Companies

RBI supersedes the board of Anil Ambani’s Reliance Capital

Our Bureau | | | Updated on: Nov 29, 2021
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Appoints Nageswar Rao Y as Administrator of Reliance Capital

 

Anil Ambani was ousted as Chairman of Reliance Capital after the Reserve Bank of India on Monday superseded the board of the non-banking financial company citing defaults in meeting various payment obligations to creditors and serious governance concerns.

The RBI appointed Nageswar Rao Y, a former Executive Director of Bank of Maharashtra, as the Administrator and will shortly initiate the resolution process.

This is the third NBFC facing the RBI’s insolvency proceedings, after Dewan Housing Finance Corporation Ltd (DHFL) and two Srei Group firms. While DHFL has been acquired by the Piramal group, the debt resolution process for Srei is just beginning.

Woes piling for Anil Ambani

For Anil Ambani, the RBI move adds to his financial woes. Earlier he had to give up control of his telecom business after the company failed to clear its debt. Reliance Navaland Engineering, which owns and operates a shipyard off the South Gujarat coast, is also under insolvency. In addition State Bank of India has moved to invoke personal guarantees given by Anil Ambani.

Reliance Capital has been under stress since the IL&FS crisis of 2018. Its total financial indebtedness, including short- and long-term debt was ₹21,781.01 crore as on October 31, 2021, according to a recent stock exchange filing by the company.

RelCap welcomes RBI move

One of its subsidiaries, Reliance Home Finance, was put on the block by the lenders to recover part of their dues. Over 91 per cent of lenders to Reliance Home Finance had voted in favour of the resolution plan of Authum Investment and Infrastructure. This deal is unlikely to go through now, with the RBI taking control of the parent. Reliance Capital said it welcomed the RBI’s move to resolve the company’s debt in accordance with the IBC Code. “The company will co-operate fully with the Administrator appointed by RBI for the expeditious resolution of its debt in the best interest of all stakeholders. The complexity of litigation initiated by certain secured and unsecured lenders, resulting in the pendency of over 10 cases in various fora, including the Supreme Court, the Bombay and Delhi High Courts, and the Debt Resolution Tribunal, has effectively stalled the resolution of the company’s debt, despite its efforts for the past over 2 years.”

Reliance Capital is a diversified NBFC and owns 100 per cent shareholding in Reliance General Insurance, 51 per cent in Reliance Nippon Life Insurance Company besides other financial investments. The company said it has no outstanding loans from banks and approx 95 per cent of its debt is in the form of debentures. It reported a consolidated net loss of ₹1,156 crore in the quarter ended September 30, 2021.

In September 2019, CARE Ratings had downgraded Reliance Capital’s entire outstanding debt to default “CARE D” rating’.

“There has been a continuous delay in servicing of debt obligations on account of stretched liquidity. The liquidity profile of the group continues to be under stress on account of delay in raising funds from the asset monetisation plan and impending debt payments,” CARE Ratings had said in March this year

 

 

 

Published on November 29, 2021

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