A group of lenders to Reliance Home Finance Ltd has approved a Rs 2,911 crore ($393 million) bid by a little-known shadow bank to take over the company as part of an insolvency resolution process.
Lenders led by state-run Bank of Baroda have selected Authum Investment & Infrastructure Ltd to acquire all assets of Reliance Home. The selection is subject to regulatory approvals, Authum said in a stock-exchange filing.
Reliance Home is the mortgage lending subsidiary of Reliance Capital Ltd, the financial services arm of former billionaire Anil Ambani’s Reliance Group. Anil Ambani is the younger brother of Mukesh Ambani, India’s wealthiest man and chairman of energy-to-telecom conglomerate Reliance Industries Ltd.
The sale of the loss-making Reliance Home is part of a debt resolution plan for Reliance Capital as per a process mandated under the Reserve Bank of India’s rules for distressed assets. Reliance Home owes its lenders about Rs 11,200 crore and recorded a loss of Rs 1,520 crore for the year through March 2021.
Authum’s offer translates to a haircut of almost 75% for Reliance Home’s lenders.
Mumbai-based Authum is a non-banking finance company majority owned by Alpana Dangi. She is the wife of Sanjay Dangi, a stock market trader who was barred by the Securities and Exchange Board of India a decade ago on allegations of price manipulation and collusion.
Authum outbid distressed assets-focused alternative investment firms Ares SSG and Avenue Capital, among others, for Reliance Home.
Authum’s revenue, profit and share price have recorded a massive jump over the past few quarters. It posted a net profit of Rs 90 crore on revenue from operations of Rs 194 crore for the nine months through December 2020. This compares with a loss of Rs 15.3 crore on revenue of just Rs 10.5 crore for the year ended March 31, 2020.
Similarly, its shares have surged 10 times over the past year, from Rs 56 apiece on June 29, 2020 to Rs 574.45 apiece on June 18 this year, stock-exchange data show.
Authum said in a statement it has assets under management of about Rs 2,200 crore. It said its investment strategy involves investments in listed companies, providing growth capital to unlisted companies, acquisition of financial assets, real estate investments and select debt investments.
The company said it aims to become a diversified financial services company by pursuing a combination of organic and inorganic growth opportunities. The acquisition of Reliance Home is part of this strategy, it added.