 "R-Infra agrees to LIC's conditions on demerger")
The restructure plan of Reliance Infrastructure (R-Infra) got a boost after the company agreed to the conditions laid down by the Life Insurance Corporation of India (LIC). R-Infra proposes to demerge its power generation units to a separate company called Reliance Electric Generation and Supply (REGSL) in a scheme valued at Rs 6,300 crore. It has filed a scheme of arrangement with the Bombay High Court for this purpose.
Last week, LIC had listed several conditions to give its consent. Following this, Reliance Infrastructure told the Bombay High Court that it would comply with all the conditions laid down by the insurer, which owns a 11.92 per cent stake and exposure of over Rs 2,000 crore to its non-convertible debentures. In an affidavit dated December 1, reviewed by Business Standard, a representative of R-Infra and REGSL said the R-Infra would not transfer a sum of Rs 283 crore, which matures in February 2017, to REGSL.
The affidavit said it was agreed that LIC’s investment in REGSL would not exceed 20 per cent of the equity and free reserves plus debentures/bonds in case of debt, in accordance with the regulations of the Insurance Regulatory and Development Authority of India (Irdai).
The companies agreed that credit rating of the transferee company would be in consonance with Irdai regulations and added that the transferee company undertook to offer a security cover of 1.25 times of the investment and interest cover of two times the investment.
Under the scheme, cleared by R-Infra in March, Mumbai Power Generation, Transmission and Distribution Division, Goa Power Station Division and Windmill Division of Reliance Infra will be transferred to Reliance Electric Generation and Supply Private Ltd (REGSPL).
“REGSPL shall pay aggregate lump-sum cash consideration of Rs 6,282.50 crore to the company,” R-Infra had said. Following initial objections by LIC, REGSPL was renamed REGSL.