Swiss Challenge process on LIC's RCap debt sale fails to get rival bid

Final bids for Reliance Capital expected on Monday

The Swiss Challenge process to sell Life Insurance Corporation's debt in Reliance Capital did not get a rival bid, thus paving the way for ACRE SSG, a stressed asset fund, to acquire the loan at a deep discount. ACRE SSG has offered 27 cent to a dollar, leading to a 73% haircut to LIC on its Rs 3,400 crore exposure on Reliance Capital

The development comes just ahead of final binding bids for Reliance Capital assets are expected on Monday.

Banking sources said IDBI Trusteeship, process advisor to sell LIC loan, did not receive a single bid, as the deadline for bid submission ended on Friday. Based on ACRE's offer for LIC debt, Reliance Capital as a core investment company is valued at around Rs 4,400 crore.

Both LIC and ACRE are members of Reliance Capital's CoC (committee of creditors) and are planning to finalise their transaction before the final bid submission deadline on Monday.

ACRE already has an exposure of Rs 1,350 crore in Reliance Capital.

As per the IBC law, the CoC will receive the independent valuation of Duff & Phelps and RBSA a day after the submission of the binding bids on November 29, which will be available to all CoC members. "If the valuation of independent valuer is higher than the ACRE-LIC transaction then questions could be raised over lower valuation of LIC debt sale," said a banker close to the development.

Nippon Life honchos to meet RBI, Irdai on Monday 

Meanwhile, top officials of Japan's Nippon Life, which currently holds 49% stake in Reliance Nippon Life Insurance (RNLIC), a subsidiary of Reliance Capital, is visiting India on Monday to meet the regulators.

Nippon Life has initiated talks with Torrent, Hinduja and Cosmea to bid for Reliance Capital's 51% stake in RNLIC.

Sources said the global president of Nippon Life, Hiroshi Shimizu, accompanied by Minoru Kimura, managing executive officer, head of global business, Nippon Life Insurance, and Tomohiro Yao, regional CEO, Nippon Life Asia Pacific, and director, RNLIC, will be in Mumbai on Monday – the day of submitting the final offers.

The Nippon Life team is scheduled to meet the senior officials of the Reserve Bank of India, insurance regulator IRDA and other stakeholders in India to apprise them of their intent to increase their stake in RNLIC.

Nippon Life has already made it clear to the administrator of Reliance Capital, Y Nageshwar Rao, that the company is opposed to the entry of Aditya Birla Sun Life Insurance in the bidding process of RNLIC, and it will not agree to merge its India business with Birla Sun Life Insurance. Nippon has also decided not to sell its 49% stake in Reliance Nippon Life Insurance.

To counter the Aditya Birla Group's bid, Nippon Life is also preparing to bid for RCAP's 51% stake in partnership with an Indian company.

At present, Indian regulations restrict the holding of foreign companies in the insurance sector at 74% and Nippon can increase its stake to the ceiling and rest has to be offered to an Indian partner. Nipon is in talks with Torrent, Cosmea and Hinduja to form a strategic partnership for the bid.

Aditya Birla Group is unhappy at the ongoing sale process. In a letter to the RCAP administrator, it has accused him of not sharing critical information with them despite repeated reminders. The Aditya Birla Group has threatened legal action if the desired information is not shared at the earliest.

In the first round, RNLIC had not received any bids for Reliance Capital's stake from any bidder.

Fifty-five companies had expressed their intention to acquire Reliance Capital assets in March this year. Of these only few companies made their indicative non-binding bids as other top companies backed out. Only the two profit making insurance ventures are getting good response from potential bidders.