Reliance General Insurance Company Ltd, a subsidiary of debt-laden Reliance Capital, has sought a capital infusion of Rs 600 crore from its parent firm, saying it is losing business to rivals due to the delay in the holding company’s insolvency proceedings.
Reliance General Insurance Company Ltd (RGICL)reiterated its demand for the capital infusion from Reliance Capital(RCap) to improve its solvency level.
The “borderline” insolvency is creating business hesitation among corporate clients, government businesses and creating problems in bagging tenders, key retail and bancassurance partnerships, which is being capitalised by the competitors, according to a financial presentation by the company, which followed its third quarter results.
Hence, the capital support is needed on an urgent basis to preserve the business, enhance its value and take the solvency level from the current 155% to about 175%. This would aid growth of over 20%, which is in line with other companies in the private sector, it said.
The company needs further investment to build up the retail health distribution network, strong digital ecosystem, tech alliances and enter into tie-ups with original equipment manufacturers (OEMs) to capture the fast-growing electric vehicle segment.
RGICL also highlighted the problem of high attrition levels in the current year, which is impacting client relationships and channel development. The company believes that a fresh fund infusion will not only increase regulatory comfort with the Insurance Regulatory and Development Authority but also reflect continued support by the promoter company.
This is the second time the company is seeking capital infusion from the parent. In August last year, the RGICL had written to RCap’s administrator seeking ₹600 crore capital support by December 31.
For the quarter that ended December 31, RGICL’s net earned premium rose to Rs 1,599 crore from Rs 1,456 crore recorded during the same period a year ago. Its total income rose to Rs 1,917 crore from Rs 1,756 crore recorded during the corresponding quarter of the last fiscal.
Earlier on November 29, 2021, the Reserve Bank of India superseded RCap’s board following payment defaults and governance issues, and appointed Nageswara Rao Y as the administrator for the bankruptcy process. The present deadline to complete the process ends on March 17.
