IRDA Clears Transfer of RCAP's Stake In Insurance Cos To Hinduja

India's Insurance regulator IRDA has approved the transfer of Reliance Capital's (RCAP) equity stake in all three insurance businesses health, life and general to Hinduja Group entity Aasia Enterprises LLP (AELLP). Recently, AELLP promoter Ashok Hinduja had declared that RCAP lenders will be paid within 48 hours after IRDA's approval to transfer the insurance company stake to the Hinduja Group and they will not have to wait till the regulatory deadline of May 27 for the dues.

The Hindujas had put in a Rs 9850 crore bid for RCAP, which was accepted by the NCLT (National Company Law Tribunal). Among other financial service businesses, RCAP has three insurance companies Reliance Nippon Life Insurance, Reliance General Insurance and Reliance Health Insurance. RCAP's acquisition is being led by Ashok Hinduja, who is walking a tightrope now, since the deadline for RBI approval granted for the deal ends on May 17 and the NCLT deadline ends on May 27, before which the dues of RCAP lenders had to be cleared. But in a surprising move, the Hindujas have revised their resolution plan and RBI's clearance for the same is now awaited. Also, the Hindujas will have to go back to NCLT with the revised plan.

Hinduja's original proposal that had won regulatory approvals from the RBI, NCLT and other authorities, was to acquire RCAP via Mauritius-based Indusind International Holdings (IIHL) and Mumbai-based AELLP. But now at the eleventh hour, the Hinduja Group has introduced new companies into the deal. These include Cyqure India Private Limited, Ecopolis Properties Private Limited, Cyqurex Technologies Private Limited and IIHL BFSI Holding Limited. Cyqure India will act as the holding company of AELLP since it will be holding a majority stake. Ashok Hinduja, Harsha Hinduja and Shom Hinduja will be the key shareholders of Cyqure.

IRDA Conditions On Transfer
 
In a communication dated May 10, IRDA said that it approved the transfer of 5.04 crore shares or 26 per cent stake of the insurance companies from RCAP to AELLP. This is being done on the condition that RCAP and AELLP remain promoters of the three insurance businesses, they obtain all the necessary regulatory permissions for the transfer of stake, always remain compliant with the IRDA provisions on Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024. Also, IRDA has said that the transfer should not violate India's foreign direct investment norms in insurance companies. Foreign investors can hold only 74 per cent stake in Indian insurance companies.

Further, IRDA has said that AEL cannot pledge or encumber the shares of the insurance companies in any manner or any time other than permitted under IRDA's provisions. The pledging and encumbrance of the insurance company shares is dealt with in section 6A(4)(b) of the Insurance Act,1938 read with provisions of Regulation 26 (1) of IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024. This apart IRDA has imposed other terms like compliance with tax laws and those on foreign exchange management for the transfer of shares.

Earlier, the IRDA had raised concerns and queries on Hinduja's resolution plan that envisaged borrowing funds overseas for RCAP's acquisition. Also, the plan was such that foreign entities would have held more than permitted FDI in the insurance companies. Indusind IIHL had submitted a sealed cover response to the IRDA on the same. Following this, as the clock was ticking on the regulatory deadlines for the deal, the Hinduja submitted a revised resolution plan to the RBI. IRDA's approval will now put to the test Ashok Hinduja's claims on clearing the dues of RCAP lenders.