Hinduja Group firm IIHL gets IRDAI nod on Rs 9,650 crore RCAP acquisition

New Delhi/Mumbai: Insurance sector regulator IRDAI has given conditional approval to Hinduja Group firm IndusInd International Holdings Ltd (IIHL) for the takeover of debt-ridden Reliance Capital.

"We are happy to acknowledge the receipt of approval from IRDAI yesterday (May 10, 2024) on the auspicious occasion of Akshay Tritiya. The approval is subject to certain ‘regulatory, statutory, and judicial clearances/compliances," an IIHL spokesperson said in a statement.

IIHL stands committed to working towards obtaining the same as soon as possible and aims to close this transaction by the NCLT's stipulated date of May 27, 2024, the spokesperson said.

"We take this opportunity to thank all stakeholders including regulators and the administrator for their timely support," it said.

IRDAI approval is crucial for the transfer of insurance businesses of Reliance Capital i.e. Reliance General Insurance and Reliance Nippon Life Insurance, to the IIHL. Reliance Capital is one of the promoters of Reliance General Insurance and Reliance Nippon Life Insurance.

The National Company Law Tribunal on February 27, 2024, approved Hinduja Group firm IndusInd International Holdings Ltd's Rs 9,650-crore resolution plan for Reliance Capital.

In November 2021, the Reserve Bank superseded the board of Reliance Capital on governance issues and payment defaults by the Anil Dhirubhai Ambani Group company. The central bank had appointed Nageswara Rao Y as the administrator, who invited bids in February 2022 to take over the company.

Reliance Capital had a debt of over Rs 40,000 crore, and four applicants had initially bid with resolution plans. However, the committee of creditors rejected all four plans for lower bid values and a challenge mechanism was initiated in which IIHL and Torrent Investments participated.

In June 2023, the Hinduja Group firm was selected by the committee for its bid of Rs 9,661 crore upfront cash. Reliance Capital's cash balance of an additional Rs 500 crore would also go to the lenders.

The deal to acquire the Anil Dhirubhai Ambani Group's financial services arm for Rs 9,650-crore has already received all the other statutory approvals including from the banking and capital markets regulators and also fair play watchdog CCI.

The Irdai had reportedly expressed certain concerns about the deal including potential violations of foreign direct investment caps in insurance companies, reliance on borrowings to buy insurance entities and also opacity in IIHL's structure.

A few days ago, chairman Ashok Hinduja had said that the Mauritius-based IIHL will pay off lenders within 48 hours of getting the Irdai nod and had tied up debt funding of Rs 7,500-crore for the deal.

The rest of the Rs 2,000 crore will come in as equity from IIHL, which has investments from 600 high net individuals including a 9.9 per cent stake by the Hindujas.

A set of teams from IIHL are already interacting with RCAP businesses and formulating strategies, he had said, adding that all the talent at RCAP will be retained. There are retirements or end of terms of some senior officials in few of the entities within RCAP including board members, and the same will see replacements, Hinduja had said.

Once the takeover is complete, IIHL plans to divest the real estate investments which also come along with the transaction, Hinduja said, adding that this will fetch it around Rs 250 crore.

The near-term objective is to maximise the value for IIHL's shareholders, the chairman said, adding that he wants to grow the market cap of IIHL's listed financial services businesses to touch $50 billion by 2030.