The Department for Promotion of Industry and Internal Trade (DPIIT) has given a go-ahead to Hinduja Group firm IIHL for acquisition of debt-ridden Reliance Capital Ltd (RCAP), sources said. DPIIT approval was required as some of the shareholders of IndusInd International Holdings Ltd (IIHL) are residents of Hong Kong, a special administrative region controlled by China.
According to Press Note 3, if an entity from a nation sharing a land border with India (China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan), or if a citizen or permanent resident of any such country is the beneficial owner of an investment in India, they are required to pursue investment through the government approval route.
According to sources, the green signal from the DPIIT will help take forward the resolution plan submitted by Mauritius-based IIHL, which emerged as the successful bidder by submitting Rs 9,861-crore bid for the debt-ridden financial firm.
The NCLT Mumbai on February 27, 2024, approved IIHL’s resolution plan.
DPIIT approval was part of the resolution plan which was put to vote and approved by 99.96 per cent of the Committee of Creditors (CoC).
The approval was crucial as the Hinduja Group should close the transaction by the extended deadline of January 31, 2025.
Failure to meet the deadline would require the group to return Rs 3,000 crore raised from high-net-worth individuals (HNIs), ultra-HNIs, and family offices for the deal.
In November 2021, the Reserve bank of India (RBI) superseded the board of Reliance Capital on governance issues and payment defaults by the Anil Dhirubhai Ambani Group company.
The central bank had appointed Nageswara Rao Y as the administrator, who invited bids in February 2022 to take over the company.
Reliance Capital had a debt of over Rs 40,000 crore, and four applicants had initially bid with resolution plans. However, the committee of creditors rejected all four plans for lower bid values and a challenge mechanism was initiated in which IIHL and Torrent Investments participated.
