RBI approves Hinduja Group directors on board of bankrupt Reliance Capital

The Reserve Bank of India (RBI) has approved the appointment of five Hinduja Group representatives as directors on the board of the debt-ridden Reliance Capital, according to sources.

The directors are: Amar Chintopanth, Shardchandra V Zaregaonkar, Moses Newling Harding John, Bhumika Batra and Arun Tiwari, they said. The RBI’s approval for the appointment of directors has come amid its no objection to the transfer of control of Reliance Capital Ltd to IIHL BFSI (India) Ltd (wholly owned subsidiary of Hinduja Group firm IndusInd International Holdings Ltd (IIHL). While granting the approval on the Rs 10,000 crore resolution plan and appointment of the directors, the RBI has stipulated that pursuant to the change of control and management, the company will maintain strict arm's length distance with respect to any transaction with the Hinduja group-run IndusInd Bank.

The RBI has also said that after the implementation of the resolution plan, any change in the shareholding of resolution applicant will be subject to the prior approval of the central bank. The RBI has also directed that a copy of the National Company Law Tribunal (NCLT) order approving the IIHL's resolution plan will have to be submitted to the bank. The NCLT approval on IIHL's resolution plan is still pending as the Supreme Court is yet to decide on the Torrent Investment's plea against the second round of auction held by the lenders of Reliance Capital.

A hearing on Torrent's plea in the Supreme Court is scheduled for this week. Torrent was the highest bidder in the first round. Hinduja raises Rs 8,000 cr for RCap acquisition The Hinduja Group has raised Rs 8,000 crore by pledging the shares of IndusInd Bank for the acquisition of Reliance Capital. As per the data submitted to the stock exchanges, 47.3 per cent of IndusInd Bank stake is pledged, as at the end of September quarter. In a letter to IIHL, the Reliance Capital Administrator had asked IIHL to submit a fresh application, along with the source of funds and the business plan which do not contemplate the creation of pledge over the shares of RGIC and RNLIC.

The Hinduja Group was then asked to raise funds which do not contemplate the creation of pledge over the shares of the RCap insurance companies. The RBI on November 29, 2021, superseded the board of Reliance Capital in view of payment defaults and serious governance issues. The bank appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the company. Reliance Capital is the third large non-banking financial company (NBFC) against which RBI had initiated bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC). The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL).

A Hinduja family spokesperson said the pledge was not created recently but was created in January 2021.