Ebix Inc., under the leadership of Robin Raina, has filed for bankruptcy in the US, grappling with a massive debt of over $600 million (about ₹5,000 crore). This move has cast doubts on the future of its Indian unit, EbixCash, known for its operations in forex, gift cards, and payment services.

What to know? The Nasdaq-listed parent company’s financial woes stem from its inability to repay loans, a situation it hoped to resolve by raising ₹6,000 crore through an IPO of EbixCash. However, despite regulatory approvals, the IPO plan has yet to take off.

The bankruptcy filing in a Texas court points to three major issues: a spike in interest rate expenses, a change of auditor that dampened investor sentiment, and a critical report from Hindenburg Research leading to a significant market value drop. These factors have collectively hampered Ebix’s ability to repay its lenders.

India-born American CEO Raina, holding a 13.9% stake in the company is the largest shareholder followed by BlackRock Inc., The Vanguard Group, and Steven D. Lebowitz.

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How does the Ebix Inc. bankruptcy impact EbixCash?

EbixCash holds RBI licenses for various financial services like prepaid instruments and forex. The RBI might take measures if Ebix India breaches authorization conditions. There’s also a possibility of insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) in case of payment defaults by Ebix India.

It is important to note that RBI licenses become void in bankruptcy cases, especially when handling third-party funds, even though EbixCash’s name isn’t included in the US-only Chapter 11 filing. Therefore, risk arises when the parent company, the ultimate beneficiary, declares bankruptcy.

Ebix Inc.’s aggressive expansion strategy has led to substantial debts, totalling $639.3 million as of the end of 2022. The company had a deadline of December 17 to settle its debts, failing which it faced the threat of bankruptcy proceedings.

Amid this financial crisis, CEO Raina’s compensation, including a $1.8 million bonus, has come under scrutiny too, raising questions about the company’s financial management practices.

Despite these challenges, EbixCash maintains a stance of resilience and independence.

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