Reliance Capital (RCap), a former Anil Ambani group company, will infuse Rs 200 crore into its subsidiary Reliance General Insurance Company (RGICL) as it needs funds to pursue growth. Following the infusion, the insurance firm will raise an additional Rs 400 crore, mostly through debt, to fund its growth.
The committee of creditors (CoC) of RCap has approved Rs 200-crore capital infusion, which is likely to be made by the end of August. The additional fundraise would be through tier-II funding, sources close to the development said, adding that the mode is yet to be finalised.
This comes at a time when the CoC has approved the Hinduja Group’s resolution plan for debt-laden RCap with 99.6% of votes. The lenders will receive Rs 10,000 crore from IndusInd International Holdings (IIHL), the company through which the Hinduja Group had placed its bids, which includes an upfront payment of Rs 9,661 crore.
Apart from the cash, IIHL – the sole bidder for RCap – had offered to infuse ₹350 crore into RGICL.
RGIL, the country’s third-largest private general insurance company, is also undergoing insolvency proceedings along with parent RCap. It had earlier received bids from Piramal Finance (₹4,000 crore), Zurich Insurance (₹3,500 crore) and US-based PE Advent International (₹7,000 crore). However, all of them later backed out.
In August last year, RGICL had sought capital infusion of ₹600 crore from the parent, citing it continues to lose business to rivals, impacted by “borderline” insolvency which was creating business hesitation among corporate clients, apart from affecting government businesses, bagging of tenders and key retail and bancassurance partnerships.
While the demand was raised twice later, RCap’s CoC had rejected the proposal, stating the firm was part of the bankruptcy proceedings, and it would not be prudent to provide fresh funds.
The firm needed the capital infusion to preserve its business, enhance the value and take the company’s solvency to about 175% from 155% at present. In its request to the administrator, RGICL had said capital was required to pursue growth like most of its peers and help increase regulatory comfort at the Insurance Regulatory and Development Authority. It will also reflect the continued support by the promoter company.
