Robin Raina-led Ebix Inc. filed for bankruptcy in the US on Monday after missing the last deadline to repay over $600 million (about ₹5,000 crore) to lenders. The move cast a cloud over its Indian unit EbixCash, which operates in forex, gift cards and payments services.
The Nasdaq-listed company had been trying to repay loans by raising ₹6,000 crore from an initial public offering (IPO) of EbixCash, a plan that has failed to take off despite a go-ahead from the stock market regulator.
Ebix Inc. and a set of US subsidiaries filed the Chapter 11 petition in a Texas court after failing to repay the $617 million loan that the company had defaulted on in September. The filing cited three factors that pushed Ebix’s US business towards bankruptcy. First, interest rate expenses that jumped from about $32 million in 2020 to $93 million in 2023. Second, a change of auditor in 2021 that hurt investor sentiment and limited its ability to borrow. And third, a 2022 report from Hindenburg Research that caused a more than 40% decline in its market value and led to several shareholder actions. All of this made it challenging for the company to pay back the money it owed to lenders, Ebix said.
India-born American Raina is Ebix’s chief executive officer (CEO) and largest shareholder owning a 13.9% stake, followed by BlackRock Inc. (13.1%), The Vanguard Group (9.8%) and Steven D. Lebowitz (6.1%).
EbixCash operates in prepaid instruments, international remittance, and forex licences, all of which are licensed by the Reserve Bank of India (RBI). On whether the bankruptcy of the US parent will have any impact on the India unit, Anoop Rawat, partner (insolvency and bankruptcy) at law firm Shardul Amarchand Mangaldas & Co., said, “The conditions attached to RBI authorizations for Ebix India for its financial services would have to be examined. RBI may take appropriate measures if the conditions of authorizations are breached. Additionally, in case of a payment default of Ebix India, which qualifies as default under the Insolvency and Bankruptcy Code (IBC), RBI may also look at initiation of insolvency proceedings under IBC.”
“Any licence which the RBI issues, it is known that it becomes null and void if you file for bankruptcy,” said a financial services industry executive on condition of anonymity. “Typically, you are holding third-party funds. But when you are bankrupt, how can you hold third-party funds? One may argue that the global entity is filing for bankruptcy, but again the ‘ultimate beneficiary’ or the ‘promoter entity’ of EbixCash is Ebix Inc.—which has filed for bankruptcy. Bankruptcy means you don’t have sufficient funds to run the business or meet your obligations. On one side you are filing for bankruptcy, and on the other side you are doing businesses where third parties are trusting you with their money. Technically, the new money that you are bringing in is also at risk,” the executive said.
EbixCash, however, dismissed any implications from the filing. The company is a standalone, fundamentally strong, growing operation, an EbixCash spokesperson said in response to a query. “EbixCash and Ebix’s approximately 200 affiliates outside the US are not included in the US-only Chapter 11 filing, and will continue to operate normally. All worldwide operations of the company will continue to operate in the ordinary course and without any interruption. This news has no impact on EbixCash, its employees, partners or vendors,” the spokesperson said.
An email sent to an RBI spokesperson for comment remained unanswered.
Over the past few years, Ebix Inc. has taken huge debt to finance aggressive expansion across countries. As of 31 December 2022, it had outstanding borrowings of $639.3 million, according to its US regulatory filings. The company said last month that its lenders had given time till 17 December to repay debt, failing which they would take the company to bankruptcy court.
Raina received a $1.8 million bonus in September, according to a Bloomberg report. In a regulatory filing in September, Ebix said that $1.2 million was paid, with the rest to be paid in October.
