The Hinduja Group is currently negotiating with private credit funds to secure $800 million for its intended acquisition of Reliance Capital, a shadow bank formerly controlled by ex-billionaire Anil Ambani. The deal's conditions remain undecided, and this comes as the latest development in India's burgeoning private credit sector.
Reliance Capital, a prominent player in the insurance industry according to InvestingPro Tips, was taken over by the central bank amidst a shadow banking crisis in 2021. The company has had a challenging recent history, with its stock faring poorly over the last month and its price falling significantly over the last five years. These real-time metrics provided by InvestingPro further illustrate the company's struggle, with it not being profitable over the past twelve months.
Regulatory restrictions on local banks providing M&A loans have fueled a rise in private credit activity in India, pushing the country to lead Asian investment volumes over the past five years, according to the Global Private Capital Association.
Prior to these negotiations, Hinduja had targeted raising $1 billion from financial institutions for this acquisition, as reported by India’s Economic Times. The shift towards private credit funds is indicative of the changing landscape of financial transactions in the country.
This negotiation between Hinduja Group and private credit funds underscores the growing importance of alternative financing routes in India's financial sector. With traditional banking avenues constrained by regulatory restrictions, private credit has emerged as a significant player in facilitating large-scale acquisitions such as this one.
For those interested in investing, it's worth noting that Reliance Capital's stock generally trades with high price volatility, one of the InvestingPro Tips that potential investors might find useful. With more than nine additional tips available on InvestingPro, investors can gain a comprehensive understanding of the company's performance and make informed decisions.
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