Hinduja Company approaches Japanese banks to fund Reliance Capital buyout

21 Mar 2024 , 12:18 PM

Hinduja group business IndusInd International Holdings Limited (IIHL) has sought Japanese banks to raise up to ₹8,000 Crore to finance a bid for Reliance Capital, originally promoted by Anil Ambani, ahead of the May 27 bankruptcy court deadline to conclude the purchase, suggested sources.

According to the sources, Japanese banks may find reassurance in Reliance Capital’s relationship with Nippon Life, the former’s joint venture partner. In India, the two have a joint venture that provides life insurance.

Reliance Capital’s lenders have accepted a ₹9,650 Crore resolution plan under IBC guidelines from IIHL, which might result in a successful debt resolution for the troubled financial services business.

The money might be provided at a substantially cheaper rate than IIHL has previously discussed with other lenders.

It was originally reported on July 12 that the Hindujas had considered obtaining $1 Billion from globally private credit firms to finance the Reliance Capital acquisition. However, money from those sources might cost 15-16% every year, thus the organisation is exploring cheaper options.

According to the sources referenced previously, conversations are underway with three Japanese banks – Mizuho, SMBC, and MUFG – for five-year loans at an annual interest rate of 8-9%, although funding has yet to be finalised.

While IIHL might raise at least half of the funds through this new approach, the Hinduja family will need to bridge the gap by investing in stock to achieve the overall fundraising requirement.

Japanese financiers have increased their presence in India and exhibited a stronger risk appetite for providing finance locally. Previously, they supported Indian corporations with foreign currency loans from their overseas balance sheets.

Last November, Mizuho invested ₹4,100 Crore to bolster its Indian balance sheet. MUFG invested ₹3,000 Crore in its Indian banking operations in September 2022. In 2020, SMBC invested ₹4,458 Crore in its India division, tripling total committed capital.

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