In a statement on its website, the central bank said it has superseded the board, “in view of the defaults by RCL (Reliance Capital Ltd) in meeting the various payment obligations to its creditors and serious governance concerns which the board has not been able to address effectively”.
Reliance Capital has two profitable insurance companies-Reliance Life Insurance and Reliance General Insurance-as subsidiaries.
Mumbai:
The Reserve Bank of India, said on Monday it will initiate bankruptcy proceedings against Reliance Capital Ltd (RLCP.NS) and superseded the non-banking financial company’s board on governance concerns.
Reliance Capital has two insurance companies-Reliance Life Insurance and Reliance General Insurance-as subsidiaries.
In a statement on its website, the central bank said it has superseded the board, “in view of the defaults by RCL (Reliance Capital Ltd) in meeting the various payment obligations to its creditors and serious governance concerns which the board has not been able to address effectively”.
The central bank will also apply to the National Company Law Tribunal (NCLT), Mumbai for appointing the administrator as the insolvency resolution professional.
The RBI appointed has Nageswar Rao Y, a former executive director at Bank of Maharashtra Ltd , as the administrator of Reliance Capital.
In June 2019 auditors raised several red flags around Reliance Capital’s fourth-quarter results, including a lack of clarity in accounting methodology.
The company has since then failed to make several debt obligation payments.
Meanwhile, the company in a statement welcomed the RBI’s move to resolve its debt under the Insolvency and Bankruptcy Code.
”The Company will co-operate fully with the Administrator appointed by the RBI for the expeditious resolution of its debt in the best interests of all stakeholders,” it said.
This is the third large NBFC against which the central bank will initiate bankruptcy proceedings under the Insolvency and Bankruptcy Code recently.
The RBI has initiated similar proceedings against Srei Group NBFCs and Dewan Housing Finance Corporation (DHFL). While the proceedings against DHFL has been completed, the Srei issue is still pending.
In September, Reliance Capital in its annual general meeting (AGM) had informed shareholders that the company’s consolidated debt was Rs 40,000 crore.
”The Company owns profitable and valuable operating businesses, through its 100 per cent shareholding in RGIC and 51 per cent shareholding in RNLIC (a JV with Nippon Life Co. of Japan), which represent the majority of the value of the Company being a Core Investment Company (CIC), besides other financial investments,” it said.
Reliance Capital further said it has ”no outstanding loans from banks” and approx 95 per cent of its debt is in the form of debentures.
The company looks forward to expeditious resolution of its debt and continuation as a well capitalised going concern through the IBC process, in the overall interests of all its stakeholders, including lenders, customers, employees and shareholders, it added.