Hinduja Group seeks RBI nod on proposed corporate restructuring for RCap resolution
Hinduja Group’s IndusInd International Holdings (IIHL) has written to the Reserve Bank of India seeking its go-ahead for proposed changes in the corporate structure set up for the acquisition and resolution of Reliance Capital (RCap).
The original resolution plan by IIHL, which was approved by the Mumbai bench of the NCLT in February 2024, had proposed two implementing entities — IIHL BFSI (India) Ltd and Aasia Enterprises LLP. Herein, RCap’s entire shareholding was to be transferred to IIHL BFSI (India) which was to be the holding company, and certain assets held by RCap were to be transferred to Aasia.
As per the new proposed structure, Asia Enterprises will have four partners and their profit sharing ratio will be in proportion to their fixed capital contribution. Further, new entities have been introduced to enable “seamless implementation of the resolution plan”, sources told businessline.
New proposal
These four companies are Cyqure India Private Ltd, Ecopolis Properties Ltd, Cyqurex Technologies Private Ltd and IIHL BFSI Holdings Ltd.
If approved, Cyqure India will hold majority stake in Aasia. The company’s shareholding will be same as Aasia, wherein Chairman Ashok P Hinduja was to hold 90 per cent stake in Aasia Enterprises, and Harsha A Hinduja and Shom A Hinduja another 5 per cent each, as per the original plan. The partners will augment the company’s capital either by bringing in fresh investors or through the sale of liquid assets held in their personal capacity, the Group is believed to have told the central bank.
Ecopolis Properties and Cyqurex Technologies will be set up as wholly-owned subsidiaries of Aasia, whereas IIHL BFSI Holding will be a wholly-owned arm of IIHL.
The RBI, in November 2023, approved the transfer of control of RCap to IIHL BFSI. However, it had then said that the approval is only valid for six months till May 17, and that any change in the shareholding of the implementing entity will need prior approval.
Introduction of new companies in the corporate structure is also likely to involve filing of fresh approval applications from other regulators such as IRDAI, SEBI and CCI, thus delaying resolution implementation beyond the NCLT deadline of May 27.
IRDA challenge
The change comes at a time when the Hinduja Group is already facing pushback from the insurance regulator regarding the shareholding of the insurance subsidiaries and plans to infuse and raise capital for these companies, including the plan for future cash flows and capital commitments.
IRDAI had also contended that if RCap becomes a subsidiary of IIHL, the insurance companies will become step-down subsidiaries through an SPV structure, which is in non-compliance with regulations. This is likely to have been one of the reasons to have triggered the proposed corporate restructuring, a source said.
Amid repeated delays in the resolution plan for RCap, institutional lenders such as EPFO, LIC and Provident Funds, who own over 50 per cent of RCap’s total debt, too have been pushing for IIHL to implement the resolution within the NCLT deadline and make the upfront payment of ₹9,661 crore.