Piramal offers to reduce stakes in competing insurance firms

Piramal offers to reduce stakes in competing insurance firms

14 Jun    Finance News

Piramal Group, a serious contender to acquire debt-laden Reliance Capital’s (RCap) assets, is willing to reduce its stake in competing insurance firms to comply with the country’s insurance sector regulations. The group has already informed the same to the Insurance Regulatory Authority of India (IRDAI), which had earlier raised concerns over its holding in two insurance companies.

“The group has replied to IRDA’s earlier letter, expressing its willingness to bring down the stake within the given time frame. This needs to be adhered to only if Piramal Group is emerging as the winner. The group, which is serious in its bid, will comply with the regulations within the prescribed time frame,” a source close to the development said.

In its earlier letter, the regulator provided an option to Piramal Group to dispose of or bring down the stake within 18 months from May 4, 2022.
The group could sell stakes in competing companies to align it with the regulations. However, the source declined to provide further details, including the stake it intends to offload, mentioned in the reply sent to IRDA.

A consortium led by Piramal Group, Yes Bank and IndusInd Bank are looking to place bids for RCap’s assets, from which creditors are seeking `23,666 crore in dues.

According to IRDA, an investor cannot hold more than 10% individually and more than 25% jointly of the paid-up equity share capital in an insurance firm.
Piramal Enterprises, a group company, is the holding company and promoter of Pramerica Life Insurance Company and holds 50% of the firm’s paid-up capital through its stake in DHFL Investments.

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Further, PEL has an indirect investment of about 20% in Shriram Capital, which is the holding company of Shriram Life Insurance Company with a 74.56% stake, IRDA had said in its earlier letter.

The indirect holding of Piramal group in Shriram Life Insurance Company is 14.91% (20% of 74.56%), which exceeds individual investor limit. RCap is the holding company and promoter of Reliance Nippon Life Insurance Company, and in case Piramal Group acquires it, this would also result in the acquisition of the life insurance firm. This would be contrary to the regulations in the sector as Piramal Group would be a promoter of two insurance companies – Pramerica Life Insurance Company and Reliance Nippon Life Insurance Company – the regulator had said.

Last week, the group had also sought an extension to submit resolution plans for RCap to August 10 from the present June 20 deadline. With a poor response, the deadline is likely to be extended to August 10.

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