Reliance Capital on Thursday said it will exit the mutual funds business by selling its stake in Reliance Nippon Life Asset Management Ltd (RNAM) to its joint venture partner Japan’s Nippon Life Insurance.
Reliance Capital will sell its entire stake of 42.88% in RNAM to Nippon Life Insurance and other financial investors and will receive approximately `6,000 crore through the sale.
Currently both the partners, Reliance Capital and Nippon Life Insurance, hold 42.88% each in the company, while the rest is with public shareholders. The company in its release said pursuant to the agreements, Nippon Life will also make an open offer to public shareholders of RNAM at `230 per share, as required under Sebi regulations, and reach the maximum permissible promoter shareholding of 75% for listed companies.
The transaction price represents a premium of 15.5% to the minimum 60-day price as specified under the Sebi takeover regulations. Senior officials in the company said over 32% of the stake will be taken by Nippon Life Insurance while remaining around 10.76% will be sold to financial investors.
Reliance Capital also said the entire proceeds of approximately `6,000 crore will be utilised to reduce the outstanding debt by 33%. On Thursday, shares of Reliance Nippon Life Asset Management closed at `233.75 up by 6.98% on the BSE. The market capitalisation of the company as on Thursday stood at `14,305.50 crore on the BSE.
“Nippon Life Insurance is a 130-year-old company and this is the first time outside Japan it will be dealing without a JV partner. Foreign shareholder is backing the existing management team, and I continue to run the company with same management team and same structure,”said Sundeep Sikka, executive director and CEO at Reliance Nippon Life Asset Management.
Reliance Mutual Fund has an average assets under management of `2.33 lakh crore as on January-March quarter, as per Association of Mutual Funds in India data. Reliance Mutual Fund currently ranks at fifth place in terms of AAUM. Currently, there are very few foreign players having mutual fund business in India and Franklin Templeton, Mirae Asset and Principal Mutual Fund are among them.
Nippon had originally picked up a 26% stake in the Indian asset management firm for `1,450 crore in 2012, valuing it at `5,600 crore then and later bought higher stake in the company.
Anil Ambani, chairman, Reliance Group, said: “I am delighted that our longstanding and most valued partner Nippon Life Insurance is increasing its stake in RNAM to 75%. The monetisation of the RNAM stake is part of our value-unlocking strategy. We expect this transaction, together with other deals underway, to substantially reduce RCAP’s debt by over 50% in the current financial year.”