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The Insurance Regulatory and Development Authority of India (IRDAI) has raised concerns over IIHL's plan to acquire Reliance Capital, specifically questioning the debt IIHL intends to take on for the deal.
The regulator is seeking more details about IIHL's borrowing plans and potential violations of Foreign Direct Investment limits.
The focus is on ensuring the protection of policyholders and adherence to regulatory compliance in the acquisition process.

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IIHL's ₹9,650 crore resolution plan for Reliance Capital was approved by NCLT

IRDAI expresses concern over IIHL's proposal for Reliance Capital acquisition

By Akash Pandey

Apr 07, 2024

06:06 pm

What's the story

The Insurance Regulatory and Development Authority of India (IRDAI), has raised questions about Hinduja Group-led IndusInd International Holdings Ltd (IIHL)'s proposed resolution plan, to acquire debt-laden Reliance Capital. The regulator communicated its concerns to Nageshwara Rao Y, the Administrator of Reliance Capital, stating that IIHL's ₹9,650 crore resolution plan does not align with insurance regulations. IRDAI is now seeking further details about the equity capital that IIHL plans to invest in Reliance Capital.

Debt worries

Concerns about debt funding

IRDAI has expressed concerns about the debt that IIHL is planning to raise for the takeover of Reliance Capital. The regulator believes that promoters should invest their own capital as insurance companies handle policyholders' money. The protection of policyholders is a top priority for the regulator, leading to its apprehension over IIHL's proposed funding method for the acquisition.

Information request

IRDAI seeks more information on the structure

IRDAI has requested more information about IIHL's borrowing plans, including details about the instruments to be issued, the rate of interest, and the proposed subscribers. The regulator also wants to understand IIHL's proposed structure for acquiring Reliance Capital's insurance subsidiaries, and its capability to meet future capital requirements of these ventures. This request for additional information underscores IRDAI's commitment to ensuring regulatory compliance in the acquisition process.

FDI concerns

Potential FDI violations in plan questioned

The transfer of Reliance Capital's stake to IIHL has raised questions about potential violations of Foreign Direct Investment (FDI) limits. The regulator stated, "In other words, RCL (Reliance Capital Ltd) will have 100% FDI. Please confirm if the same is permissible as per extant FDI law. Please provide reference to the said law that permits the same." This query highlights IRDAI's vigilance over adherence to foreign investment regulations in India.