Hinduja’s billion-rupee gamble: Can they save Anil Ambani-led Reliance Capital?

In a significant development in the Indian financial sector, the Hinduja Group has embarked on an ambitious Rs 4,300 crore initiative to acquire the bankrupt Anil Ambani-led Reliance Capital, indicating a robust move in the corporate recovery landscape. This follows the approval of IndusInd International Holdings’ (IIHL) resolution plan by the National Company Law Tribunal (NCLT) Mumbai in February, which originally valued the acquisition at Rs 9,650 crore.

IIHL is actively working to secure the necessary funds to finalize the acquisition, with plans to issue non-convertible debentures (NCDs) worth Rs 4,300 crore. The initiative seeks to meet the financial requirements set forth for closing the deal by May 27, 2024. However, due to intricate regulatory processes and the vast scope of the transaction, IIHL has requested an additional 90-day extension, as reported by Economic Times.

Hinduja Group’s bold Rs 4,300 crore bid could mark a turning point for the embattled Reliance Capital

The NCDs are expected to be a blend of domestic market sourcing and contributions from global private credit funds. Importantly, the proceeds from the sale of shares in underlying insurance companies affiliated with Reliance Capital will be utilized as security for the debenture holders. This financial arrangement also includes directing cash flows into an escrow account dedicated exclusively to debenture repayment.

As of the March 2024 quarter, the Ambani family is listed as the promoters of the Reliance Group company, with Anil Ambani having divested his shares while his wife Tina Ambani and son Jai Anmol Ambani hold 263,474 and 28,487 shares, respectively. The company is currently under the corporate insolvency resolution process, with Nageswara Rao Y appointed as the administrator by the Reserve Bank of India under the Insolvency and Bankruptcy Code, 2016.

The strategic decision by the Hinduja Group to venture into this acquisition through the issuance of NCDs reflects a calculated move to leverage the distressed assets market. This approach not only aids in the revitalization of Reliance Capital but also underscores the potential for recovery in the financial services sector, catalyzing further investment and interest in similar distressed assets.