A clutch of overseas funds and banks, who were in discussions with Hinduja Group to fund its plans to take over Reliance Capital (RCap) through the insolvency process, are believed to have backed out. This comes after a proposal to raise funds by pledging shares of RCap’s two subsidiaries was rejected by the insurance regulator.
According to sources close to the development, leading overseas funds such as Barclays Bank, JP Morgan, Cerberus Capital and Apollo, among others, have conveyed their inability to provide funds.
Hindujas, which had placed its bids through a group firm IndusInd International Holdings (IIHL) in April this year, was looking at raising $850 million from a clutch of lenders against the shares of two RCap subsidiaries, Reliance General Insurance (RGIC) and Reliance Nippon Life Insurance (RNLIC).
Last week, the administrator to Rcap’s insolvency process had sought the details of Hinduja Group’s source of funds and business plans after the Insurance Regulatory and Development Authority of India (IRDAI) rejected its plans to pledge shares. The regulator had stated that no application for change in control would be considered, if the source of the funds for the acquisition contemplates pledging of shares of RGIC and RNLIC.
The administrator to RCap’s insolvency process had also sought details of Hinduja Group’s source of funds and business plans. In a letter to IIHL, the administrator has sought the firm to submit a fresh application, along with the source of funds and the business plan, which does not “contemplate the creation of pledges”.
Earlier in September, IIHL had sought IRDAI’s approval for creation of pledge over RGIC and RNLIC shares to raise funds. It had proposed to raise the debt against the assets of RCap, which primarily includes the parent company’s 100% stake in RGIC and 51% stake in RNLIC.
These two assets constitute more than 90% of RCap’s value. IIHL had also sought for change in ownership of RGIC and RNLIC to raise the funds.
Plans derailed
Hindujas planned to raise $850 million against shares of RCap subsidiaries RGIC and RNLIC
It had placed the bids through a group firm, IndusInd International Holdings (IIHL), in April
Overseas funds and banks who were in talks to fund Hinduja’s take over of RCap are believed to have backed out
These lenders included Barclays Bank, JP Morgan, Cerberus Capital, Apollo, etc.
