Reliance General Insurance Company Ltd (RGICL), a subsidiary of debt-laden Reliance Capital (RCap), has sought an “urgent” capital infusion of Rs 600 crore from the parent firm to pursue growth. The capital is required to preserve the business, enhance the value and take the company’s solvency (ability of a company to meet its long-term fixed expenses and accomplish long-term expansion and growth) to about 175% from the present 155%. RGICL has sought for the capital infusion by December 31, 2022.
“We also feel that this capital will allow us to outperform market growth rate once again, help augment value creation and negate the risk of underperforming the boarder markets. As a large format insurer, RGIC can gain significantly in the current ecosystem if it can pursue growth like most of its peers,” RGICL said in a letter to RCap administrator. The capital support from RCap would also help in increasing regulatory comfort at Insurance Regulatory and Development Authority (IRDAI), apart from reflecting continued support by the promoter company.
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The borderline solvency is creating business hesitation among corporate clients, governments and key retail and bank partnerships. Further, the borderline solvency is also being capitalised by competitors, it said. According to RGICL, the capital infusion from the existing stakeholders will send a strong message of support to the market, apart from helping it outperform the market growth rate. RGICL also wants the issue to be taken up with the Committee of Creditors (CoC) on an “urgent basis”.
With a 5.3% market share, the company is at fifth position among the private sector insurers after ICICI Lombard, HDFC Ergo, Bajaj Allianz and Tata AIG General as of October-end. Its gross direct premium rose 11% to Rs 6,478 crore in this year (till October) from Rs 5,813 crore recorded during the same period of last year. The COC, which is slated to meet on Friday to finalise the modalities of the ongoing auction process, is also expected to take a call on RGICL’s request.
Piramal Finance had earlier placed a bid of Rs 4,000 crore for RGICL, which is also undergoing insolvency proceedings along with parent RCap, while that by Zurich Insurance stood at Rs 3,500 crore. US-based private equity investor Advent International, which had placed a bid of Rs 7,000 crore for the insurance firm, later backed out from the race. The deadline to complete RCap’s resolution process is January 31, 2023.