Reliance Capital had pledged shares in its entity RGI in FY19 as a safeguard against funds raised by group companies through non-convertible debentures.
The trusteeship, the custodian of RGI shares, says it is not allowed to issue pledged shares from debenture holders who – as mentioned above – represent a 37% stake in the insurance entity.
According to analysts, wholly owned by Reliance Capital, part of the Anil Ambani-led Reliance Group, RGI is profitable and could be worth Rs 6,000 crore.
It has been described as the crown jewel of Reliance Capital’s available assets, which lenders have recourse to under insolvency proceedings. Other Valuable Assets Reliance Capital holds 51% stake Reliance Nippon Life Insurance, Reliance Capital group of companies had borrowed from Credit Suisse and Asset Management by selling non-convertible debentures backed by RGI stock in FY19. IDBI Trusteeship and Reliance Capital administrator Nageswara Rao Y did not respond to ET’s queries.
The people mentioned above said that the administrator is likely to take legal recourse to get back into the pool of assets that are part of Reliance Capital’s insolvency proceedings.
“The bankruptcy law is clear that creditors have to give up their personal rights such as debts created in their favor once the bankruptcy proceedings begin,” said a legal expert familiar with the matter on condition of anonymity. “These should all be part of a larger pool of assets for the benefit of the creditors.”
The Reserve Bank of India (RBI) on November 30 last year superseded the board of Reliance Capital citing governance concerns. It appointed Rao, former executive director of Bank of Maharashtra, as its administrator. He has so far accepted claims of ₹24,000 crore from financial creditors. Expression of Interest (EoI) has been invited from parties who wish to bid for their stake in the company or its assets, such as life and general insurance enterprises.
The deadline for submission of bids for Reliance Capital is June 30. However, according to sources, the deadline may be extended as the administrator will wait for the court’s decision on the issue of RGI shares.
There are more than 50 applicants who have submitted EOI for Reliance Capital. The main contenders are insurance companies like Nippon Life, ICICI Lombard General Insurance, HDFC ERGO General Insurance and Tata AIG. Cosmia Financial, headed by former Reliance Capital CEO Soumen Ghosh, is also seen as a major contender in the form of Motilal Oswal, Piramal, Adani, Torrent and Naveen Jindal groups. Private equity funds such as TPG, True North, Blackstone and Arpwood Capital have also shown interest.