The Hinduja Group is expanding its search for alternative financing options to secure its Rs 9,661 crore ($1.3 billion) bid for Reliance Capital, a move that follows the rejection of its initial collateral proposal by the Insurance Regulatory and Development Authority of India (IRDAI). The proposal had involved shares of two insurance firms owned by Reliance Capital, namely Reliance Nippon Life Insurance and Reliance General Insurance.
Originally, the conglomerate was in negotiations with Barclays (LON:BARC), JP Morgan, Cerberus Capital Management, and Apollo Global Management (NYSE:APO). The group has now broadened its potential financier base to include European banks and private equity funds. This shift has been prompted by the significant capital available in the global private credit market, estimated at $350 billion.
The acquisition's success is contingent upon a Supreme Court verdict on a petition by the Torrent group. The petition pertains to a second auction conducted by a bank and seeks guidance from the Reserve Bank of India (RBI) administrator on a new funding plan and change in control.
Foreign private equity companies have also shown interest in the deal, drawn by the substantial capital available in the global private credit market. The stakes of Hinduja Group in Reliance Nippon Life Insurance and Reliance General Insurance play a pivotal role in this acquisition.
This development underscores an increasing trend among corporations to explore alternative financing options amidst tightening regulatory scrutiny and fluctuating market conditions.
On a related note, InvestingPro's real-time metrics highlight that Reliance Capital has been experiencing some challenges. The company has seen a significant fall in its stock price over the last three months and five years, as well as poor performance over the last month. This is in line with InvestingPro's observation that the stock generally trades with high price volatility.
However, Reliance Capital remains a prominent player in the insurance industry. One of InvestingPro Tips suggests that despite suffering from weak gross profit margins and not being profitable over the last twelve months, the company has consistently increased its earnings per share and has raised its dividend for 5 consecutive years.
For more detailed insights and tips, readers can visit InvestingPro. This platform provides access to an additional 10 InvestingPro Tips and real-time metrics about companies, including Reliance Capital, to help investors make informed decisions.
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