LIC lists conditions for R-Infra rejig

India’s largest insurer has set conditions to approve Reliance Infrastructure Ltd’s plan to revamp the company, in which it is one of the largest investors.
 

Life Insurance Corp of India filed an affidavit in the Bombay High Court this week stipulating conditions to approve a plan by Reliance Infrastructure to spin off its Mumbai power business, according to a copy of the document seen by Bloomberg. The insurer has said the company needs to repay some bonds due next year and set a requirement that its exposure to the new company’s debt and equity not exceed 20% following the revamp.
 

The move comes as Reliance Infrastructure’s billionaire owner Anil Ambani plans to sell stake in the Mumbai power business and pare debt across his conglomerate. Reliance Infrastructure has been trying to iron out a deal with the Public Sector Pension Investment Board, one of Canada’s largest pension funds, since at least November last year. Life Insurance Corp is the second-largest investor in the Mumbai-based company after the owner group led by Ambani, based on exchange filings.
 

LIC holds non-convertible debentures issued by Reliance Infrastructure worth $297 million and an equity stake of 11.9%, according to the affidavit. Debentures worth Rs 283 crore are due for repayment in February. LIC has asked the company to offer a security cover of 1.25 times its investment, interest cover of two times its investment and to ensure that the new firm have a minimum AA credit rating, the document shows.

The insurer’s legal counsel Little & Co. said they could not comment as the matter is confidential. Reliance Infrastructure has filed an affidavit in the court undertaking that the revamp will be effective only on consent of the lenders, the company said in an e-mail response. “The matter has been explained to LIC also."

Life Insurance’s spokesman S N Bhattacharya didn’t respond to an e-mail and a phone call seeking comment.

Reliance Infrastructure is considering splitting its Mumbai power generation and distribution business and combining that with power operations in the Western state of Goa. The company signed a non-binding term sheet and entered exclusive talks with the Canadian pension fund PSP on the sale of 49% of its Mumbai power generation, transmission and distribution business, according to an exchange filing last year.

Montreal-based PSP has C$112 billion ($84 billion) in assets under management and oversees the retirements savings of public servants, the Canadian Forces, and the Royal Canadian Mounted Police.