The acquisition saga of Reliance Capital, helmed by Anil Ambani, is advancing towards a significant milestone with the recent developments indicating a change of guard on the horizon. The Hinduja Group’s IndusInd International Holdings Limited (IIHL) is on the threshold of acquiring Reliance Capital, having secured vital regulatory approvals. The green light from the Insurance Regulatory and Development Authority of India (IRDAI) has set the stage for IIHL to potentially steer the future of the debt-laden financial services behemoth.
The origins of this acquisition tale trace back to an offer tabled a few months prior, in which IIHL expressed an intent to buy out Reliance Capital for a sum of Rs 9650 crore. This figure became a beacon of hope for Anil Ambani’s beleaguered company. Since the announcement of the offer, IIHL has navigated the regulatory landscape successfully, securing clearances from the Securities and Exchange Board of India (SEBI), Competition Commission of India (CCI), IRDAI, and is pending final approval from the Reserve Bank of India (RBI).
The Economic Times has reported that IIHL is awaiting the RBI’s permission to pledge 100% shares of Reliance Capital. This move aims to raise a substantial amount of Rs 8000 crore, with the funds being earmarked to settle the debts of Reliance Capital’s lenders. The RBI is currently assessing the proposal submitted by IIHL BFSI (India) which was lodged in the early days of May, keeping the financial sector abuzz with anticipation.
Prior murmurs in the industry hinted at Hinduja Group engaging with a trio of Japanese financial institutions—Mizuho, SMBC, and MUFG—to procure a loan of Rs 8000 crore. This targeted loan would facilitate the acquisition of Reliance Capital under the provisions of the bankruptcy code. The clock is ticking for the Hinduja Group, as a bankruptcy court has set a looming deadline of May 27 to finalize the transaction.
The ambition of the Hinduja Group stretches beyond merely clinching the deal, as they Eye on securing a five-year loan structured with an interest rate between 8 to 9 percent annually. This quest has the potential to be bolstered by Reliance Capital’s existing allegiance with Nippon Life, a partnership that has already carved its niche in the Indian insurance market through a joint venture. It’s thought that the Japanese banks might source a sense of security from this pre-existing alliance, possibly easing the path to securing the desired loan.
The evolution of Reliance Capital has been riddled with challenges, with its financial distress becoming a story of caution in the Indian corporate landscape. The impending acquisition by the Hinduja Group is not just a business transaction but also a pivotal moment that signals the resurgence of a once dominant player in the Indian financial sector. The meticulous pursuit of regulatory approvals and strategic financial planning by the Hinduja Group is a testament to the importance placed on this acquisition.
Reliance Capital, once a titan in India’s financial market, has grappled with setbacks that pushed it to the fringes. Now, as the RBI’s nod is the last piece of the regulatory puzzle, both the future of Reliance Capital and the ambitions of the Hinduja Group hang in delicate balance. The stakeholders of the finance world are holding their breath, awaiting the final word from the RBI that could set this corporate saga on a new trajectory, potentially ushering in a new era for Reliance Capital under the stewardship of IIHL.
