Reliance General Insurance Company (RGIC) has sought Rs 600 crore capital infusion from its debt-ridden parent entity Reliance Capital Ltd (RCL) to grow its business in line with peers, sources said.
In a letter to Reliance Capital's administrator, RGIC has sought Rs 600 crore capital support by this month-end.
The Committee of Creditors (CoC) is expected to discuss RGIC's request for capital infusion in its meeting soon, the sources added.
RCL is undergoing a resolution process under the Insolvency and Bankruptcy Code (IBC) and has received binding bids from Oaktree, Cosmea-Piramal consortium, Hinduja and Torrent Group.
RGIC has said the fund infusion is essential to preserve its business, enhance the value and take the company's solvency ratio from 155 per cent to about 175 per cent, sources said.
Borderline solvency is creating business hesitation in corporate clients as well as government business, the letter written by the top management of the general insurance firm said.
The borderline solvency of RGIC is also being capitalised on by its competitors, it added.
"This capital infusion will also increase regulatory comfort at IRDAI and reflect the continued support towards RGIC," the letter dated December 1, 2022, said.
The general insurer has told the RCL administrator that as a large format insurer, it can gain significantly in the current ecosystem if it can pursue growth like most of its peers, but that would require adequate capital support.
The non-life company has over 7,000 employees and more than 70 lakh customers.
The Reserve Bank of India (RBI) had on November 29 last year superseded the board of RCL in view of payment defaults and serious governance issues.
The RBI appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm.
Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under the IBC.
The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The RBI subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the National Company Law Tribunal (NCLT).
In February this year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.