IIHL Acquires Reliance Capital: Debt-Ridden Firm's Insurance Units Set for 2-3 Year Listing

IndusInd International Holdings Ltd (IIHL) has marked a significant milestone in the financial sector by announcing the acquisition of Reliance Capital, a process that has been in the works for over three years. On March 18, IIHL’s Chairman, Ashok P. Hinduja, revealed that the bid amount has successfully been transferred to the lender’s escrow account, paving the way for management control to shift from the Administrator on March 19. This acquisition is poised to reshape the landscape of financial services in India.

Key Details of the Acquisition

IIHL’s successful bid totaled ₹9,650 crore, making it the prominent contender in the resolution of the financially troubled Reliance Capital (RCAP). This Mauritius-based firm has ambitious plans for the future, including the potential listing of Reliance Capital’s insurance segments within the next two to three years.

Bid Amount: ₹9,650 crore
Escrow Transfer Date: March 18
Management Takeover Date: March 19
Projected Insurance Business Value: ₹20,000 crore

Strengthening Financial Stability

In addition to the bid, IIHL committed an extra ₹200 crore to enhance RCAP’s solvency, demonstrating its dedication beyond the initial acquisition cost. Hinduja expressed his satisfaction with the completion of the transaction, stating, "The deal has been a three-year journey for us, with funds currently moving between escrow accounts."

Future Plans for Reliance Capital

With the acquisition finalized, a new chapter for value creation is set to commence. Hinduja noted that the new management will conduct a thorough review of RCAP’s operations to determine any necessary capital infusions. Until the company’s performance meets value creation expectations, he reassured stakeholders that financial support will not be a concern.

Managing Subsidiaries and Workforce

The new management will inherit around 39-40 subsidiaries under the Reliance Capital umbrella. Many of these entities, identified as small shell companies with limited business activities, are expected to be divested. However, critical sectors like broking and asset reconstruction will remain under IIHL’s control.

The deal also has implications for the workforce, with 1.28 lakh employees expected to have their interests safeguarded as IIHL transitions into management. The blending of IndusInd and Reliance Capital is anticipated to take approximately 6-9 months.

Regulatory Oversight and Future Outlook

The acquisition received necessary regulatory approvals from entities such as the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) before IIHL emerged victorious in the bidding process during the Corporate Insolvency Resolution Process. Reliance Capital was placed under administration in November 2021, following governance issues and payment defaults related to the Anil Dhirubhai Ambani Group.

Looking ahead, IIHL has set ambitious targets, aiming for a valuation of $50 billion by 2030 as it integrates Reliance Capital into its portfolio.

Conclusion

This acquisition not only represents a strategic move for IIHL but also promises to revitalize Reliance Capital, potentially transforming it into a robust player in the financial services market. As the new management takes charge, stakeholders can expect significant changes and opportunities for growth in the coming years.