Brookfield, Cerberus, and Deutsche Bank have recently submitted term sheets to IndusInd International Holdings (IIHL), the Hinduja Group's holding entity, to finance the acquisition of Reliance Capital. The Hinduja Group is seeking to raise up to ₹7,000 crore for this purchase. Major lenders have proposed term sheets of up to ₹6,000 crore, while smaller funds are contemplating loans between ₹800 crore and ₹1,000 crore.
According to InvestingPro's real-time metrics on Reliance Capital, the company has not been profitable over the last twelve months and its stock has fared poorly over the last month. Despite these challenges, it remains a prominent player in the insurance industry. In light of these factors, the acquisition could be seen as a strategic move by the Hinduja Group to capitalize on potential future growth.
The committee of creditors had approved the Hinduja Group's bid of ₹9,650 crore for Reliance Capital back in July, pending court and regulatory approvals. Brookfield has expressed willingness to cover the entire amount, while Cerberus and Deutsche Bank are considering partial financing participation.
The acquisition strategy is aimed at growth over the next 3-4 years before raising equity through the capital market. IIHL has expressed a preference for banks and funds to abstain from further debt distribution. This aligns with InvestingPro Tips that suggest a focus on consistently increasing earnings per share and caution against high price volatility, which has been a characteristic of Reliance Capital's stock.
This development comes after the Supreme Court in August declined to stop bankruptcy proceedings at the National Company Law Appellate Tribunal (NCLAT). The NCLAT is currently reviewing Hinduja Group's resolution plan for acquiring Reliance Capital.
During the initial bidding process in December, Gujarat-based Torrent Investments emerged as the highest bidder with an offer of ₹8,640 crore. The Hinduja Group subsequently increased its initial bid from ₹8,110 crore to ₹9,000 crore. This move was contested by Torrent at the National Company Law Tribunal (NCLT) on grounds of auction process integrity violation and prevention of a second auction. Despite these objections, the appellate authority overturned the tribunal's decision and approved the ₹9,650 crore bid by Hinduja Group.
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