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Advent exits bid for RCap’s insurance arm; Piramal, Zurich still in fray

Over-valued offer, lock-in regulation likely reason

Advent exits bid for RCap’s insurance arm; Piramal, Zurich still in fray
Following Advent International’s exit, the two remaining bidders are likely to explore the possibility of submitting a joint bid for RGIC, which is likely to expedite the process.

US-based private equity investor Advent International has backed out from bidding for Reliance General Insurance Company (RGIC), a subsidiary of debt-laden Reliance Capital (RCap), making it a two-horse race now, between Piramal Finance and Zurich Insurance. The decision to drop out comes closer to the November 28 deadline to submit binding bids for the resolution process.

Advent had submitted a non-binding bid of Rs 7,000 crore for RGIC during the first round of the bidding. The other two players had placed bids which were about 50% lower. Piramal’s bid was for about Rs 3,600 crore, while that of Zurich’s was at Rs 3,700 crore, according to sources close to the development.

“One of the reasons for pulling out of the race is the over-valuation by Advent at the time of submitting of non-binding bids, which was nearly 100% more than the nearest competitors. Another reason is Advent being a private equity fund, it is not permitted to invest in companies where there are lock-in periods,” another source said.

Also Read: RCap bidders want legal issues totalling Rs 20K cr to be sorted

The Insurance Regulatory and Development Authority of India (Irdai) guidelines stipulate a five-year lock-in period for private equity investors in the Indian insurance business.

Advent did not participate in due diligence or management meetings, nor did it seek any clarifications on the process after the deadline for the non-binding bids ended on August 29. The administrator closed the Virtual Data Room (VDR), where the documents regarding the bids were stored, for all the bidders on November 4.

Following Advent International’s exit, the two remaining bidders are likely to explore the possibility of submitting a joint bid for RGIC, which is likely to expedite the process.

Earlier, the bidders for RGIC had raised concerns over the shares of the company, which are not in the administrator’s possession. The shares are currently in the possession of IDBI Trusteeship Services (ITSL), which in its capacity as a debenture trustee of Credit Suisse had invoked them in November 2019. Being the custodian of the shares, ITSL would have to submit it to the administrator for inclusion in the ongoing insolvency process.

Earlier on November 2, RCap bidders had sought settlement of the debt-laden company’s multiple legal issues totalling Rs 20,000 crore before the completion of the resolution plan. The bidders – including a consortium led by Piramal Enterprises, Hinduja Group, Torrent Group and Zurich Insurance – took both the lenders and the administrator to the bankruptcy process, seeking to address the issue “immediately”.

There are a number of legal cases, including those filed by both financial and operational creditors against RCap and its subsidiaries, and lawsuits between administrators and trustees among others.

According to the bidders, a quick resolution is necessary for the successful closure of RCap’s resolution plan, as the deadline to complete the entire process ends on January 31.

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First published on: 10-11-2022 at 06:30:00 am