Hinduja firm’s bid for Reliance Capital gets lenders’ nod

RELIANCE CAPTAIL’S lenders have overwhelmingly approved a proposal from Hinduja Group to acquire the bankrupt financial services company once led by Indian tycoon Anil Ambani.

IndusInd International Holdings Ltd (IIHL), the investment arm of the London-based Hinduja family business empire, offered Rs 96.61 billion (£930 million) for Reliance Capital in the second round of auction under the insolvency process. It was supported by 99.6 per cent of the creditors as the voting concluded on Thursday (28).

Reliance Capital’s administrator will submit the resolution plan to the Mumbai bench of the National Company Law Tribunal (NCLT) next week, Business Standard reported citing sources.

The proposed acquisition will hinge on the Supreme Court’s ruling on a case brought by the Gujarat-based Torrent Investments which objected to the second auction.

India’s banking regulator in November last year sent Reliance Capital to administration citing governance concerns, after the company defaulted on servicing its debt of Rs 240 bn (£2.31 bn).

In the first auction held in December, Torrent emerged as the top bidder with an offer of Rs 86.40 bn (£830m). But IIHL entered the picture after the auction, offering Rs 90 bn (£860m), leading to a second round of bidding, a move Torrent opposed. But an appellate tribunal and the Supreme Court refused to stay the process. IIHL was the only bidder in the second auction held on April 26 this year.

If the Hinduja firm’s resolution plan goes through, it will mean the lenders will recover nearly Rs 102 bn (£980m), including the nearly Rs 5 bn (£48m) on Reliance Capital’s books. The recovery, however, would be lower than the company’s liquidation value, estimated between Rs 125 bn (£1.20 bn) and Rs 130 bn (£1.25 bn).

Reliance Capital, a core investment company, has 20 units, including Reliance Nippon General Insurance and a 51 per cent stake in Reliance Nippon Life Insurance.

Reliance Securities is a part of the company which also owns 20 per cent of the Indian Commodity Exchange.

Reliance Capital shares hit its five per cent upper circuit on the Bombay Stock Exchange on Friday (30), closing the day at Rs 9.36 (9p), down from its lifetime high of Rs 2,926 (£28.10) reached in January 2008.

Hinduja Group is an established player in India’s finance sector through its non-banking financial services company Hinduja Leyland Finance. It also holds a stake in IndusInd Bank.al on November 30 last year