IIHL's takeover of Reliance Capital set to complete by January end

RCap subsidiaries to get listed by mid-2026, 2027

With all approvals in place now, IndusInd International Holdings Ltd (IIHL) — the successful resolution applicant for Reliance Capital — expects to complete the acquisition of the troubled non-banking financial company by the end of January, following the approval of the Department for Promotion of Industry and Internal Trade (DPIIT) after almost nine months, said Ashok Hinduja, chairman of IIHL.

 

IIHL, which holds a stake in IndusInd Bank and is in the process of acquiring Invesco Asset Management and Invesco Trustee, is aiming for a valuation of $50 billion by 2030. Currently valued at $15 billion, IIHL is a Mauritius-based investment holding company with interests in banking and financial assets.

 

 

With DPIIT’s approval now secured, the next steps for the administrator and the committee of creditors (CoC) in completing the acquisition include delisting Reliance Capital’s equity shares and non-convertible debentures (NCDs), creating a trust for the transfer of excluded assets, capital reduction, and releasing all charges on Reliance Capital’s assets. These steps are expected to take between four and six weeks.

 

The National Company Law Tribunal (NCLT) approved IIHL’s resolution plan for Reliance Capital, once an Anil Ambani company, in February 2024. The acquisition will grant IIHL control over 42 entities, with key subsidiaries including Reliance Nippon Life Insurance, Reliance General Insurance, Reliance Securities, and Reliance Asset Reconstruction.

 

The cost of the acquisition stands at Rs 9,861 crore, financed through Rs 7,300 crore in debt raised from Barclays and 360 ONE, and Rs 2,750 crore in equity. Additionally, IIHL has invested Rs 200 crore in Reliance General Insurance as capital.

 

“Rs 2,750 crore has already been paid and is with the CoC,” said Hinduja. “An additional Rs 3,000 crore in debt has been raised and is kept in a separate account, pending closure of certain activities. The remaining Rs 4,300 crore will be disbursed upon the delisting of Reliance Capital shares from stock exchanges.”

 

The debt raised from Barclays and 360 ONE has a maturity of 42 months, but IIHL plans to retire the debt early by listing the key businesses of Reliance Capital, such as Reliance General and Reliance Nippon Life, by mid-2026 or 2027.

 

IIHL does not foresee any immediate capital infusion into Reliance Capital’s entities, said Hinduja. However, IIHL would step in with growth capital if needed in the future.

 

IIHL also plans to divest around 34 or 35 subsidiaries of Reliance Capital, mainly small shell entities with limited business activities. From this divestment, IIHL expects to raise approximately Rs 450 crore. Additionally, through the sale of some Reliance Capital properties, IIHL expects to generate around Rs 1,000 crore, which will be reinvested into the remaining subsidiaries.

 

Regarding changes to management, Hinduja stated that there are no plans to alter the current management of the subsidiaries at the moment. “…the current management is doing a good job, and we do not see a need to change them. If the companies have survived and generated profits in the last 3-4 years, it means they are performing well,” he said.

 

However, there will be a change in the board composition at Reliance Capital, with the Reserve Bank of India (RBI) approving five new directors: Moses Harding John, Arun Tiwari, Sharadchandra Zaregaonkar, Bhumika Batra, and Amar Chintopanth.

 

On scaling up the businesses, Hinduja said, “These entities currently have no bancassurance tie-ups, so the first step will be to establish bancassurance relationships. We cannot finalise any agreements until the acquisition is complete. After the acquisition, I am hopeful that we will secure partnerships and implement digitisation to improve services to policyholders before the end of the financial year in March 2024. The various group companies will leverage their marketing networks to sell insurance and other products.”

 

IIHL is open to strategic partners for various subsidiaries of Reliance Capital but insists on retaining its majority stake. Hinduja confirmed that while the company would consider minority investors at both the holding company and subsidiary levels, it would not dilute its control. “Any investor who is coming as a minority investor, either at that level or at the subsidiary level, is always welcome, because I will be giving that freedom,” said Hinduja. “There are so many interested parties to enter as a minority holder at the holding company in Mauritius.”

 

Reliance Capital had been under the RBI’s oversight since November 2021, when the central bank superseded its board due to governance issues and payment defaults. In February 2022, the RBI-appointed administrator Nageswara Rao Y invited bids for the company, which led to IIHL’s successful bid. Claims worth Rs 37,744 crore were submitted, of which Rs 25,345 crore were admitted. Initially, four applicants submitted resolution plans, but all were rejected by the committee of creditors, leading to a challenge mechanism in which IIHL and Torrent Investments participated.

 

Macro view 

Total acquisition cost for IIHL: Rs 9,861 crore 

> This is funded via Rs 7,300 cr in debt and Rs 2,750 cr in equity

> Additionally, Rs 200 cr of capital has been put in one of RCap subsidiaries

> Debt raised from Barclays and 360 One will be repaid early through subsidiary listings by 2026-27

> IIHL expects Rs 1,000 cr from divestment of smaller subsidiaries and properties of RCap

> No immediate capital infusion into subsidiaries, but growth capital will be provided as needed

> IIHL aims to establish bancassurance ties and implement digitisation after acquisition