Successful completion of the resolution process of Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) will help Reliance Capital reduce its consolidated debt by 50 per cent or Rs 20,000 crore, Chairman Anil Ambani said on Tuesday.
Earlier this year, lenders had selected Authum Investment and Infrastructure Limited (Authum) as the successful bidder to acquire RCF and RHF. The resolution plan was approved by lenders forming part of the Inter-Creditor (ICA) under Reserve Bank of India''s Prudential Framework for Resolution of Stressed Assets, 2019.
While Reliance Capital holds 100 per cent stake in Reliance Commercial Finance (RCF), it is a majority shareholder in Reliance Home Finance (RHF).
Reliance Capital's consolidated debt is Rs 40,000 crore and the resolution of the two lending businesses - RCF and RHF will have an impact on the consolidated debt of Reliance Capital, Ambani said.
"Between these two companies (RCF and RHF), there is a debt of over Rs 20,000 crore, and this will be deconsolidated from Reliance Capital's balance sheet. So, just two transactions for RHF and RCF will drop our debt by a staggering 50 per cent or Rs 20,000 crore," Ambani said during the Reliance Capital's Annual General Meeting (AGM).
Post-this, Reliance Capital will have roughly Rs 15,000 crore of secured debt represented by NCDs (non-convertible debentures) or debenture holders, and around Rs 5,000 crore worth of unsecured and guaranteed debt, he added.
He said Authum will pay around Rs 2,200 crore for RCF and close to Rs 2,900 crore for RHF.
"As we now complete the appropriate formalities to close these transactions, we are confident based on the regulatory and other approvals that both these companies will be moving forward under change in management and control," Ambani said.
He said Authum has committed that all the employees of RCF and RHF will be retained.
There are 20,000 debenture holders between the two companies and these investors will get 100 per cent of their dues, he said.
Ambani said the committee of debenture holders and the debenture trustee of Reliance Capital had invited bids through expressions of interest last year for the monetization of nine key assets under the Reliance Capital umbrella.
However, due to the pandemic and the issues facing the financial services sector, the progress on the asset monetization process in the last 20 months has not been in line with the expectation of all the shareholders of the company, he said.
Owing to this, he said, "The committee of debenture holders and the Trustee have now circulated a new timeline of 180 days to progress the asset monetization programme, effective July of 2021."
The board is currently examining various options, in addition to the option of the committee of debenture holders, on a fast track resolution to maximize the value of all its assets, he said.
All the companies under Reliance Capital such as Reliance Nippon Life Insurance, Reliance General Insurance, Reliance Securities, among others, have been performing exceedingly well and have not been hampered by the challenges faced by the financial services sector, he informed shareholders.
All these companies are fully capitalized and there is no need for infusion of any fund, he added.
Ambani said close to 90 per cent of the value of Reliance Capital is derived from two insurance businesses- Reliance General Insurance and Reliance Nippon Life insurance.
Reliance General Insurance is 100 per cent owned by Reliance capital. Reliance Nippon Life Insurance company is a joint venture between Reliance Capital (51 per cent) and Nippon Life Insurance, Japan (49 per cent).
"Just the value of our two insurance companies and stake that we have in these two companies is far greater than the overall secured debt of Reliance capital," Ambani said.
He also assured the shareholders that there will not be any fire sale or distressed sale of any asset of the company.