The Insurance Regulatory Development Authority of India (IRDAI) on May 10 cleared the transfer of 26 percent stake in debt-ridden Reliance Capital's insurance arms to Hinduja Group firm, Aasia Enterprises, Moneycontrol has learnt. The insurance arms of Reliance Capital include Reliance General Insurance Company, Reliance Nippon Life Insurance Company (RNLIC), and Reliance Health Insurance.
RNLIC is a joint venture (JV) between Reliance Capital and Japan’s Nippon Life. According to RNLIC’s annual report for financial year 2022-23, Reliance Capital is a majority stakeholder with 51 percent and the remaining 49 percent is owned by Nippon Life.
As per the IRDAI clearance, Hinduja’s have to complete the share purchase in RNLIC within a period of three months from the date of approval. Post the transaction, Reliance Capital, Nippon Life Insurance and Aasia Enterprises LLP will remain the promoters of the company, as per IRDAI conditions.
A spokesperson from IndusInd International Holdings Limited, in a response to Moneycontrol's queries said that: “We are happy to acknowledge the receipt of approval from IRDAI yesterday, May 10, 2024, on the auspicious occasion of Akshay Tritiya. The approval is subject to certain ‘regulatory, statutory, and judicial’ clearances/compliances.”
The company further said it stands committed to working towards obtaining the same as soon as possible and aims to close this transaction by the NCLT's stipulated date of May 27, 2024.
According to sources familiar with the matter the deal needs to be completed by the stipulated deadlines otherwise it would amount to a default.
According to IRDAI, post the completion of the share transfer, the insurance company needs to submit the details of the share transfer to the IRDAI.
Earlier, IRDAI had expressed some reservations over the proposed structure for Reliance Capital’s insurance subsidiaries. IRDAI in a communication to the administrator of Reliance Capital, Nageshwara Rao Y, has sought the proposed structure for the acquisition of Reliance Capital’s insurance subsidiaries. The sector regulator is of the opinion that promoters should invest their own capital as insurance companies deal with the money of policyholders and as a regulator protection of policyholders is the top priority.
The transfer of ownership to Aasia Enterprises comes as the group was looking to offload part of its stake in the general insurance arm to Aasia Enterprises to abide by regulatory norms on foreign ownership in the insurance sector. Regulatory guidelines cap foreign ownership in Indian insurance companies at 74 percent of the equity share capital.
Ashok Hinduja, Chairman, IIHL, in a media briefing on May 5 in Mumbai, said the company will close the Reliance Capital transaction in the required timelines once the company gets go-ahead from IRDAI. I am hopeful that the approval will come as quickly as possible. Normally, the approval process takes two to three months. The original information (application) was submitted in November, 2023. So, if we check the timeline, we'd say that the IRDAI was provided with whatever information they required, right from November onwards. So, I think they would move fast with the approval process. If you ask me, are we ready for the 27th? We are even ready for May 15."
Emails sent to IRDAI, Reliance Capital and RNLIC remained unanswered till the time of filing this copy.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
