Mumbai: Reliance Capital Ltd will exit its lending business and let its insurance units become long-term value creators, said Anil Ambani, chairman of Anil Dhirubhai Ambani Group (ADAG).
Reliance General Insurance business is currently valued at more than ₹8,000 crore while Reliance Capital’s total investment in the life insurance business was ₹3,000 crore.
Elaborating on the company’s plan for its lending businesses, Ambani said Reliance Home Finance and Reliance Commercial Finance are working closely with lenders to finalize a resolution plan, which is expected to be completed by December 2019.
“Reliance Capital will be a financial shareholder in both companies to re-converge shareholder value under the new management and shareholding structure and effectively, debt of Reliance Capital will stand reduced by ₹25,000 crore," Ambani said at the company’s annual general meeting.
Reliance Capital has suffered great collateral damage over the last six months from the crisis in the financial services sector, irrational action by auditors and rating agencies, and the temporary economic slowdown, Ambani told shareholders.
Ambani added that his group has more than ₹60,000 crore of receivables stuck in regulatory and arbitration matters which have been pending for 5-10 years.
He claimed his group has shown progress in paring debt, repaying over ₹35,000 crore over the last 15 months. “It is close to repaying another ₹15,000 crore by March 2020, despite nil funding from any bank, NBFC or financial institution," he said.
Reliance Capital said it made interest and principal repayment of ₹72.65 crore on Friday and Monday on a range of instruments, including non-convertible debentures, term loans and inter-corporate deposits.
It said the company remained current on all its repayment obligations.
Last week, CARE Ratings had downgraded Reliance Capital’s debt to default grade ‘D’ from a stable ‘BB’ earlier. “The liquidity profile of the group continues to be under stress on account of the delay in raising funds from the asset monetization plan and impending debt repayments," the rating agency said in the release.
On Friday, the company completed a 21.54% stake sale in Reliance Nippon Life Asset Management to Nippon Life Insurance of Japan for ₹3,030 crore.
With this, Nippon Life has raised its shareholding to 75% and has become the insurer’s sole sponsor. The company also plans to change its name with prominence given to Nippon India.
In February, Ambani’s telecom venture Reliance Communications Ltd filed for insolvency as its lenders did not receive any proceeds from its proposed asset monetization plans even after 18 months. This comes after its planned asset sale to brother Mukesh Ambani’s Reliance Jio failed to get approval from the Department of Telecommunications.
On Monday, shares of Reliance Capital closed at ₹24.55—a level last seen on 26 March 1999—down 12.32% from its previous close. Stocks of other group companies too closed at record lows. Reliance Infrastructure Ltd was down 12.3%, Reliance Power Ltd 8.7% and Reliance Communications 1.3%.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.