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Reliance Home Finance Ltd (RHFL), which is a subsidiary of Anil Ambani group-led Reliance Capital, is again in the news as Invent Assets Securitisation & Reconstruction has moved an insolvency petition against the firm. This action comes on the heels of RHFL's ongoing financial woes, such as a series of defaults on loans and a recent voluntary liquidation nod by the Reserve Bank of India (RBI). The insolvency petition is another key installment in the firm's long history of dealing with creditors and regulator bodies.
Background to Reliance Home Finance's Financial Incapacities
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RHFL has defaulted on substantial amounts of loans, most recently on over ₹40 crore to Punjab & Sind Bank, even while possessing more than ₹1,500 crore of cash and equivalents which it cannot utilise owing to an order passed by a court of law.
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Total obligations of the company involve a ₹200 crore secured term loan at 9.25% per annum with Punjab & Sind Bank.
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RHFL has experienced numerous non-payments and non-compliances to debenture holders, with numerous reminders and legal notices having been issued since 2020.
Recent Developments and Insolvency Proceedings
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Invent Assets Securitisation & Reconstruction has moved a petition to commence Corporate Insolvency Resolution Process (CIRP) against RHFL under Section 7 of the Insolvency and Bankruptcy Code.
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Past legal proceedings involve applications made by Catalyst Trusteeship and other creditors for non-payment and other defaults, with the matter being on trial at the National Company Law Tribunal (NCLT).
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The NCLT has been progressively hearing petitions pertaining to RHFL's debt and resolution schemes.
Regulatory and Strategic Steps
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In January 2024, RBI sanctioned RHFL's voluntary withdrawal from the home finance business, allowing for the proposed liquidation of the company.
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Authum Investment and Infrastructure Ltd, the buyer of RHFL, has sent a slump sale proposal to Reliance Commercial Finance Ltd, another Authum-acquired company, for all the assets of RHFL.
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In the resolution plan, Authum bought ₹11,540 crore of RHFL's debt for ₹3,351 crore with the aim of settling a major part of the group's liabilities.
Effect on Stakeholders
The current insolvency and liquidation process has a direct bearing on lenders, debenture holders, and institutional investors like insurance and pension funds, most of whom have expressed concerns regarding possible heavy losses.
The process is being watched closely by regulators, with the RBI and NCLT taking central roles in monitoring the resolution and liquidation plans.
Relevant Sources: NCLT Order on Invent Assets' Insolvency Petition Against RHFL, Business Standard, NCLT Proceedings on RHFL Debt Issues, Economic Times, Catalyst Trusteeship
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