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In a setback to the ongoing Reliance Capital resolution process, the proposed joint venture arrangement between Piramal Finance and Zurich Insurance, formed to place a joint bid for Reliance General Insurance Company (RGIC), has collapsed.

In the first round, both companies had submitted separate non-binding bids for the general insurance business of Reliance Capital, but later, they decided to form a joint venture and place a joint bid.

According to the sources close to the development, both companies have decided to part ways due to the differences on various issues like shareholders agreement, valuation, etc.

With the collapse of Piramal-Zurich JV, the fate of RGIC's bidding process is uncertain, as US-based Advent, the only other bidder for this business, has already decided to exit the race.

Initially, there were three bidders in the race for RGIC - Piramal, Zurich, and Advent. Advent had submitted the highest non-binding bid of Rs 7,000 crore, which was almost double the amount offered by two other bidders - Piramal and Zurich Insurance. Piramal's bid was Rs 3,600 crore, while Zurich's bid was Rs 3,700 crore.

According to the sources, there are primarily two reasons for Advent's change of mind. One, after the submission of non-binding bids, they realised that they had over-bid for RGIC, almost 100 per cent more than Zurich and Piramal. The second reason is that Advent is a US-based private equity fund. The fund has a life and as per the fund's policy, it is not allowed to make investments where there is a condition of a lock-in period. On the other hand, IRDAI guidelines stipulate a 5 year lock-in period for private equity investors in the Indian insurance business.

This is being seen as a setback for the resolution process of Reliance Capital and its multiple subsidiaries, as there are only 3 days left to the deadline for the submission of final binding bids.

Before this, Aditya Birla Sun Life and Nippon Life of Japan had engaged in merger talks for the Reliance Nippon Life Insurance Company (RNLIC), but those talks also failed due to the differences between both companies on multiple issues. Nippon Life of Japan, a 49 per cent partner in the RNLIC, is vehemently opposing Birla Sun Life's bid, as the company is not interested in a merger with Birla Sun Life.

The last date to submit the resolution plan for RCAP and its subsidiaries is November 28.

In August end, the RCAP received 6 non-binding bids under option 1 i.e. for Reliance Capital as a company. Torrent, IndusInd, Oaktree, Cosmea Financial, Authum Investment, and B Right Real Estate had submitted bids in the range of Rs 4,000 crore to Rs 4,500 crore for Reliance Capital's entire assets.

For Reliance General Insurance business, Piramal Finance had bid Rs 4,000 crore, while Zurich Insurance's bid was Rs 3,500 crores. The third bidder i.e. Advent had bid Rs 7,000 crore for Reliance General Insurance.

Jindal Steel and Power and UVARC had submitted bids for Reliance Capital's ARC business.

For other assorted assets of Reliance Capital, three bidders - Choice Equity, Global Fincap, and Grand Bhawan - had submitted the non-binding bids.

The deadline to complete the resolution process of Reliance Capital, as approved by the NCLT, is January 31, 2023.