Merging company

Aditya Birla threatens to sue RCAP administrator for not sharing critical information

Mumbai, November 22 (IANS) Aditya Birla Sun Life Insurance Company Ltd, a bidder for Reliance (NS:) Nippon Life Insurance Company (RNLIC), has threatened to take action and file a lawsuit against the Capital Dependency (NS:) Administrator if he does not provide the critical information required by the company, at the earliest.

In a letter to the administrator, the company accused the administrator of failing to provide critical information related to the RNLIC. He said that despite repeated reminders, neither his questions were answered nor his request for a management meeting considered.

The company accused the administrator of brazenly ignoring its repeated requests for information or management meetings.

He stated that the information sought by him, as a resolution bidder, is very essential to make an overall valuation of RNLIC’s assets and submit a competitive resolution bid to maximize value, for all Reliance Capital stakeholders. .

“Given the deadlines for the final submission of the resolution plan, it becomes all the more critical that the information or clarifications required are provided as soon as possible, otherwise the terms of the resolution plan could be impacted.”

The company said if the information gets too close to the bid submission deadline of Nov. 28, it may not be able to secure the necessary approvals to submit the financial bid for the RNLIC. It may even result in the presentation of a sub-optimal resolution plan.

Notably, the sale of Reliance Capital’s 51% stake in Reliance Nippon Life Insurance became a triangular struggle between Aditya Birla, Nippon Life (Japan) and the Administrator.

Angered by Aditya Birla Sun Life’s entry into the RNLIC bidding process, and too close to the deadline for submitting binding bids, Nippon Life, a 49% stakeholder in the RNLIC, made it clear to the administrator and Aditya Birla Sun Life that it is not interested in merging with Aditya Birla Insurance or selling its stake, at any cost.

Nippon Life has expressed its resentment and reservations to RCAP’s administrator, Aditya Birla Sun Life, and its overseas partner, Sun Life Financial Inc.

Nippon Life wants to acquire RCAP’s 51% stake in RNLIC, through a strategic partner, as Indian insurance rules do not allow a foreign company to hold more than 74% stake in an Indian insurance entity.

The entry of Aditya Birla Sun Life appears to have disrupted Nippon Life’s plans. In the event that Birla Sun Life succeeds in acquiring RCAP’s 51% stake in the RNLIC, it will have to merge the RNLIC with its existing insurance company, i.e. Birla Sun Life Insurance, due to the directives of IRDA prohibiting cross-ownership. between the two insurance companies.

In the event of RNLIC’s merger with Birla Sun Life, Nippon Life’s stake would be significantly diluted to less than 10% in the merged entity, and it would lose all ownership and governance rights that exist in terms of appointment of the CEO. , equal representation on the Board, member of the audit committee, and right of veto on reserved matters, within the RNLIC.

According to a source, Nippon Life, in a letter to the administrator of RCAP, said merging with another insurance entity or selling its stake was not an option for them. He expressed his intention to remain invested in the Indian insurance market as a long-term player.

Nippon Life is believed to be in talks with some Indian companies, including Torrent Group, to form a strategic partnership, to bid for RCAP’s 51% stake in RNLIC, but Aditya Birla’s entry has upended plans for Nippon and complicated the matter for them. .

According to sources, Nippon Life is also comfortable with a scenario where the 51% of RCAP is acquired by someone like Hindujas, who is the bidder of RCAP under the Option I CIC plan, as they see the potential to get IndusInd Bank (NS:) as a Banca partner, which is essential to the growth of the life distribution business.

The RNLIC currently has no banca partners, which limits its reach and access, which impacts the growth of the business.

Notably, Reliance Capital and its multiple subsidiaries, including RNLIC, are subject to a corporate insolvency resolution process governed by the RBI.

Initially, the RNLIC had not even received a single non-binding offer from a potential candidate, but a few weeks ago Aditya Birla Capital (NS:) suddenly entered the fray and submitted an extension of Interest (EoI) for RCAP 51. percent of the capital of the RNLIC.