Aditya Birla Threatens Action against RCAP Administrator for Not Sharing Critical Information
IANS 22 November 2022
The Aditya Birla Sun Life Insurance Company Ltd, a bidder for the Reliance Nippon Life Insurance Company (RNLIC), has threatened to take action and file a complaint against the Reliance capital administrator if it fails to provide the critical information required by the company, at the earliest.
In a letter addressed to the administrator, the company has accused the administrator of not providing the critical information related to the RNLIC. It said that, despite the repeated reminders, neither its queries have been addressed nor its demand for a management meeting been considered.
The company has accused the administrator of brazenly ignoring its repeated requests for providing information or holding management meetings.
It said that the information sought by it, as a resolution bidder, is very critical for making a holistic assessment of the RNLIC's assets and submitting a competitive resolution bid for maximising value, for all the stakeholders of Reliance Capital.
"Considering the timelines of the final submission of the Resolution Plan, it becomes all the more critical that the requisite information or clarifications are provided at the earliest, failing which the terms of the resolution plan may be impacted."
The company has said that if the information comes too close to the deadline for bid submission, i.e., 28th November, then it may not be able to seek necessary approvals to submit the financial bid for the RNLIC. It may even result in the submission of a sub-optimal resolution plan.
Notably, the sale of Reliance Capital's 51% stake in Reliance Nippon Life Insurance has become a triangular fight between Aditya Birla, Nippon Life (Japan) and the Administrator.
Miffed at the entry of Aditya Birla Sun Life in the bidding process of RNLIC, and that too so close to the binding bids submission deadline, Nippon Life, a 49% stakeholder in the RNLIC, has 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 communicated its resentment and reservations to the RCAP administrator, Aditya Birla Sun Life, and its foreign partner, Sun Life Financial Inc.
Nippon Life is keen on acquiring the RCAP's 51% stake in RNLIC, through a strategic partner, as Indian insurance rules do not allow a foreign company to have an equity stake of more than 74% in an Indian insurance entity.
The entry of Aditya Birla Sun Life seems to have upset the plans of Nippon Life. In case Birla Sun Life succeeds in acquiring a 51% stake of RCAP in RNLIC, it will have to merge RNLIC with its existing insurance company, i.e., Birla Sun Life Insurance, due to the Insurance Regulatory and Development Authority of India (IRDAI) guidelines of no cross-holding being allowed between the two insurance companies.
In the case of the merger of RNLIC with Birla Sun Life, Nippon Life's stake would be hugely diluted to below 10% in the merged entity, and it would lose all the shareholder and the governance rights that exist in terms of nominating the chief executive officer (CEO), equal representation on the board, member of the audit committee, and the veto rights on the reserved matters, in RNLIC.
According to a source, Nippon Life, in a letter to the RCAP administrator, has said that merging with another insurance entity or selling its stake, is not an option for them. It has expressed its intention to stay invested in the Indian insurance market as a committed long-term player.
Nippon Life is believed to be in talks with some Indian companies, including Torrent group, to form a strategic partnership, in order to bid for RCAP's 51% stake in RNLIC, but Aditya Birla's entry has upset Nippon's plans and complicated the matter for them.
According to sources, Nippon Life is also comfortable with a scenario where the RCAP's 51% is acquired by someone like Hindujas, who are bidders for RCAP under the Option I CIC plan, as they see the potential of getting IndusInd Bank as a Banca partner, which is key to the growth of life distribution business.
The RNLIC currently has no banca partner, which restricts its reach and access, impacting the growth of the business.
Notably, Reliance Capital and its multiple subsidiaries, including RNLIC, are undergoing an RBI-governed corporate insolvency resolution process.
Initially, RNLIC had not received even a single non-binding bid from any prospective applicant, but a few weeks back, the Aditya Birla Capital suddenly entered the fray and submitted an Expression of Interest (EoI) for RCAP's 51% stake in RNLIC.
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