Piramal, Zurich Insurance may bid separately for Reliance General Insurance

Piramal, Zurich Insurance may bid separately for Reliance General Insurance

Piramal Group (Piramal) and Zurich Insurance Group (Zurich) are likely to make separate bids for Reliance General Insurance Company (RGIC) ahead of next week’s deadline after talks for a joint bid fell through.

Both Piramal and Zurich had submitted separate expressions of interest (EoIs) for the general insurance business of the bankrupt Reliance Capital (RCap).

Both Piramal and Zurich, which had submitted separate non-binding bids for the general insurance business of RCap in August, had earlier planned to hold 50 per cent each in the proposed special purpose vehicle.

Piramal had valued RCap’s general insurance business at Rs 3,600 crore, while Zurich had quoted Rs 3,700 crore for the same.

The two companies later decided to form a joint venture (JV) to make a bid, but due to differences on shareholder agreement and valuation, their talks collapsed, said banking sources.

Banking sources said RCap assets are unlikely to fetch a good price for lenders, considering all the bidders are seeking additional time to make a final bid. With lenders in no mood to extend the deadline again, the response from bidders will be half-hearted, they said.

Moreover, once the top offer is made, the other bidders will be given the option to make a better offer under the Swiss challenge method to get better offers.

Private equity (PE) major Advent has submitted the highest non-binding bid of Rs 7,000 crore for the general insurance firm. This is nearly double the amount offered by Piramal and Zurich Insurance. Advent is unlikely to submit a binding bid for RGIC.

“Advent changed its mind after the submission of non-binding bids as it realised it had overbid for RGIC. Since the fund has a life and is in line with its policy, it is not allowed to make investments where there is a condition of a lock-in period,” said a banker.

Guidelines by the Insurance Regulatory and Development Authority of India (Irdai) stipulate a five-year lock-in for PE investors in Indian insurance. Irdai is likely to change the rules on the lock-in period for PEs at its next board meeting on Friday, added a banker.

Aditya Birla Group and Japan’s Nippon Life Insurance Company (also known as Nissay or Nihon Seimei) were earlier engaged in merger talks for their respective life insurance ventures — Aditya Birla Sun Life Insurance and Reliance Nippon Life Insurance. But the talks failed to fructify.

As many as 55 companies have submitted EoIs for RCap’s assets. Of these assets, only the profit-making insurance ventures are catching the eye of bidders.

In general insurance, lenders are selling 100 per cent stake held by RCap. In the life insurance venture, 51 per cent stake is up for sale. The rest of the life insurance JV stake is owned by Reliance Nippon Life Insurance.

Reliance Nippon Life Insurance is likely to tie up with Torrent Group to make a bid for the rest of the stake in the life insurance JV, said a source close to the development.

According to the plan under discussion, Reliance Nippon Life Insurance will raise its stake to 74 per cent (as permissible under India’s foreign direct investment guidelines for insurance); the rest will be held by a local partner.

Reliance Capital:  The journey so far

2021
 

November: Reserve Bank of India sends the company for debt resolution under the Insolvency and Bankruptcy Code

2022
 

March: 54 companies, including the Tatas, Adanis, and TPG send expressions of interest to acquire the company’s assets

August: 14 companies make non-binding offers for various assets; most bidders drop out

October: Aditya Birla Capital joins race to buy life insurance firm