CoC Flags Concerns: Reliance Capital Lenders Question ₹7,300 Cr Debt Terms from IIHL

Lenders of Reliance Capital (RCAP), which is currently struggling with debt, have raised concerns about the terms of a ₹7,300 crore debt proposal from IndusInd International Holdings Ltd (IIHL), a company under the Hinduja Group. The committee of creditors (CoC) is worried because the conditions set by IIHL’s bankers for this loan are quite stringent, and some of these conditions can only be fulfilled after the resolution plan for Reliance Capital is already in place. This situation makes it nearly impossible to access the funds needed to pay off Reliance Capital’s debts, sources said.

Efforts to get a response from IIHL on this issue were unsuccessful at the time of the story’s publication.

Sources also mentioned that the term sheets suggest more conditions could be added later in the final agreements. The CoC has asked IIHL to provide these final documents for review.

Reliance Capital Resolution Plan

IIHL plans to raise ₹7,300 crore in debt to help finance the Reliance Capital resolution plan, with an additional ₹2,750 crore coming from equity or cash already deposited in the CoC’s escrow accounts. The company has hired 360 One and Barclays to handle the debt raising, with ₹5,000 crore coming from 360 One and ₹2,300 crore from Barclays. The term sheets for the ₹7,300 crore were shared with the CoC following directions from the National Company Law Tribunal (NCLT) in Mumbai.

Key conditions in these term sheets include pledging RCAP equity shares issued to IIHL, a first-ranking hypothecation over all RCAP assets, and pledging 100% of Reliance Securities Limited’s shares with the new lenders.

Meanwhile, the CoC has also filed an application with the National Company Law Appellate Tribunal (NCLAT) seeking the forfeiture of IIHL’s ₹2,750 crore in escrow accounts in case of a default. They have also requested that the tribunal order IIHL to pay interest on the ₹7,300 crore debt from August 8 until the actual payment date.

In November 2021, the Reserve Bank of India took control of Reliance Capital’s board due to governance issues and payment defaults by the Anil Dhirubhai Ambani Group company. Nageswara Rao Y was appointed as the administrator and invited bids in February 2022 for taking over the company.

Reliance Capital had over ₹40,000 crore in debt, and initially, four bidders submitted resolution plans. However, the CoC rejected these plans due to low bid values, leading to a challenge mechanism in which IIHL and Torrent Investments participated.