Hinduja Group's IIHL gets IRDA approval to acquire Anil Ambani's Reliance Capital

Hinduja Group's IndusInd International Holdings Ltd. (IIHL) recently received approval from the Insurance Regulatory and Development Authority of India (IRDAI) to acquire Reliance Capital.

The approval, announced on May 10, 2024, the auspicious occasion of Akshay Tritiya, is crucial for the transfer of Reliance Capital's insurance arms to IIHL.

These include Reliance General Insurance and Reliance Nippon Life Insurance, a joint venture with Nippon Life. The acquisition is still pending other regulatory, statutory, and judicial clearances.

Financial details

IIHL's takeover deal for Reliance Capital includes a resolution plan amounting to Rs 9,650 crore, approved by the National Company Law Tribunal (NCLT) on February 27, 2024.

The transaction also involves the divestment of some of Reliance Capital's assets, including its real estate investments, expected to generate about Rs 250 crore.

The deal's financing structure includes Rs 7,500 crore in debt and Rs 2,000 crore in equity, contributions from 600 high-net-worth individuals, and a 9.9% stake from the Hinduja family.

Concerns raised in the approval process?

The IRDAI had initially expressed concerns regarding the transaction, particularly potential violations of foreign direct investment caps in insurance companies and the opacity of IIHL's structure.

These issues were addressed by restructuring the consortium and including new India-based entities to comply with FDI regulations, ensuring that the foreign investment ceiling of 74% for the insurance sector was not exceeded.

How will IIHL manage the transition post-takeover?

Post-approval, IIHL plans to retain all existing talent within Reliance Capital and has formulated strategies for integrating the businesses. Ashok Hinduja, chairman of the Hinduja Group, mentioned that replacements would be seen for retiring or outgoing senior officials.

Furthermore, the firm aims to significantly increase the market capitalization of its financial services businesses, targeting a valuation of $50 billion by 2030.

With IRDAI's conditional approval, IIHL is now focused on obtaining the remaining clearances and complying with regulatory requirements to finalize the acquisition by the NCLT's deadline of May 27, 2024.