In a surprise move that could further delay Reliance Capital’s (RCap’s) ongoing bankruptcy process, its administrator has approached the Reserve Bank of India (RBI) for permission to restructure the former Anil Ambani group firm into four core investment companies (CICs).
CICs, typically, are companies that invest in other companies of the group. And RBI guidelines are clear that one group can only have one CIC.
The move is unlikely to be favoured by lenders and bidders as they fear this would to lead to a further delay in the firm’s ongoing insolvency process. The bidders were in the process of submitting binding bids under the existing structure.
According to the proposal, Reliance General Insurance Company would be carved out as the first CIC and Reliance Nippon Life Insurance Company as the second, while all other businesses of RCap including Reliance Securities, asset reconstruction companies, private equity (PE) and its investments in real estate among others would constitute the third CIC. The fourth CIC would include all the assets and businesses of Reliance Commercial Finance and Reliance Home Finance, sources close to the development said, referring to the letter written to the RBI.
The objective of this reconstruction is to help the bidders of RCap’s insurance businesses circumvent the insurance guidelines of the five-year lock-in period. If the proposed restructuring is allowed by the regulator, the five-year lock-in period would not be applicable to the CICs, the sources said.
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As per the guidelines of the Insurance Regulatory and Development Authority of India (Irdai), equity contribution by promoters and other investors (including PE funds) in an insurance company has a lock-in period of five years from the time of grant of final approvals.
According to the RBI, a CIC is an NBFC in the business of acquisition of shares and securities and holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.
The new structure proposed by the administrator was also approved by a three-member advisory committee to RCap’s administrator, including former bankers and top corporate executives.
On November 29, 2021, the RBI had superseded RCap’s board following payment defaults and governance issues, and appointed Nageswara Rao Y as the administrator for its bankruptcy process.
Earlier on Tuesday, the National Company Law Tribunal’s (NCLT) Mumbai bench had extended the deadline to complete RCap’s resolution process to January 31 from the earlier schedule of November 1.
This is the third time the deadline has been extended from the initial June 3 deadline. As per the Insolvency and Bankruptcy Code (IBC), the process has to be closed within 180 days. The current deadline to submit binding bids for businesses and assets of RCap ends on October 31. RCap had received 14 non-binding bids for its multiple businesses, with six firms evincing interest for the entire company, and the remaining bidding for its multiple subsidiaries.
Torrent Group, IndusInd Bank, Oaktree Capital, Cosmea Financial, Authum Investment and B Right Real Estate submitted bids in the range of Rs 4,000 crore-4,500 crore for RCap’s entire assets. Piramal Finance has bid Rs 3,600 crore for the Reliance General Insurance business, while Zurich Insurance’s bid stood at Rs 3,700 crore and Advent International had bid Rs 7,000 crore.