As the November-end deadline to make offers for Reliance Capital assets nears, US-based private equity fund Advent has dropped out of the bidding process for Reliance General Insurance Company (RGIC), a subsidiary of Reliance Capital.

In the first round, Advent had submitted the highest non-binding bid of Rs 7,000 crore for the general insurance business of RCAP, 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.

There are primarily two reasons for Advent’s change of mind. One, after the submission of non-binding bids, they realised that they had overbid for RGIC, almost 100% more than Zurich and Piramal. The second reason is that Advent is a US-based private equity fund. 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.

Insiders say that for all the bidders, the VDR (Virtual Data Room) of RCAP closed on November 4, and between the time from the submission of non-binding bids on August 29 to the closure of VDR, Advent did not participate in any due diligence or management meetings, and neither did it seek any clarifications.

BIDDERS LEFT

With the exit of Advent, there will be only two players (Piramal and Zurich) left in the race and both have been exploring the possibility of submitting a joint bid for RGIC. If that happens, it will be a one-horse race for the general insurance business of RCAP.

Birla meanwhile will be bidding for the Life Insurance arm of Reliance Capital while Nippon Life Insurance Corporation will also be participating with a local partner.