The delay in the resolution process of Reliance Capital is hurting subsidiary Reliance General Insurance, which has sought ₹600 crore capital on an “urgent basis” to preserve the business and enhance its value.
The proceeds will be Reliance General Insurance’s solvency level from 155-160 per cent to 175-180 per cent, to replace capital charge items, and to provide for growth capital in coming months to match the over 20 per cent growth being seen for private insurers.
They will also be used to build the retail health distribution network, strong digital ecosystem, technology alliances, and enter into tie-ups with OEMs (original equipment manufacturers) to capture the fast-growing EV segment.
Borderline solvency
The insurer said that borderline solvency is creating business hesitation in corporate clients, government businesses, tenders, and key retail and bancassurance partnerships, which are being capitalised on by competitors.
This is the second time the subsidiary has requested capital, after it wrote a letter to Reliance Capital’s administrator in August 2022, seeking a similar amount by December 31, 2022.
While at that time, bids were being made under the resolution process of Reliance Capital, currently the resolution process is sub judice with NCLAT’s final decision expected to come next week.
High attrition
The demand for fresh capital was made while declaring the financial results for the quarter ended December 31. The insurer also highlighted the issue of high attrition, which is impacting client relationships and channel development.
For the reporting quarter, Reliance General registered total income of ₹1,917 crore, up from ₹1,756 crore in the year ago period. Net earned premium also increased to ₹1,599 crore from ₹1,456 crore.
Reliance General said capital from existing stakeholders will send a strong message of promoter support to the market, allow the company to outperform the market growth rate and increase regulatory comfort.