USA's Advent may leave race for Reliance Capital general insurance arm

PE firm previously submitted the highest non-binding bid for the business

US-based private equity (PE) major Advent International is unlikely to make a binding bid for the general insurance arm of Reliance Capital, after it put up a Rs 7,000 crore non-binding offer this August.

Advent lost interest due to the regulatory requirement of a five-year lock- in for private equity investments in an Indian insurance company and its high bid compared to its rival bidders, said bankers. Binding bids for Reliance Capital’s assets close by this month’s end.

In the first round, Advent submitted the highest non-binding bid for the general insurance arm–almost double the amount offered by the two other bidders. Piramal made an offer of Rs 3,600 crore and Zurich Insurance Company's bid was Rs 3,700 crore, said banking sources.

When contacted, Advent declined to comment. Zurich Insurance said it has submitted a non-binding offer to acquire a stake in Reliance General Insurance Company. “The terms of any transaction are subject to negotiations and there can be no assurance that a transaction will take place,” it said. Piramal did not reply to an email.

Banking sources said as per Advent’s policy it is not allowed to make investments with a condition of a lock-in period. Guidelines by India’s Insurance Regulatory and Development Authority stipulate a five year lock-in period for private equity investors in insurance business thus conflicting with the company’s policy.

The firm did not participate in the virtual data room for information which closed on November 4th. "The PE did not participate in any due diligence or management meetings, and it did not seek any clarification. Thus we will not be surprised if it drops out,” said a source close to the development.

With the exit of Advent, Piramal and Zurich Insurance will be left in the race and both are looking at the possibility of submitting a joint bid for RGIC. If that happens, then it will be one horse race for the general insurance business.

At least 50 global and local conglomerates have shown their interest to bid for Reliance Capital and its 19 subsidiaries so far, according to a filing made by Reliance Capital to the stock exchanges on October 20. But of these, only a few are keen to make a binding bid. While Reliance Capital’s profitable insurance subsidiaries are generating some interest, the other assets are not in demand.

Switzerland’s Zurich Insurance Company, and local conglomerates such as Aditya Birla Group, the Piramals and Torrent are expected to make their binding offers by November end. Bank officials say they want to complete Reliance Capital’s sale process before the ongoing financial year ends next March. Aditya Birla group is talking to Nippon Life Corporation of Japan so that they can merge Reliance Nippon Life and Birla Sun Life Insurance.

Reliance Capital, the Story

November 2021:  RBI sends the company for debt resolution under IBC
 

March 2022:  54 cos including Tatas, Adani and TPG send EoIs to acquire company assets
 

August 2022: 14 cos make non-binding offers for various assets; most of the bidders drop out
 

October 2022:  Aditya Birla Capital joins race to buy life insurance firm