Anil Ambani’s debt-ridden Reliance Capital secured a buyout offer of Rs 9650 crore from Hinduja Group a few months ago.
Anil Ambani’s Reliance Capital deal with Hinduja Group firm IndusInd International Holdings has hit a roadblock as insurance regulator IRDAI has expressed some reservations over IndusInd International Holdings' (IIHL) resolution plan for debt-ridden Reliance Capital. For those who are unaware, Anil Ambani’s Reliance Capital is also in the insurance business, including non-life, sources said. Anil Ambani’s debt-ridden Reliance Capital secured a buyout offer of Rs 9650 crore from Hinduja Group a few months ago. As per the reports, Hinduja Group is in talks with three Japanese banks - Mizuho, SMBC and MUFG to borrow Rs 8000 crore to acquire Anil Ambani’s Reliance Capital under the bankruptcy code. The group aims to secure the loan before the May 27 deadline set by a bankruptcy court to close the deal.
Now, the Insurance Regulatory and Development Authority of India (IRDAI) in a recent communication to Nageshwara Rao Y, the administrator of Reliance Capital has said that the resolution plan submitted by IIHL is not in line with insurance regulations.
The regulator has sought clarification regarding equity capital that IIHL, the proposed buyer of insolvent Reliance Capital is willing to put in. It has expressed reservations about debt that IIHL plans to raise to fund the Reliance Capital takeover, sources said. The sector regulator is of the opinion that promoters should invest their own capital as insurance companies deal with the money of policyholders and as a regulator protection of policyholders is the top priority.
It has also sought clarifications on the structure of the company's borrowing plans, including the rate of interest, the instruments to be issued and the proposed subscribers etc.
Besides, it has sought the proposed structure for the acquisition of Reliance Capital's insurance subsidiaries, IIHL's ability to meet future capital requirements of insurance ventures.
The regulator also expressed apprehensive over the exceeding FDI following the transfer of the stake of Reliance Capital to IIHL.
"In other words, RCL (Reliance Capital Ltd) will have 100% FDI. Please confirm if the same is permissible as per extant FDI law. Please provide reference to the said law that permits the same," the communication said.
The National Company Law Tribunal on February 27, 2024, approved Hinduja Group firm IndusInd International Holdings Ltd's Rs 9,650-crore resolution plan for Reliance Capital.
In November 2021, the Reserve Bank superseded the board of Reliance Capital on governance issues and payment defaults by the Anil Dhirubhai Ambani Group company. The central bank had appointed Nageswara Rao Y as the administrator, who invited bids in February 2022 to take over the company.
Reliance Capital had a debt of over Rs 40,000 crore, and four applicants had initially bid with resolution plans. However, the committee of creditors rejected all four plans for lower bid values and a challenge mechanism was initiated in which IIHL and Torrent Investments participated. In June 2023, the Hinduja Group firm was selected by the committee for its bid of Rs 9,661 crore upfront cash. Reliance Capital's cash balance of an additional Rs 500 crore would also go to the lenders.
(with inputs from PTI)
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 "Anil Ambani's Reliance Capital deal hits roadblock")
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