The Hinduja Group has received the insurance regulator’s approval to conclude the acquisition of Reliance Capital’s (RCap) three insurance companies, a move that will help it complete the resolution process of the debt-laden firm by the May 27 deadline.
However, IndusInd International Holdings (IIHL), a group firm through which the Hinduja Group had placed bids for RCap, now requires regulatory approvals for a proposed change in holding structure. Sources said these approvals are expected “anytime now”.
On Friday, the Insurance Regulatory and Development Authority of India (IRDAI) permitted transfer of RCap’s three insurance subsidiaries— Reliance General Insurance Company Ltd (RGICL), Reliance Nippon Life Insurance Co Ltd. (RNLICL) and Reliance Health Insurance Ltd (RHIL)—to Hinduja Group, sources close to the development said.
IRDAI has permitted transfer of RCap’s 26% stake in the insurance firms to Aasia Enterprises, a private family firm with 90% stake held by Ashok P Hinduja (Hinduja Group chairman), 5% each by Harsha A Hinduja (Hinduja Foundation trustee) and Shom A Hinduja (president, alternative energy and sustainability at Hinduja Group).
The transfer should not violate foreign direct investment rules, and RCap and Aasia Enterprises would have to remain promoters of the three insurance firms. The shares of the insurance firms should not be encumbered, according to IRDAI’s approval letter.
The insurance companies would now be transferred to IIHL, which had earlier received approvals from Securities and Exchange Board of India, Reserve Bank of India and the Competition Commission of India.
“The approval is subject to certain regulatory, statutory and judicial clearances and compliances. IIHL stands committed to working towards obtaining the same as soon as possible and aims to close this transaction by the National Company Law Tribunal’s stipulated date of May 27,” an IIHL spokesperson said, confirming the approval.
The approval comes at a time when RCap lenders led by Employees’ Provident Fund Organisation (EPFO), Life Insurance Corporation of India (LIC) and provident funds were insisting IIHL make a payment of Rs 9,661 crore to them to close the insolvency process.
Last week Ashok P Hinduja had said that IIHL tied up the funds needed for the deal—of which 25% would be equity that would come from a subsidiary of IIHL, while the remaining 75% will be debt.
Earlier this month, IIHL had proposed to change the holding structure with it proposing four new firms— Cyqure India, Ecopolis Properties, Cyqurex Technologies and IIHL BFSI Holding—as part of the new corporate structure.
As per the proposal submitted before RBI, Cyqure India will be the holding company of Aasia Enterprises. Besides, the two new companies—Cyqurex Technologies and Ecopolis Properties—will be wholly-owned subsidiaries of Aasia Enterprises, while IIHL will hold 100% stake in IIHL BFSI Holding.