MUMBAI: A dispute over escrow agreements between creditors of Reliance Capital and the lenders backing IndusInd International Holdings Ltd (IIHL) has stalled the final Rs4,300-crore funding required to complete the acquisition. IIHL has now approached the National Company Law Tribunal (NCLT) in Mumbai to resolve the deadlock, which centers on the “unwinding” mechanism in case of litigation during the escrow period, according to an Economic Times report.
IIHL is required to bring in Rs9,861 crore to finalise the transaction, including Rs2,750 crore in equity and Rs7,300 crore in debt. So far, it has deposited Rs5,750 crore – about 58.31 per cent of the total payout – including the equity portion and Rs 3,000 crore in debt.
However, the remaining amount, which is backed by Reliance Capital’s insurance subsidiaries, is contingent on Committee of Creditors (CoC) approval and a clear resolution framework.
The CoC had approved a “Fund Flow Note” with 89.07 per cent voting in favor, but the impasse over escrow terms has delayed the deal’s closure. As part of the agreed process, IIHL was required to submit certain documents to the administrator and the CoC.
By January 31, 2025, it had submitted all required documents except two key escrow agreements – the intermediate escrow agreement and the global escrow agreement.
Deadlock
“The reason these escrow agreements have not been submitted is a deadlock between the CoC and the lenders of IIHL, who are funding Rs4,300 crore, over the unwinding mechanism,” IIHL stated in its application.
The second tranche of Rs4,300 crore is backed by Reliance Capital’s insurance subsidiaries and raised from lenders including 360 One, Barclays, and Bank of America. Under the approved “Fund Flow Note,” IIHL’s lenders would first transfer the money to the intermediate escrow account. However, these lenders are concerned that if a legal dispute arises while the funds are in escrow but before the shares are transferred, there is no clear process for recovering their money.
“With no resolution in sight, all parties are now before the NCLT seeking guidance,” IIHL said in its plea.
IIHL’s resolution plan was approved by the NCLT in February last year. However, it has since sought extensions to complete the transaction. The deal must be finalised by mid-February, according to a source.
