Reliance Capital’s ₹7,300 Cr Funding Faces Hurdles as Hinduja Group’s Plan Hits a Snag

The lenders of Reliance Capital have raised concerns about a debt proposal submitted by IndusInd International Holdings Ltd (IIHL), a Hinduja Group company, to raise ₹7,300 crore.

NCLT’s Directive and Stakeholder Confidentiality

Earlier this month, the National Company Law Tribunal (NCLT) asked IIHL to share the necessary documents with the lenders as part of the plan to resolve Reliance Capital’s debts. IIHL agreed to do so in a Monitoring Committee meeting but only on the condition that stakeholder confidentiality would be maintained.

Delays and Lender Concerns

However, there are tensions between the lenders and IIHL due to delays in carrying out the debt resolution plan, which the NCLT approved back in February. The lenders are particularly worried about the strict conditions tied to the ₹7,300 crore debt proposal. Some of these conditions can only be met after the debt resolution plan is put into action, making it difficult to access the funds needed to repay Reliance Capital’s creditors.

Strict Conditions Beyond the Original Plan

One lender, speaking anonymously, mentioned that IIHL’s funding is based on several conditions that go beyond the original plan. These include transferring a 26% stake in insurance companies to Aasia, a Hinduja Group company, delisting Reliance Capital’s shares and debentures, securing assets in favor of IIHL’s lenders, and issuing new unlisted debentures for Reliance Capital.

Request for Final Documents

The term sheets suggest that more conditions could be added to the final agreements, prompting the lenders to ask IIHL for the final documents for review.

Fundraising Strategy

To raise the ₹7,300 crore, IIHL has hired 360 One and Barclays, with 360 One responsible for raising ₹5,000 crore and Barclays managing the remaining ₹2,300 crore.

Key Conditions and NDU Proposal

Key conditions in the term sheet include pledging Reliance Capital shares to IIHL, delisting existing debentures and shares to issue new ones, and securing a first-ranking lien on all Reliance Capital assets.

There’s also a proposal for a Non-Disposal Undertaking (NDU) on Reliance Asset Reconstruction Company (RARC) shares held by Reliance Capital. This NDU must be completed before the debt resolution plan can proceed, and Reliance Capital needs to file the required forms with the Depository Participant (DP).

Lenders Seek Equity Forfeiture

Additionally, the lenders have filed a new application with the Delhi bench of the National Company Law Appellate Tribunal (NCLAT), seeking to forfeit IIHL’s ₹2,750 crore equity stake if the company fails to meet its obligations.