Mumbai, Nov 24 (IANS): In a setback to Reliance Capital’s ongoing resolution process, the proposed joint venture agreement between Piramal Finance and Zurich Insurance, formed to place a joint bid on Reliance General Insurance Company (RGIC), has collapsed.
In the first round, the two companies submitted separate non-binding bids for Reliance Capital’s general insurance business, but later decided to form a joint venture and place a joint bid.
According to sources familiar with the development, the two companies have decided to part ways due to differences over various issues such as shareholders’ agreement, valuation, etc.
With the collapse of Piramal-Zurich JV, the fate of RGIC’s bidding process is uncertain, as US-based Advent, the only other bidder for this business, has already decided to withdraw from the competition. race.
Initially, there were three bidders in the race for RGIC – Piramal, Zurich and Advent. Advent had submitted the highest non-binding bid of Rs 7,000 crore, almost double the amount offered by two other bidders – Piramal and Zurich Insurance. Piramal’s bid was Rs 3,600 crore, while Zurich’s was Rs 3,700 crore.
According to the sources, there are mainly two reasons for Advent’s change of heart. First, after submitting non-binding offers, they realized that they had outbid RGIC, almost 100% more than Zurich and Piramal. The second reason is that Advent is a US-based private equity fund. The fund has a lifespan and according to the policy of the fund it is not allowed to make investments when there is a lock-up period condition. On the other hand, the IRDAI guidelines stipulate a lock-up period of 5 years for private equity investors in the insurance industry in India.
This is seen as a setback to the resolution process of Reliance Capital and its multiple subsidiaries, as there are only 3 days left before the deadline for submission of final binding offers.
Prior to this, Aditya Birla Sun Life and Nippon Life of Japan had engaged in merger talks for Reliance Nippon Life Insurance Company (RNLIC), but those talks also broke down due to differences between the two companies on several issues. Nippon Life of Japan, a 49% partner in the RNLIC, vehemently opposes Birla Sun Life’s bid, as the company is not interested in a merger with Birla Sun Life.
The deadline for submitting the resolution plan for RCAP and its subsidiaries is November 28.
At the end of August, RCAP received 6 non-binding offers under option 1, ie for Reliance Capital as a company. Torrent, IndusInd, Oaktree, Cosmea Financial, Authum Investment and B Right Real Estate had submitted bids ranging from Rs 4,000 crore to Rs 4,500 crore for all of Reliance Capital’s assets.
For Reliance General Insurance business, Piramal Finance had offered Rs 4,000 crore, while Zurich Insurance’s bid was Rs 3,500 crore. The third bidder, i.e. Advent, had bid Rs 7,000 crore for Reliance General Insurance.
Jindal Steel and Power and UVARC had submitted bids for Reliance Capital’s ARC business.
For Reliance Capital’s other miscellaneous assets, three bidders – Choice Equity, Global Fincap and Grand Bhawan – had submitted non-binding offers.
The deadline to complete Reliance Capital’s resolution process, as approved by the NCLT, is January 31, 2023.