Reliance Capital sheds 5% as RBI supersedes board

Reliance Capital sheds 5% as RBI supersedes board

 NEW DELHI: Shares of Reliance Capital NSE -4.99 % dropped 5 per cent in early trade Tuesday after the Reserve Bank of India superseded the board of the Anil Ambani-led company and said that it will soon initiate bankruptcy proceedings against the debt-laden non-banking financial company.

The counter fell to a low of RS 18.10 on the National Stock Exchange as against the previous close of RS 19.05.

The steps taken by the regulator on Monday against the beleaguered NBFC are for payment defaults and serious governance issues. The RBI has appointed former Executive Director, Bank of Maharashtra, Nageswar Rao as the administrator of Reliance Capital.

In a statement on Monday, the RBI said, "RBI will also apply to the National Company Law Tribunal for appointing the administrator as the insolvency resolution professional."

Reliance Capital too released a statement saying that it would cooperate fully with the central bank-appointed administrator in order to ensure the expeditious resolution of its debt in the interest of stakeholders.

Also Read : Reliance Capital defaults on interest payments on HDFC, Axis loans

The company is the third financial services company to face insolvency proceedings after the law was amended to bring NBFCs under its purview.

In an annual general meeting in September, Ambani had informed shareholders that the consolidated debt of Reliance Capital stood at RS 40,000 crore.

The central bank’s step comes more than two years after the company was declared a defaulter by rating agency CARE for failing to meet debt obligations.

As a result of the default, the company’s debenture trustee Vistra ITCL invited bids for Reliance Capital’s investments in various holding companies.

An immediate impact of the insolvency proceedings could be a re-evaluation of the entire asset sale process and may also likely put a spanner in the works for a planned sale of Reliance Commercial Finance and Reliance Home Finance to Authum Investment and Infrastructure.

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