Pending the takeover of Reliance Capital by the Hinduja Group, the latter is looking to offload part of its stake in the general insurance arm to a domestic arm Aasia Enterprises to abide by regulatory norms on foreign ownership in the insurance sector.

Regulatory guidelines cap foreign ownership in Indian insurance companies at 74 per cent of the equity share capital. Currently, Reliance Capital holds a 51 per cent stake in Reliance General Insurance, whereas Nippon Life holds the remaining 49 per cent, sources told businessline.

Following the takeover of Reliance Capital by Hinduja Group, the foreign shareholding, including both Nippon and IndusInd International, will exceed 74 per cent, which is why Hinduja Group is looking to offload some part of the holding to its domestic arm, sources said.

IRDAI’s inquiry

Reliance General Insurance had written to IRDAI on October 28, 2023, seeking prior-approval for the transfer of 25.05 per cent equity capital of Reliance General Insurance from Reliance Capital to Aasia Enterprises LLP. Aasia Enterprises is an India-domiciled limited liability partnership (LLP) promoted by IndusInd International Holdings of the Hinduja Group.

In turn, the Insurance Regulatory and Development Authority of India (IRDAI) has sought clarity from Reliance General Insurance on the rationale for the application seeking permission to transfer the 25 per cent stake from Reliance Capital.

“Given the above, you are requested to clarify the rationale for filing the captioned application with the IRDAI, pending approval of NCLT on the resolution plan and disposal of the matter by the Supreme Court,” IRDAI said in a letter to the insurer on December 11.

The resolution plan submitted by the Hinduja Group for acquiring Reliance Capital was approved by the Reserve Bank of India in November 2023 but is still awaiting the go-ahead from NCLT.

“The shares held by the transferor (i.e. Reliance Capital) are part of the Corporate Insolvency Resolution Plan (CIRP),” IRDAI said, adding that the entire shareholding is currently pledged in favour of IDBI Trusteeship Services Ltd.