The insurance regulator has restored 100% shareholding of Reliance General Insurance Company Ltd to Reliance Capital Ltd by cancelling the pledge enforcement of shares by Credit Suisse and Nippon India Mutual Fund.
The Insurance Regulatory and Development Authority of India (IRDAI) has held that the pledge/transfer of shares of Reliance General Insurance "was in violation of the applicable provisions of law", Reliance Capital said in a regulatory disclosure.
The development will now help Reliance Capital to monetise its stake in Reliance General Insurance Company for reduction of its debt.
In November 2019, the trustee had transferred 100% shareholding in Reliance General Insurance Company by invoking pledge, which was being contested by Reliance Capital. Now IRDAI has directed the trustee not to give effect to any encumbrance/transfer or any change in the shareholding of Reliance General Insurance Company.
"The IRDAI ruling has protected the interest of all lenders and debenture holders of Reliance Capital," Reliance Capital said in the regulatory filing.
The sale of shares is expected to fetch Rs 6,000 crore for Reliance Capital's lenders, which is almost 40% of its total secured debt, according to a PTI report.
In February 2019, as part of its divestment plans, Reliance General Insurance Company Ltd had re-filed its draft documents for an initial public offering (IPO), less than three months after regulatory approval for its previous proposal lapsed.
Reliance Capital, the financial services arm of Anil Ambani-owned Reliance Group, has already exited the mutual fund business by selling its entire stake to its joint venture partner Nippon Life Insurance of Japan.
Reliance Group’s debt woes
Earlier this year, the country’s Supreme Court held Anil Ambani, chairman of Reliance Group, guilty of contempt of court after the group's telecom arm, Reliance Communications, failed to pay dues worth around Rs 550 crore ($78 million) to telecom equipment maker Ericsson.
Reliance Communications, in May, became the first Reliance Group firm to undergo insolvency proceedings at the bankruptcy court for resolution of debt worth over Rs 50,000 crore.
Other Reliance Group companies include Reliance Infrastructure Ltd, Reliance Power Ltd, Reliance Naval and Engineering Ltd, and Reliance Home Finance Ltd.
