The two troubled subsidiaries of Reliance Capital have over Rs 20,000 crore debt of both the companies. Reliance Home Finance has a debt of Rs 11,500 crore and Reliance Commercial Finance owes Rs 9,000 crore to lenders.
After the inter-creditor agreements (ICAs) of Reliance Infrastructure (RInfra) and Reliance Power (RPower) recently, two more companies from the Anil Ambani group - Reliance Home Finance and Reliance Commercial Finance - are at an advanced stage to close ICA with their respective lenders, said sources.
The two troubled subsidiaries of Reliance Capital have over Rs 20,000 crore debt of both the companies.
Reliance Home Finance has a debt of Rs 11,500 crore and Reliance Commercial Finance owes Rs 9,000 crore to lenders.
Last week, RInfra and RPower informed the stock exchanges that their lenders had entered into an ICA with lenders, kicking in a six-month standstill period to resolve their debt issues.
Sources said Bank of Baroda was the lead banker in both the consortium of lenders, who have exposures to these troubled finance companies.
There are 24 banks in the consortium for Reliance Home Finance and 21 for Reliance Commercial Finance.
Sources said 95 per cent of the lenders in both the consortiums have signed the ICA.
A Reliance Capital spokesperson declined to comment on the two companies’ debt restructuring plans.
Lenders are at advanced stage as far as signing the ICA is concerned.
Sources said the pact was expected be finalised by the end of September 2019.
Reserve Bank rules stipulate that the recast plan has to be set in motion in 180 days breathing period.
Both the lending arms of Reliance Capital have said they are looking to wind down their wholesale portfolio by March 2020 and they will exclusively focus on their retail portfolios.
Earlier, Reliance Capital had deferred its fourth quarter results for FY19 as Reliance Home Finance and Reliance Commercial Finance had named new statutory auditors and they would take some time to consolidate the subsidiaries’ financials with the holding company.
Last month, Price Waterhouse & Co had resigned as statutory auditors of both Reliance Capital and Reliance Home Finance citing unsatisfactory response to “certain observations” made by it as a part of the ongoing audit for fiscal 2018-19, the two companies said in their respective regulatory filings to stock exchanges.
Reliance Capital had said the auditor’s observations were “completely baseless and unjustified”.
Anil Ambani group is selling several assets to pare debt.
RInfra has put its road assets on the block. It will also sell its radio business.
In early July, CARE Ratings downgraded Reliance Home Finance’s debentures from “C” to “D” grade.
The rating action reflected the recent instance of rescheduling of non-convertible debenture by the company to address the timing mismatches of receipts.
This indicates that the company did not have funds to meet their debt obligations on the given date, the rating agency said.
The current resolution plan is likely to include extension of maturity for the loans given the asset liability mismatch issues that finance companies are facing.
Reliance Home Finance is looking to bring in a strategic equity partner and is in talks with private equity firms, sources said.
The liquidity profile of the group continues to be under stress on account of delay in raising funds from the asset monetisation plan and impending debt payments.
CARE Ratings had factored in linkages between Reliance Home Finance and its parent Reliance Capital.
These linkages, are in the form of Reliance Capital’s demonstrated track record of support to the subsidiary and strategic importance of the subsidiary to its parent along with sharing of the brand name.
The moderation in Reliance Capital’s profile has weakened these linkages as the parent may not be in a position to extend adequate support to its subsidiaries, CARE said.
Photograph: Francis Mascarenhas/Reuters