The Mumbai bench of National Company Law Tribunal (NCLT) has granted the Hinduja Group just seven more days up to July 31 to deposit Rs 2750 crores (part money as equity contribution) in the escrow account for the Reliance Capital (RCAP) deal. The tribunal has ordered the Hinduja group to deposit Rs 250 crores in India and Rs 2500 crores in an overseas escrow account, failing which it would be declared a defaulter in the deal and stands to close between Rs 350 to Rs 500 crores that it had deposited with the Resolution Application for the deal.
It has been nearly two years that Hinduja Group has been trying to acquire RCAP. The NCLT had approved the Resolution Application (RA) by Indusind International Holdings Ltd (IIHL), a holding company of the Ashok Hinduja Group, in October 2023. Since then, the Hinduja Group has been unsuccessful in bringing just Rs 2750 crores on the table in the total deal worth Rs 9850 crores. Considering that it has missed several deadlines in the past, it seems difficult for the group to put Rs 2750 crores in escrow in just seven days. In case, Hinduja manages to bring Rs 2750 crores in these seven days, the NCLT has directed it to implement the Resolution Plan by August 10, which means it will have to bring the further contribution of Rs 7300 crores (debt money) in 15-18 days from today.
In an order on Tuesday, the NCLT said they would permit IIHL to implement the Resolution Plan by August 10 on the following conditions: Which is to deposit Rs 250 crores in an escrow in India and Rs 2500 crores in escrow overseas.
"The Applicant (IIHL) shall deposit Rs. 250 crores towards domestic equity in the escrow account in India designated by the Committee of Creditors (of RCAP). The Applicant shall deposit Rs. 2500 crores in an offshore escrow account designated by the Committee of Creditors as contribution towards the equity to be invested in the Corporate Debtor (RCAP), and this amount shall forthwith be brought in India upon receipt of approval from Central Government for bringing in foreign equity. The Applicant shall place all the above on record under an affidavit on or before 31st July, 2024," the NCLT bench said.
The NCLT has further asked IIHL to submit to the Monitoring Committee (Of RCAP) copies of the binding executed Term Sheets for the loan amount of Rs. 7300 crore and such loan should be disbursed to the credit of designated account before the extended date subject to foreign equity component approval in place, which has to be placed on record under an affidavit on or before July 31, 2024.
The NCLT said that the COC was also entitled to any cash recovery arising during the extended period in RCAP net of CoC entitlement amount. "In the event the Applicant fails to implement the resolution plan within the extended period, the same shall be treated as an event of default and the Committee of Creditors shall be entitled to take all requisite steps against the Applicant.
After having won approval from NCLT IIHL has missed two deadlines for payment to RCap creditors. The last deadline of 90 days ended on 27 May. Even after around 60 days after the 27 May deadline, the Hinduja Group has not been able to put the minimum equity share on the table.
No Money, More Deals In Pipeline?
In legal proceedings at the NCLT last month, the lawyers appearing for IIHL told the tribunal judges that their money was deployed somewhere else and that they would bring equity money for this deal only after debt-linked fundraising was complete. Lawyer Gaurav Joshi, who appeared on behalf of RCAP's administrator appointed by the Reserve Bank of India (RBI), told the tribunal to record such a statement that the Hinduja Group had no money for the current transaction.
Even the NCLT bench was surprised and asked why IIHL had failed to bring money on the table. The NCLT bench wanted to know as to why even after a year of the approval of the resolution plan by the tribunal, the Hinduja Group had still not finalised the term sheets, which were still not binding. IIHL counsel Venkatesh Dhond told the tribunal that they would bring the equity money on the table after debt fundraising. On this, the council for the Committee of Creditors of RCAP said as per the international norms of financing equity money has to first come on the table followed by debt money. The NCLT had reserved its order on granting any further extension to Hinduja Group to honour the deal.
IIHL, a Mauritius-based entity, is in the process of raising funds for the RCAP acquisition. But around 50 per cent of Hinduja Group's holding in Indusind Bank has been pledged in the past and remains with the lenders. Apart from the RCAP deal, the group has also committed investments for a 60 per cent stake in Indusind Bank. Further, IIHL has also won approval from the RBI to hike the group's stake in Indusind Bank to 26 per cent from around 16 per cent currently -- all of which will require billions of dollars when it has been unable to bring just Rs 250 crores before within the deadline.
