Barclays to anchor Hinduja’s ₹4,300 crore bond for Reliance Capital acquisition

Barclays Capital will help the Hinduja group raise about ₹4,300 crore (about $515 million) by selling high-yield rupee bonds, three people with knowledge of the deal said, in the group's second tranche of fund-raising to take over the bankrupt financier.

The funding, however, is conditional on the Hinduja Group receiving regulatory approvals from the Reserve Bank of India, the Insurance Regulatory and Development Authority of India, and the Department of Industrial Policy and Promotion.

The Hinduja group aims to raise a total ₹7,300 crore (about $873 million) in debt to fund the acquisition, which has been approved by the National Company Law Tribunal (NCLT) but has faced delays due to regulatory hurdles and funding challenges.

“The money has been raised by 360One while Barclays has received commitments for bond issuance. The capital has been parked in escrow and will be released once regulatory approvals are in place," said one of the three people cited above. All of them asked to remain anonymous.

Barclays is underwriting ₹1,500 crore of the bond jointly with wealth manager 360One, while managing the remaining ₹2,800 crore independently, said the second of the three people cited above. 

The global investment bank is expected to subscribe to ₹800-1,000 crore of the issue before downselling to a mix of institutional investors including Allianz, Bank of America, JP Morgan, and Edelweiss’ Special Opportunities Fund.

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Barclays is anchoring the second bond tranche for Hinduja Group’s acquisition of bankrupt Reliance Capital, underwriting part of the issue and offloading the remainder to global investors.

Other expected participants include PAG, Varde, and Standard Chartered, this person said, adding that the second tranche is expected to be finalised in 2-3 weeks. Institutional cheque sizes will likely range from $25 million to $70 million.

The bond is aggressively priced at a 15% coupon rate, according to bankers.

“The bond is aggressively structured at a coupon rate of 15%, which is lower than what many of the market participants were expecting at 16-17%," said an official at a private credit fund.

The second tranche of the bonds will be issued by IndusInd International Holdings Ltd, an offshore entity of the Hinduja Group, that holds assets worth ₹2,500 crore in the form of unencumbered listed shares of IndusInd Bank.

In August, IndusInd International clarified before the NCLT that Reliance Capital would be rebranded under the ‘IndusInd’ name after the takeover of the insolvent company once owned by the Anil Ambani-promoted Reliance Group. 

The Anil Dhirubhai Ambani group had filed a petition before the bankruptcy court seeking to restrain IndusInd from using the brand ‘Reliance’.

“Barclays is yet to come out with a term sheet. But investors are betting on the approvals from regulators and the comfort of IndusInd Bank shares to subscribe to these bonds," said the head of a wealth management firm. “However, in the event of any default by the group, investors will find it difficult to monetize the shares of the bank as it's held by an offshore entity and foreign exchange regulations do not allow that."

Earlier this week, 360One arranged the first tranche of ₹3,000 crore in bonds for Hinduja’s special purpose vehicle Cyqure, with investments from family offices, wealthy individuals, and other domestic and foreign entities.

“It is unclear if it is a good idea to sell this product to high-net worth-individuals directly. They may not appreciate the risk involved," the third of the three people cited above said.

While Barclays, Bank of America, JP Morgan, PAG, and Standard Chartered declined to comment, emails to 360One, Hindujas, Allianz, and Varde went unanswered.

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Lessons from Shapoorji Pallonji Group’s bond offering

The Hinduja Group bond deal bears resemblance to last year’s massive ₹14,300 crore bond issuance by Shapoorji Pallonji Group’s Goswami Infratech Pvt. Ltd (GIPL), which was secured against shares of Tata Sons Ltd and Afcons Infrastructure Ltd, and came with an 18.75% coupon.

Despite strong initial demand from wealthy individual investors, family offices, and institutional investors, the SP Group struggled to meet coupon payments, prompting a request for an extension from bondholders. Ratings agency Care downgraded GIPL’s bonds earlier this year, citing refinancing risks and weak operating cash flows.

The Hindujas are looking to acquire Reliance Capital, including its two insurance subsidiaries, for an upfront payment of ₹9,650 crore.

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Despite receiving approval from NCLT, the Hinduja Group has faced delays in securing funding and regulatory approvals for acquiring Reliance Capital, missing the initial deadline for implementation. 

Lenders have petitioned the National Company Law Appellate Tribunal, seeking a 16.6% interest payout on the delayed payment. The court has instructed RBI and the Department for Promotion of Industry and Internal Trade to expedite the necessary approvals to close the acquisition.

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