DPIIT Approves Hinduja Group’s IIHL Acquisition of Reliance Capital

The Department for Promotion of Industry and Internal Trade (DPIIT) has granted approval for the ₹10,000-crore acquisition of Reliance Capital Ltd (RCAP) by IndusInd International Holdings Ltd (IIHL), a Hinduja Group-backed firm. This marks a significant development in the resolution of the debt-ridden Reliance Capital, which had accumulated liabilities exceeding ₹40,000 crore. The deal, which has passed through the necessary regulatory clearances, paves the way for the finalization of the acquisition, resolving one of the key challenges facing the troubled financial entity.

Background and Regulatory Process

Reliance Capital, part of the Anil Ambani-led group, has faced financial turmoil, leading the Reserve Bank of India (RBI) to intervene and supersede its board in 2021 due to governance issues and defaults. In February 2022, the RBI invited bids for the company’s resolution. Initially, multiple bids were received, but none met the necessary value expectations. IIHL, submitting a ₹9,861-crore bid, emerged as the successful bidder through a challenge mechanism involving entities like Torrent Investments.

DPIIT Approval and Its Significance

The DPIIT’s approval was essential, as some shareholders of IIHL are residents of Hong Kong, a region sharing a land border with India. Under Press Note 3, such investments require government approval. With this clearance, all regulatory requirements have been met, ensuring that the resolution plan, which was approved by 99.96% of the Committee of Creditors (CoC), can proceed.

Timeline and Key Deadlines

The approval from DPIIT is crucial for IIHL to meet the January 31, 2025 deadline for completing the acquisition. Failure to meet this deadline would result in a significant financial penalty, requiring the return of ₹3,000 crore raised from high-net-worth individuals and family offices for the deal. With the NCLT Mumbai’s earlier approval of the resolution plan in February 2024, the acquisition now moves towards finalization.

The Resolution Plan and Future Implications

The resolution plan presented by IIHL, which includes a ₹9,861-crore bid, highlights the ongoing restructuring of Reliance Capital, an entity once at the center of India’s financial troubles. The successful completion of this acquisition will also have broader implications for the financial stability of the group and its stakeholders, setting a precedent for similar distressed asset acquisitions in India’s banking and financial sectors.

Summery of the news

Why in News	Key Points
DPIIT approval for Reliance Capital acquisition	The Department for Promotion of Industry and Internal Trade (DPIIT) has approved the ₹10,000-crore acquisition of Reliance Capital by IndusInd International Holdings Ltd (IIHL), a Hinduja Group-backed firm.
Timeline and key deadlines	The transaction must be completed by January 31, 2025, or IIHL will need to return ₹3,000 crore raised for the deal.
Key financial figures	IIHL bid ₹9,861 crore to acquire Reliance Capital, which had a debt of over ₹40,000 crore.
Committee of Creditors approval	99.96% of the Committee of Creditors (CoC) approved the resolution plan, which included the acquisition by IIHL.
Previous regulatory interventions	RBI intervened in 2021 and superseded the board of Reliance Capital due to governance issues and defaults.
NCLT approval	The National Company Law Tribunal (NCLT) Mumbai approved the resolution plan on February 27, 2024.
Press Note 3 and DPIIT approval	DPIIT approval was required as some IIHL shareholders are based in Hong Kong, a region sharing a land border with India.
Stakeholders and bidders	IIHL emerged as the successful bidder after a challenge mechanism involving Torrent Investments.