Reliance Capital lenders red-flag Hinduja’s ₹7,300 crore debt proposal

The committee of creditors (CoC) of Reliance Capital has raised concerns over the term sheets submitted by IndusInd International Holdings Ltd (IIHL), a Hinduja Group entity, for a proposed debt raise of ₹7,300 crore.

Earlier this month, the National Company Law Tribunal (NCLT) instructed IIHL to provide the requested term sheets to the lenders as part of the implementation of the resolution plan for Reliance Capital. IIHL agreed to submit these documents during a meeting of the Monitoring Committee, contingent upon maintaining stakeholder confidentiality.

However, tensions have arisen between the CoC and IIHL due to delays in executing the resolution plan, which was approved by the NCLT in February.

The creditors’ concerns centre on the stringent conditions attached to the ₹7,300 crore debt offering. Some of these conditions can only be fulfilled after the resolution plan is executed, complicating the drawdown of funds required to settle payments to Reliance Capital’s lenders.

“IIHL has has secured funding basis various conditions that travel well beyond the resolution plan. These conditions include transfer of 26% shareholding in the insurance companies to Hinduja Group company Aasia, delisting of shares and debentures of RCAP, creation and perfection of security in favour of lenders to IIHL, and issuance of new unlisted RCAP NCDs etc,” said one of the lenders, speaking on condition of anonymity.

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The term sheets also suggest that additional terms and conditions may be introduced in the final binding agreements. Consequently, the CoC has requested that IIHL provide these definitive documents for review.

IIHL has enlisted 360 One and Barclays to raise ₹7,300 crore in debt, with 360 One tasked with raising ₹5,000 crore and Barclays responsible for the remaining ₹2,300 crore.

Key conditions in the term sheet include pledging equity shares of Reliance Capital Limited issued to IIHL, delisting existing debentures and equity to facilitate the issuance of new equity to IIHL and debentures to new lenders, and establishing a first-ranking hypothecation over all RCapital assets. 

A Non-Disposal Undertaking (NDU) is also proposed on the equity securities of Reliance Asset Reconstruction Company (RARC) held by RCAP, which must be executed as a Condition Precedent, with RCAP required to file the necessary forms with the DP.

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Meanwhile, on Thursday, the CoC filed a fresh application with the Delhi bench of the National Company Law Appellate Tribunal (NCLAT), seeking forfeiture of IIHL's equity component of ₹2,750 crore in the event of a default by the Hinduja Group-owned company.