IIHL Seeks Rs 3,000 Crore in NCDs for Reliance Capital Takeover

Hinduja Group's IndusInd International Holdings Ltd (IIHL) has submitted documents to raise Rs 3,000 crore via non-convertible debentures (NCDs). This funding will help finance the acquisition of Reliance Capital (RCAP), a debt-laden company. The NCDs, with a tenure of 3.5 years, are expected to be available for subscription early next week.

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Funding and Regulatory Approvals

The raised funds will partially support the RCAP acquisition. The remaining Rs 4,300 crore needed for the transaction is being processed and awaits regulatory approvals and formalities by the administrator. Sources indicate that IIHL has already deposited its equity component of Rs 2,750 crore in a designated account managed by the Committee of Creditors under the supervision of the National Company Law Tribunal (NCLT).

Resolution Plan Approval

On February 27, 2024, NCLT Mumbai approved IIHL's Rs 9,650-crore resolution plan for Reliance Capital. This approval came after the Reserve Bank of India (RBI) took control of RCAP's board in November 2021 due to governance issues and payment defaults by the Anil Dhirubhai Ambani Group company.

Administrator's Role and Bidding Process

The RBI appointed Nageswara Rao Y as the administrator, who invited bids in February 2022 to take over Reliance Capital. Initially, four applicants submitted resolution plans, but all were rejected by the Committee of Creditors for lower bid values. Consequently, a challenge mechanism was initiated where IIHL and Torrent Investments participated.

Reliance Capital had accumulated over Rs 40,000 crore in debt. The process to resolve this debt involved multiple steps and regulatory oversight to ensure compliance and proper management of funds.

The acquisition process is moving forward with necessary regulatory approvals and formalities being completed. The successful resolution will mark a significant step in addressing Reliance Capital's financial challenges.

The NCD offer document has been filed with the Bombay Stock Exchange (BSE). This marks a crucial step in securing the required funds for completing the acquisition process.

The completion of this transaction is subject to regulatory approvals and formalities by the administrator. The funds raised through NCDs will play a vital role in finalising the acquisition deal.

In November 2021, governance issues and payment defaults led to RBI superseding Reliance Capital's board. This intervention aimed to address financial mismanagement and ensure a structured resolution process.

The administrator's role has been pivotal in managing bids and overseeing the resolution process. The involvement of multiple bidders highlights the competitive nature of acquiring distressed assets like Reliance Capital.

The resolution plan approval by NCLT Mumbai signifies a major milestone in resolving Reliance Capital's debt issues. It reflects a structured approach towards financial recovery and stability for the company.

This acquisition process underscores the importance of regulatory oversight and structured financial management in resolving large-scale corporate debt issues. The involvement of multiple stakeholders ensures transparency and accountability throughout the process.

The successful completion of this acquisition will not only address Reliance Capital's debt but also set a precedent for future resolutions of similar financial challenges faced by other companies.