Rcap insurance arm seeks ~600 cr from its bankrupt parent

Profit-making subsidiary’s request to complicate matters

Reliance General Insurance, a profitmaking subsidiary of bankrupt Reliance Capital, has sought ~600 crore as capital infusion from its parent before December’s end to deal with solvency margin requirements.

Reliance Capital’s lenders have to decide the matter on Friday: a task made difficult as it undergoes the bankruptcy process that saw bidders showing interest in the insurance arms of the company. Bidders will have to recalculate their offers made in the binding bids for the additional ~600 crore requirement of the general insurance arm.

In a letter to Reliance Capital’s bankruptcy administrator, the insurance firm said the fund infusion is essential to preserve the business, enhance the value and take the company's solvency from 155 per cent to about 175 per cent of the required margin requirements.

Reliance General Insurance, in the letter dated December 1, said its borderline solvency is creating hesitation among its corporate clients, winning government business tenders, and forming retail and bank partnerships. The company said its borderline solvency is being capitalised on by its competitors. The letter has been reviewed by this paper.

The company said the additional capital infusion from the existing stakeholders of the company will send a strong message of support to the market. It earned 11 per cent higher gross direct premium of ~6,478 crore between January and October this year, compared to ~5,813 crore in the same period of 2021. It had a market share of 5.3 per cent in the industry in the new premium segment.

The additional capital will augment value creation and negate the risk of underperforming the broader markets. The company believes that fresh fund infusion will assure the insurance regulator and reflect continued support by the promoter company.

The company has told the administrator that as a large format insurer it can gain significantly and pursue growth, but that would require adequate capital support from Reliance Capital.

Among the four bidders for the company as a whole, the highest offer was submitted by Piramal-cosmea Financial at ~5,231 crore. The Hinduja group offered ~5,060 crore. Ahmedabad-based Torrent Investments offered ~4,500 crore and Oaktree Capital offered ~4,200 crore.