New Delhi, Oct 19 (PTI) In a surprise move, the administrator of debt-ridden Reliance Capital Ltd has proposed to change the whole structure of the company and divide it into four core investment companies (CICs).

The proposal to change the structure, that too, at an advanced stage of the bidding process, has come as a big surprise to many, sources said.

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According to sources, the administrator has proposed to reconstruct Reliance Capital (RCAP) CIC into four different CICs, and has also written to the Reserve Bank of India (RBI) to seek its views/approval on the new structure.

As per the proposal, the administrator wants to reconstruct RCAP CIC into four different CICs---Reliance General Insurance Company (RGIC), Reliance Nippon Life Insurance Company (RNLIC), All other businesses of RCAP, including Reliance Securities, ARC, Private Equity, Investment Real Estate etc and Reliance Commercial Finance and Reliance Home Finance.

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The sole objective of reconstructing into four CICs is to help the bidders of RCAP's insurance businesses circumvent the IRDAI guidelines, related to the five-year lock-in period, sources said.

As per the extant IRDAI guidelines, equity contribution of promoters and other investors, including private equity funds, in an insurance company, will have a lock-in period of five years at the time of granting the final approval.

According to the legal view given by AZB and Partners, the legal advisor to the Administrator, the IRDAI guidelines related to the lock-in period of 5 years will not apply to the new proposed structure.

Currently, there are four companies in the fray for RCAP's General Insurance and Life Insurance ventures – Piramal, Zurich, Advent Private Equity and Aditya Birla Capital.

The circumvention of the five-year lock-in period will help companies like Advent Private Equity to exit the insurance venture at any time, sources said.

The new proposed structure has also received the approval of a three-member advisory committee of RCAP Administrator, comprising of former State Bank of India DMD, Sanjeev Nautiyal, former Axis Bank DMD, Srinivasan Varadarajan, and Ex-CEO of Tata Capital Praveen P Kadle, sources said.

As per the rules, RBI does not allow more than one CIC in a company, hence to reconstruct 4 CICs out of Reliance Capital CIC would need RBI's prior approval.

According to RBI, a Core Investment Company (CIC) is a Non-Banking Financial Company (NBFC) which carries on the business of acquisition of shares and securities and holds not less than 90 per cent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.

As per the current resolution process, Reliance Capital bidders have two options. Under the first option, bidders are required to submit bids for the entire RCAP and in the second one, they have the choice to bid for specific verticals of the company.

Reliance Capital Administrator has also written to RBI informing them about the 90 days extension granted by NCLT Mumbai to complete the resolution process, by January 31, 2023.

The Reserve Bank of India (RBI) on November 29 last year superseded the board of RCL in view of payment defaults and serious governance issues.

The RBI appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm. Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under the IBC.

The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The RBI subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the NCLT.

In February this year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)