Shares of Anil Ambani-led Reliance Capital hit 5 per cent upper circuit on Bombay Stock Exchange (BSE) on Monday after the company said IRDAI has cancelled pledge enforcement of Reliance General Insurance Company Ltd's (RGICL) shares by Credit Suisse and Nippon India MF.
With this, IRDAI (Insurance Regulatory and Development Authority of India) has restored 100 per cent shareholding in Reliance General Insurance to Reliance Capital. The authority has also directed IDBI Trusteeship Services (Trustee) not to give effect to any encumbrance or transfer or any change in the Shareholding of the RGICL.
Boosted by the development, share price of Reliance Capital was locked in the 4.85 per cent upper circuit at Rs 14.05 against previous close price of Rs 13.40 on the BSE. In contrast, the BSE Sensex was trading 86 points, or 0.21 per cent, lower at 41,488.
In the last five trading sessions, the stock of the non-banking financial company (NBFC) firm has climbed over 9 per cent. There was also surge in volume trade as 10.26 lakh shares changed hand over the counter as compared to two-week average volume of 6.10 lakh shares.
In a similar trend, shares of Reliance Capital were trading 4.85 per cent higher at Rs 14.05 apiece on the National Stock Exchange (NSE). The stock opened higher at Rs 14.05 against previous close of Rs 13.40.
"The Insurance Regulatory and Development Authority of India (IRDAI), on December 27, 2019, has held that the pledge/transfer of shares of Reliance General Insurance Company Limited, a 100 percent subsidiary of Reliance Capital (RCAP), was in violation of the applicable provisions of law," the company said in an exchange filing on December 29.
In November 2019, the trustee had transferred RCAP's 100 per cent shareholding in RGIC by invoking pledge, which was being contested by the company.
The company said that IRDAI ruling will protect the interest of all lenders and debenture holders of RCAP. This will now help RCAP to monetise its stake in RGIC and to reduce its debt, it added.
Cash-strapped Reliance Capital said it will continue its efforts to monetise its shareholding in RGICL as part of its overall plans for debt reduction.
Edited by Chitranjan Kumar