Company Law Tribunal between Friday and Monday to admit the finance company for corporate insolvency resolution process, one of the persons cited above said. Y Nageswara Rao, a former executive director at Bank of Maharashtra, has been appointed administrator of RCap. The ADAG-promoted Reliance Capital is registered as a core investment company with RBI, with investments in general and life insurance, asset management, stockbroking, housing finance, wealth management and asset reconstruction.



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Reliance Capital’s public shareholders to take big hit; Anil Ambani barely hurt

Banking & Finance

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Public shareholders of Reliance Capital, holding over 97 per cent in the company, will take a major hit with the RBI superseding the NBFC’s board even as the ousted promoter-Chairman, Anil Ambani, walks away, barely bruised, as he had reduced his stake to less than 2 per cent by March 2020 from over 52 per cent in December 2018.

Even as the promoters were selling the shares, retail investors were lapping them up. Data with BSE show that the promoter group, led by Anil Ambani and his family, owns just 1.51 per cent stake as on September 30, 2021, while public shareholders held 97.85 per cent. Retail shareholders with a share capital of up to ₹2 lakh hold as much as 57.53 per cent.

 

 

Promoter stake cut, red flag

Foreign portfolio investors, who held as much as 22.74 per cent as on June 30, 2019, owned just 0.43 per cent by September 30, 2021. JN Gupta, Managing Director, Stakeholder Empowerment Services, said: “Past failures such as those at YES Bank and DHFL indicate that rarely a company with high promoter stake fails… The first red flag is when the promoter stake begins to come down. This should be a trigger for the RBI to sit up and take action, rather than wait till the company completely fails.”

LIC, with a stake of 2.98 per cent, is the single largest shareholder of Reliance Capital. Ramkrishna Reddy Chinta is another large shareholder (2.16 per cent), with his RKR Investments Services Private Limited holding a further 1.43 per cent. The RBI must re-look ownership norms, setting also a minimum threshold, Gupta said.

 

Advisory panel

Simultaneously, the RBI has constituted a three-member Advisory Committee to assist the Administrator of Reliance Capital. The members are Sanjeev Nautiyal, former Deputy Managing Director, SBI; Srinivasan Varadarajan, former Deputy Managing Director, Axis Bank; and Praveen P Kadle, former MD and CEO, Tata Capital.

 

RBI supersedes the board of Anil Ambani’s Reliance Capital

 

Reliance Capital shareholding      
       
  Promoter % Public % FPI %
Jun 30- 2018 52.23 47.14 17.13
Sept 30-2018 52.24 47.12 19.64
Dec 31-2018 52.24 47.12 16.5
March 31-2019 47.48 51.88 24.35
Jun 30- 2019 41.71 57.66 22.74
Sept 30-2019 40.41 58.95 13.67
Dec 31-2019 33.51 65.85 5.16
March 31-2020 1.51 97.85 0.24
Jun 30- 2020 1.51 97.85 0.42
Sept 30-2020 1.51 97.85 0.41
Dec 31-2020 1.51 97.85 0.39
March 31-2021 1.51 97.85 0.42
Jun 30- 2021 1.51 97.85 0.44
Sept 30-2021 1.51 97.85 0.

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Overseas assets of defaulters, guarantors may soon be within lenders’ reach, BFSI News, ET BFSI

Banking & Finance

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FILE PHOTO: An India Rupee note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

Lenders may soon be able to lay their hands on overseas assets of defaulting firms and personal guarantors.

The government has proposed adopting a global model law that will enable lenders to apply the Insolvency and Bankruptcy Code to defaulters’ assets lying overseas. These will include the offshore personal assets of the promoter if they have issued a personal guarantee. The changes would also allow the execution of orders against defaulters by overseas courts that have adopted the model law.

The model law is provided by the UNCITRAL — a subsidiary body of the United Nations.

The government has invited public comments on the proposed modifications by December 15.

The model law lays down the basic framework for cooperation between domestic and foreign courts and domestic and foreign insolvency professionals.

Personal guarantors

In the case of a personal guarantor, their ‘habitual’ place of residence will be taken into account to decide the jurisdiction where the main bankruptcy proceedings will happen. Debt recovery tribunals and the National Company Law Tribunal (NCLT) benches and their appellate tribunals are platforms where overseas creditors could initiate or participate in proceedings against personal guarantors in India.

The introduction of a cross-border insolvency law in the IBC, that is in line with international best practices and suitable for the Indian context, may be beneficial to all stakeholders. Draft part Z, as recommended by the insolvency law committee, is under consideration for enactment,” the ministry said, while proposing the additional measures regarding personal guarantors.

The changes were proposed after the ILC, constituted under the corporate affairs ministry to review the implementation of the IBC, noted the lack of a framework for cross-border insolvency. The government has decided to put in place a comprehensive framework for this purpose based on UNCITRAL model law on cross-border insolvency, which could be made a part of the IBC by inserting a separate chapter for this purpose.

In January 2020, the government had constituted a crossborder insolvency rules/regulations committee to recommend subordinate legislation.

Banks have approached the National Company Law Tribunal for invoking personal guarantees of promoters of 17 defaulting companies.

The defaulting promoters include those of Punj Lloyd, Amtek Auto, ABG Shipyard, Videocon, Varun Shipping, and Lanco, according to reports.

Armed with a Supreme Court order, banks are looking to invoke personal guarantees of tycoons from Venugopal Dhoot to Kapil Wadhawan to recover unpaid loans from their delinquent firms

The guaranteed debt

According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of bank led by State Bank of India.

The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.



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Anil Ambani, BFSI News, ET BFSI

Personal Finance

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Successful completion of the resolution process of Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) will help Reliance Capital reduce its consolidated debt by 50 per cent or Rs 20,000 crore, Chairman Anil Ambani said on Tuesday. Earlier this year, lenders had selected Authum Investment and Infrastructure Limited (Authum) as the successful bidder to acquire RCF and RHF. The resolution plan was approved by lenders forming part of the Inter-Creditor (ICA) under Reserve Bank of India’s Prudential Framework for Resolution of Stressed Assets, 2019.

While Reliance Capital holds 100 per cent stake in Reliance Commercial Finance (RCF), it is a majority shareholder in Reliance Home Finance (RHF).

Reliance Capital’s consolidated debt is Rs 40,000 crore and the resolution of the two lending businesses – RCF and RHF will have an impact on the consolidated debt of Reliance Capital, Ambani said.

“Between these two companies (RCF and RHF), there is a debt of over Rs 20,000 crore, and this will be deconsolidated from Reliance Capital’s balance sheet. So, just two transactions for RHF and RCF will drop our debt by a staggering 50 per cent or Rs 20,000 crore,” Ambani said during the Reliance Capital’s Annual General Meeting (AGM).

Post this, Reliance Capital will have roughly Rs 15,000 crore of secured debt represented by NCDs (non-convertible debentures) or debenture holders, and around Rs 5,000 crore worth of unsecured and guaranteed debt, he added.

He said Authum will pay around Rs 2,200 crore for RCF and close to Rs 2,900 crore for RHF.

“As we now complete the appropriate formalities to close these transactions, we are confident based on the regulatory and other approvals that both these companies will be moving forward under change in management and control,” Ambani said.

He said Authum has committed that all the employees of RCF and RHF will be retained.

There are 20,000 debenture holders between the two companies and these investors will get 100 per cent of their dues, he said.

Ambani said the committee of debenture holders and the debenture trustee of Reliance Capital had invited bids through expressions of interest last year for the monetization of nine key assets under the Reliance Capital umbrella.

However, due to the pandemic and the issues facing the financial services sector, the progress on the asset monetization process in the last 20 months has not been in line with the expectation of all the shareholders of the company, he said.

Owing to this, he said, “The committee of debenture holders and the Trustee have now circulated a new timeline of 180 days to progress the asset monetization programme, effective July of 2021.”

The board is currently examining various options, in addition to the option of the committee of debenture holders, on a fast track resolution to maximize the value of all its assets, he said.

All the companies under Reliance Capital such as Reliance Nippon Life Insurance, Reliance General Insurance, Reliance Securities, among others, have been performing exceedingly well and have not been hampered by the challenges faced by the financial services sector, he informed shareholders.

All these companies are fully capitalized and there is no need for infusion of any fund, he added.

Ambani said close to 90 per cent of the value of Reliance Capital is derived from two insurance businesses- Reliance General Insurance and Reliance Nippon Life insurance.

Reliance General Insurance is 100 per cent owned by Reliance capital. Reliance Nippon Life Insurance company is a joint venture between Reliance Capital (51 per cent) and Nippon Life Insurance, Japan (49 per cent).

“Just the value of our two insurance companies and stake that we have in these two companies is far greater than the overall secured debt of Reliance capital,” Ambani said.

He also assured the shareholders that there will not be any fire sale or distressed sale of any asset of the company. PTI HV MR



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Banks explore the option of invoking personal guarantee of promoters, BFSI News, ET BFSI

Banking & Finance

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New Delhi: Armed with Supreme Court order, banks may invoke personal guarantees of tycoons ranging from Venugopal Dhoot to Kapil Wadhawan to recover unpaid loans from their delinquent firms, sources said Monday.

According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of bank-led by State Bank of India (SBI).

The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on a debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.

The Supreme Court in May had held that the November 15, 2019 government notification allowing creditors, usually financial institutions and banks, to move against personal guarantors under the Insolvency and Bankruptcy Code (IBC) was ‘legal and valid’.

Post the judgement, a senior official of a public sector bank said banks are assessing the level of involvement of those directors who pledged their personal guarantee against the loan.

After the assessment, another banker said, banks would move National Company Law Tribunal (NCLT) for invoking personal guarantee as part of the recovery process.

The official said that banks have started receiving calls from some of the promoters for exclusion of their personal guarantee from the non-performing assets. Some of them are coming forward to resolve bad loans to save their personal wealth.

Most of the promoters thought that once their case is admitted under IBC, their past sins and obligations cease, the official said.

However, the order has generated fear among the promoters and directors who pledged their personal guarantee of losing their personal wealth as part of the resolution process, the official said, adding, the personal guarantee angle would expedite the resolution process as the guarantor stands at risk of losing personal property.

The creditor-debtor relationship has got a leg up and this will minimise chances of default in the future.

The concept of ‘guarantee’ is derived from Section 126 of the Indian Contracts Act, 1872. A contract of guarantee is made among the debtor, creditor and guarantor. If the debtor fails to repay the debt to the creditor, the burden falls on the guarantor to pay the amount.

The creditor reserves the right to begin insolvency proceedings against the personal guarantor if the latter does not pay. Usually, promoters of big businesses submit personal guarantees to creditors to secure loans and assure repayment.

During the hearings, the government had justified the November 2019 notification extending bankruptcy proceedings to personal guarantors. Attorney General KK Venugopal argued that by roping in guarantors, there was a greater likelihood that they would “arrange” for the payment of the debt to the creditor bank in order to obtain a quick discharge.



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Voting on Reliance Commercial Finance’s debt resolution underway

Banking & Finance

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Voting on the resolution plan for debt-ridden Reliance Commercial Finance has started and is likely to be completed by June 25.

“Banks have begun voting for the successful resolution plan of Reliance Commercial Finance on June 7 and it is expected to be completed by June 25,” said a person familiar with the development.

The resolution would help address the ₹9,017 crore debt of Reliance Commercial Finance, which is a 100 per cent subsidiary of Anil Ambani-controlled Reliance Capital.

Final bidders

The four final bidders whose plans have been taken up for voting include Authum Infrastructure and Investment, UV ARC in consortium with Hawk Capital, Invent ARC and Alchemist ARC. Bank of Baroda is the lead banker under the Inter Creditor Agreement for the resolution.

The debt resolution of Reliance Home Finance is also underway and the voting is expected to be completed by June 15.

Lenders had initiated the resolution of both the companies under the June 7, 2019 circular of the Reserve Bank of India on Prudential Framework for Resolution of Stressed Assets Directions 2019 .

Reliance Commercial Finance, which has been re-branded as Reliance Money, offers small and medium enterprises loans, loans against property, infrastructure financing, agriculture loans, supply chain financing, micro financing, vehicle loans and construction finance.

The total financial indebtedness of Reliance Capital stood at ₹20,916.78 crore including accrued interest up to April 30, 2021, as per a recent regulatory filing. The total amount of outstanding from the banks and the financial institutions was ₹721.9 crore.

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YES Bank buys RInfra’s Santa Cruz office for ₹1,200 cr

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Anil Ambani-backed Reliance Infrastructure Limited has sold its office Reliance Centre at Santacruz, Mumbai to YES Bank for ₹1,200 crore. “Entire proceeds from sale of Reliance Centre, Santacruz is utilised only to repay the debt of YES Bank,” Reliance Infra said in a statement.

The office building is spread over a 21,432.28 square metre plot in Santacruz and housed Anil Ambani group’s headquarters.

Background

Last year, YES Bank had said that it was taking possession of the properties under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act for non-payment of loans amounting to ₹2,892 crore.

YES Bank had then said it had issued a demand notice on May 6, 2020 to Reliance Infrastructure Ltd under the SARFAESI Act to repay the dues within 60 days, which the latter failed to repay. “The bank had taken possession of the building last year. Now the two sides have agreed to formalise this into a sale deal,” said a source.

Prior to this sale, ADAG is estimated to have an exposure of about ₹4,000 crore to YES Bank. Reliance Infra has now closed three asset sale deals in the last 90 days as part of its debt reduction plan. This includes the Delhi-Agra toll road, Parbati Koldam transmission company, and now the Reliance Centre.

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Yes Bank takes over Anil Ambani’s Reliance Centre for Rs. 1200 cr, BFSI News, ET BFSI

Banking & Finance

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Reliance Infrastructure Limited’s Reliance Centre at Santacruz, Mumbai has been taken over by private lender YES Bank for ₹1,200 crore. The office building is spread over a 21,432.28 square metre plot and houses Anil Ambani group’s headquarters.

Reliance Infra said in a statement, “Entire proceeds from sale of Reliance Centre, Santacruz is utilized only to repay the debt of YES Bank.”

The Anil Ambani-led group is one of the biggest borrowers of YES Bank. The bank has also taken over another property of the group situated at Veer Nariman Road in Mumbai.

Last year, Yes Bank had said that it was taking possession of the Santacruz building and two other smaller properties owned by the company under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act for the loan amount of Rs 2,892 crore.

YES Bank had then said it had issued a demand notice on May 6, 2020 to Reliance Infrastructure Ltd under the SARFAESI Act to repay the dues within 60 days, which the latter failed to repay.

In January, 2021 Anil Ambani-led Reliance Infrastructure completed the sale of its entire holding in a power transmission joint venture with the state-run Power Grid Corporation of India for an enterprise value of Rs 900 crore.



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