The Reserve Bank of India (RBI) has ordered an arms length distance between Hinduja group-run IndusInd Bank Ltd and Reliance Capital – the debt-laden firm the conglomerate is acquiring in an insolvency proceeding. The RBI laid down the condition while giving nod to the appointment of five Hinduja Group representatives as directors on the board of Reliance Capital, sources said citing the central bank’s November 17 letter.
Hinduja Group firm IndusInd International Holdings Ltd (IIHL) had emerged as the highest bidder for Reliance Capital in an insolvency proceeding to recover unpaid loans. IIHL had made an offer of Rs 9,650 crore to take over Reliance Capital in the second round of auction concluded in April.
The RBI in the November 17 letter conveyed its no objection to the transfer of control of Reliance Capital Ltd to IIHL BFSI (India) Ltd (wholly owned subsidiary of IndusInd International Holdings Ltd).
It also approved the appointment of Amar Chintopanth, Shardchandra V Zaregaonkar, Moses Newling Harding John, Bhumika Batra, and Arun Tiwari as directors on the Reliance Capital board, sources said.
The no-objection was being granted on the condition that pursuant to the change of control and management, the company shall maintain a strict arm’s length distance with respect to any transaction with IndusInd Bank Ltd, they said citing the central bank letter.
The RBI also stipulated that any change in the shareholding, post takeover, will be subject to prior approval by the central bank.
The RBI has also directed that a copy of the NCLT order approving the IIHL’s resolution plan will have to be submitted to the bank.
The NCLT approval on IIHL’s resolution plan is still pending as the Supreme Court is yet to decide on the Torrent Investment’s plea against the second round of auction held by the lenders of Reliance Capital.
A hearing on Torrent’s plea in the Supreme Court is scheduled for Tuesday.
