Hindujas' Reliance Capital buy faces further delay; matter pending in SC

Matter pending in Supreme Court; group firms to pay Rs 9,661 crore to lenders only after all the clearances

Mauritius-based IndusInd International Holdings and other Hinduja group entities are expected to make payments worth Rs 9,661 crore for the acquisition of bankrupt Reliance Capital (RCap) only after getting all the legal and regulatory clearances, including from the Supreme Court, thus delaying the closure of the transaction.

A source close to the development said that according to the National Company Law Tribunal (NCLT) order dated February 27, the payment for the acquisition was to be made within 90 days from the NCLT’s approval of the resolution plan and after receiving all legal and regulatory clearances.
 

As the matter is still pending in the Supreme Court following a petition filed by the Torrent group, which has opposed the second round of the auction for RCap, the payment may not be made by May 27, i.e., within three months of the NCLT order. The Supreme Court is expected to hear the Torrent petition in June, but no date has been fixed as yet. Besides, the Insurance Regulatory and Development Authority of India (Irdai), in its approval on May 10, had said the new promoter would have to obtain all the necessary approvals from other statutory, regulatory, and judicial bodies, as may be required, in connection with the transfer of shares of the insurance companies currently owned by RCap.
 

RCap owns a 51 per cent stake in Reliance Nippon Life Insurance Company, 100 per cent of Reliance General Insurance, and also holds a health insurance company. The Irdai has also made it clear that the insurers’ shares cannot be pledged by the new owners to raise funds.

IIHL Chairman Ashok Hinduja had earlier said it would complete the transaction within 48 hours of getting the Irdai approval. But sources said the payment to the lenders would be made only after the latest pre-conditions prescribed by the Irdai are met. IIHL and other entities are raising Rs 7,500 crore as debt and the rest as equity.
 

The members of the monitoring committee of RCap operations agreed to seek an extension of time from the lenders to close the transaction. The ball is now in the court of the lenders, who will have to take a call on whether to agree to the Hinduja plan or not.
 

The Hinduja group had earlier changed the structure of the companies bidding for Reliance Capital by inducting four new entities led by Aasia Enterprises to satisfy the insurance regulator’s norms. The new structure helped the group to meet the foreign direct investment (FDI) ceiling of 74 per cent for the insurance sector.
 

In the new structure, Cyqure India acted as the holding company of Aasia Enterprises and mirrored the same shareholders — Ashok Hinduja, Harsha Hinduja, and Shom Hinduja, who hold the Indian passport. Besides this, the other two new companies, Cyqurex Technologies and Ecopolis Properties, will be 100 per cent subsidiaries of Aasia Enterprises. IIHL BFSI Holding is fully owned by IIHL.

The Irdai had earlier raised queries on IIHL, a Mauritius-based firm, holding a majority stake in RCap, which, in turn, holds a 51 per cent stake in Reliance Nippon Life Insurance Company.

A look back
 

Dec 2021: Reliance Capital sent to NCLT for debt resolution
 

Dec 2022: Hinduja wins race to acquire RCap in second auction
 

Oct 2023: Torrent, winner of first auction, moves SC appealing against second auction. No stay by SC
 

Feb 2024: NCLT Mumbai approves resolution plan by IndusInd International Holdings
 

May 2024: Irdai approves IIHL, Aasia Enterprises application to buy RCap insurance firms with riders