Aditya Birla Capital to seek regulator role in RCap resolution process

Warns it will seek intervention if RCap's Administrator ignores its demand for additional info on the company

Aditya Birla Sun Life Insurance Company, a late bidder for the Reliance Nippon Life Insurance Company (RNLIC), has threatened to seek the intervention of regulators and courts if its demand for additional information about the company is ignored by Reliance Capital's Administrator.

In a letter dated November 16, Aditya Birla Sun LIC has accused the Administrator of not providing the critical information related to the Reliance Nippon LIC. The company said despite repeated reminders, neither have its queries been addressed nor has its demand for a management meeting been considered.

The company has accused the Administrator of brazenly ignoring its repeated requests for providing information or holding management meetings. In its letter, the Aditya Birla Capital said the information sought by it is critical for making a holistic assessment of RNLIC's assets and submitting a competitive resolution bid for maximising value, for all the stakeholders of Reliance Capital.  

"Considering the timelines of the final submission of the Resolution Plan, it becomes all the more critical that the requisite information or clarifications are provided at the earliest, failing which the terms of the resolution plan may be impacted."  

The company has said that if the information comes too close to the deadline for bid submission i.e. 28 November, then it may not be able to seek necessary approvals to submit the financial bid for RNLIC. It may even result in the submission of a sub-optimal resolution plan, it warned.

Aditya Birla Capital, the parent firm of Aditya Birla Sun LIC, did not comment on the matter.

Meanwhile,  Nippon Life of Japan, which already owns a 49 per cent stake in RNLIC, has made it clear to the Administrator and Aditya Birla Sun life that it is not interested in merging with Aditya Birla Sun LIC or sell its stake.

Meanwhile in a letter dated November 11th Nippon Life - Japan has communicated its resentment and reservations to the RCAP Administrator, Aditya Birla Sun Life, and its foreign partner, Sun Life Financial Inc, Nippon Life said in a communication to the administrator.

Nippon Life is keen on acquiring the rest of the stake in RNLIC, through a strategic partner as Indian Insurance rules do not allow a foreign company to have an equity stake of more than 74 per cent in an Indian Insurance entity.  

But the entry of Aditya Birla Sun Life has upset Nippon Life plans for its Indian venture. In case Birla Sun Life succeeds in acquiring a 51 per cent stake in RNLIC, then it will have to merge the RNLIC with Birla Sun Life Insurance as the IRDA guidelines does not allow cross-holding between the two insurance companies.

In the case of the merger of RNLIC with Birla Sun Life, Nippon Life's stake would fall to  below 10 per cent in the merged entity. Nippon Life will then also lose all the shareholder and the governance rights that exist in terms of nominating the CEO, equal representation on the Board, member of the audit committee, and the Veto rights on the reserved matters, in the RNLIC.

Nippon Life, in a letter to the RCAP Administrator, has said all issues including IRDA's permission and three fourth of shareholders nod should be sought before announcing the sale to Aditya Birla group.

Nippon Life is in talks with some Indian companies, including Torrent Group, to form a strategic partnership, in order to bid for RCAP's stake in RNLIC.

Fifty-five companies have bid for Reliance Capital assets with maximum interest coming in for its two insurance joint ventures. Of these only a handful companies are interested in making the final bids by the month end deadline.