Hinduja’s Stake Transfer Plan Hits IRDAI Roadblock

MUMBAI: A move by Reliance General Insurance (RGICL), a subsidiary of Reliance Capital (RCap), to transfer its 25% stake to a Hinduja group company has hit a roadblock following objections raised by the insurance regulator.

In October, Hinduja group had sought Insurance Regulatory and Development Authority of India‘s (Irdai’s) permission to transfer about 25% equity capital from RCap to a group company, Aasia Enterprises.

Irdai has asked the company to clarify the rationale behind its application and termed it “premature”. This is because Hinduja’s bid for debt-laden RCap, which was approved by the committee of creditors (CoC), is yet to get approvals from the National Company Law Tribunal (NCLT), sources close to the development said.

RCap’s insolvency process is yet to be concluded, Irdai said in a letter to RGICL, sources added.

Moreover, a petition for custody of the shares, which are currently in possession of IDBI Trusteeship Services (ITSL), is pending before the Supreme Court.

RCap’s entire shareholding in RGICL was earlier pledged in favour of ITSL. Later in November 2019, ITSL, in its capacity as a debenture trustee of Credit Suisse, had invoked them. Being the custodian of the shares, ITSL would have to submit it to RCap’s administrator for inclusion in the ongoing insolvency process. A case regarding the transfer of shares is also pending before the Supreme Court.

In view of these facts, Irdai has asked RGICL to clarify the rationale for filing such an application.

IndusInd International Holdings (IIHL), a Hinduja Group company, the only bidder in the second e-auction had quoted `9,661 crore for the bankrupt firm. With RCap having a cash balance of more than `500 crore on its books, lenders were expecting to receive `10,200 crore, a 65% recovery against the `16,000-crore principal secured debt of the company.

IIHL had proposed to take over RCap through its wholly-owned subsidiary, IIHL BFSI (India). RCap now needs mandatory approvals from Irdai, NCLT and the Supreme Court to complete the insolvency process.

Earlier, IIHL had sought Irdai’s approval to raise about $850 million by pledging shares of RGICL and Reliance Nippon Life Insurance (RNLIC), another RCap subsidiary, for the completion of resolution plan. It had proposed to raise the debt against the assets of RCap, which primarily includes the parent company’s 100% stake in RGICL and 51% stake in RNLIC.

These two assets constitute more than 90% of RCap’s value. IIHL had also sought for a change in ownership of RGIC and RNLIC to raise the funds. However, the regulator had rejected the proposal.

Source: The Financial Express

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