Banking News

Reliance Capital: Reliance Capital lenders approve Rs 200 crore capital infusion in Reliance General


Reliance General Insurance will soon receive an equity infusion of Rs 200 crore from its parent Reliance Capital which is undergoing bankruptcy proceedings, said people aware of the development.

The committee of creditors of Reliance Capital approved last week a proposal to infuse capital – a move that would help the private insurer to retain its market share in the non-life industry. Reliance General Insurance is the most valuable asset through which lenders hope to recover a substantial part of their dues, and any dip in its valuation would correspondingly lower the company’s valuation, said one of the lenders.

Reliance General had earlier said that the capital infusion was crucial to increase its solvency margin to 175% from 155%. The Insurance Regulatory and Development Authority (IRDA) requires companies to maintain a minimum solvency margin of 150%.

Although the private life insurer is profitable, the insurance laws pertaining to solvency margins require companies to increase their capital as their business grows.

In December, Reliance General Insurance sought Rs 600 crore from the parent to retain its market share.

Reliance General Insurance is considering raising the balance of Rs 400 crore by issuing Tier II bonds, the people cited above said.Reliance General is among the 20 financial services companies owned by Reliance Capital- an Anil Ambani Group Company. Lenders have unanimously approved a resolution plan of Rs 9660 crore offered by IndusInd International Holdings Ltd (IIHL) for Reliance Capital- a core investment company registered with the Reserve Bank of India.IIHL, a holding company of the Hinduja group, has also filed an application with the Reserve Bank of India to acquire Reliance Capital under Insolvency and Bankruptcy Code. It is mandatory for any winning bidder to receive a ‘fit and proper’ approval from RBI to acquire a financial services company under corporate insolvency.

The RBI-appointed administrator, Nageswara Rao Y, has filed an application with the National Company Law Tribunal to approve the IIHL plan. Separately, the Supreme Court has listed hearing a petition of Torrent Investments, another bidder in the fray, on August 4.

In the first auction on December 21, Torrent Investments made the highest offer of Rs 8,640 crore, while the Hinduja Group entity offered Rs 8,110 crore.

However, within 24 hours, the Hinduja entity gave a revised, improved offer of Rs 9,000 crore, a development contested by Torrent.

The following auction was held on April 26, wherein Hinduja offered Rs 9,640 crore while Torrent did not participate.


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