IndusInd International Holdings Ltd. (IIHL), a Hinduja Group firm, has received conditional approval from the Insurance Regulatory and Development Authority of India (IRDAI) for its proposed takeover of debt-laden Reliance Capital, as announced on May 10, 2024, coinciding with Akshay Tritiya.

In a statement, an IIHL spokesperson expressed gratitude for the approval, which is contingent upon fulfilling certain regulatory, statutory, and judicial requirements. IIHL is committed to expediting these processes and aims to finalise the transaction by the National Company Law Tribunal's specified deadline of May 27, 2024.

The approval from IRDAI is key for the transfer of Reliance Capital's insurance businesses, including Reliance General Insurance and Reliance Nippon Life Insurance, to IIHL. Reliance Capital, as a promoter of both insurance entities, necessitates regulatory clearance for the proposed acquisition.

The resolution plan proposed by IndusInd International Holdings Ltd., worth Rs 9,650 crore, was endorsed by the National Company Law Tribunal on February 27, 2024. This resolution follows the Reserve Bank's intervention in November 2021 due to governance issues and payment defaults within the Anil Dhirubhai Ambani Group company.

Despite initial challenges and a rigorous selection process, IIHL emerged as the preferred bidder with a bid of Rs 9,661 crore upfront cash, supplemented by Reliance Capital's additional cash balance of Rs 500 crore.

While the deal has received approvals from various regulatory bodies and watchdogs, including banking and capital markets regulators, the Competition Commission of India, and others, IRDAI had expressed concerns regarding potential violations of foreign direct investment caps in insurance companies, reliance on borrowings for insurance entity acquisitions, and opacity in IIHL's structure.

Chairman Ashok Hinduja reiterated IIHL's commitment to promptly settle outstanding debts upon receiving IRDAI's final nod. Funding for the deal includes Rs 7,500 crore in debt financing, with the remaining Rs 2,000 crore infused as equity by IIHL, which boasts investments from 600 high-net-worth individuals, including a 9.9% stake by the Hindujas.

Upon completion of the takeover, IIHL plans to divest real estate investments associated with the transaction, expecting to garner approximately Rs 250 crore. The immediate focus is on maximizing shareholder value, with aspirations to elevate the market capitalization of IIHL's listed financial services businesses to $50 billion by 2030, according to Hinduja.

(With Reuters inputs)