The Reserve Bank of India-appointed Administrator of debt-ridden Reliance Capital (RCAP) on 15 October wrote a letter to Hinduja Group firm IndusInd International Holdings Ltd (IIHL). It raised questions on the source of funds and business plan, reported news agency PTI citing sources.
In the letter to IIHL, the Administrator has asked the successful resolution bidder IIHL to submit a fresh application along with the source of funds and the business plan which does not contemplate the creation of a pledge over the shares of RGIC and RNLIC.
In the letter, the RBI-appointed Administrator said in their meeting with Irdai on 9 October, Irdai indicated that no application for change in control would be considered favorably if the source of the funds for the acquisition contemplates the creation of pledge over the shares of an insurance company.
The Administrator has further asked IIHL that the company should submit a fresh application for change in control of the insurance companies (RGIC and RNLIC), along with the source of funds and the business plan which do not contemplate the creation of pledge over the shares of the RCAP insurance companies.
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Meanwhile, Hinduja Group is raising a debt of $850 million from the leading foreign funds and banks to fund the acquisition of RCAP.
The Group proposes to raise this fund against the assets of RCAP and these two assets constitute more than 90 percent of the value of the debt-ridden firm.
Earlier, IIHL sought approval from IRDAI for the change in control of the ownership of RGIC and RNLIC and the creation of a pledge over their shares to raise funds from the investors. But it was turned down.
According to the details, IRDAI's approval is necessary for the successful resolution of Reliance Capital.
IIHL is in talks with some foreign banks for its $850 million fundraise.
The Reserve Bank of India (RBI) on November 29, 2021, superseded the board of Reliance Capital given payment defaults and serious governance issues. Regarding the firm's Corporate Insolvency Resolution Process (CIRP), the RBI appointed Nageswara Rao Y as the Administrator.
Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under IBC.
The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The central bank subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of NCLT. In February last year, the RBI-appointed Administrator invited expressions of interest for the sale of Reliance Capital.
With agency inputs.
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Updated: 15 Oct 2023, 06:32 PM IST
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