Reliance Capital to raise Rs 6,000 crore from Reliance Nippon Life Asset Management Limited stake monetisation

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Anil Ambani owned Reliance Capital Ltd said that it signed binding definitive agreements with Nippon Life Insurance, one of the largest life insurance companies in Japan to increase its stake in investment management firm Reliance Nippon Life Asset Management Limited (RNAM) to 75%.

Reliance Capital said that it will receive Rs 6,000 crore from the entire RNAM stake monetisation, touted to be one of the largest deals in India’s financial sector.

Reliance Nippon Life Insurance Management Ltd, formerly known as Reliance Capital Asset Management Limited, is one of the largest asset managers in India, managing assets across mutual funds, pension funds, managed accounts, alternative investments and offshore funds.  

The company also manages offshore funds through its subsidiaries in Singapore and Mauritius and also has representative office in Dubai thereby catering to investors across Asia, Middle East, UK, US, and Europe.

Both Nippon and Reliance Capital currently hold 42.88% each in Reliance Nippon Life Asset Management, while the rest is with public shareholders.

As per the agreement, Reliance Capital will exit its entire RNAM shareholding to Nippon Life Insurance and offer for sale to other financial investors to ensure that the minimum free float requirement of 25% is met.

Nippon Life Insurance said that it will make the mandatory open offer at Rs 230 per share, in accordance with the SEBI Takeover Regulations.

Reliance Capital, the financial services arm of the Anil Ambani Group, added that the amount will be utilised to reduce its outstanding debt by 33%.

“The monetisation of the Reliance Nippon stake is part of our value unlocking strategy. We expect this transaction, together with other deals underway, to substantially reduce Reliance Capital’s debt by over 50% in the current financial year”, said Anil Ambani, Chairman of Reliance Capital.

Nippon Life’s total investment in Reliance Nippon Asset Management will be over Rs 7,800 crore and over Rs 5,000 crore in Reliance Nippon Life Insurance Ltd, cumulatively adding up to over Rs 12,800 crore. The investment is one of the largest Foreign Direct Investments (FDI) to India in the financial services sector.

Established in 1889, Nippon Life Insurance has the largest market share in Japan among private life insurance companies, employing over 70,000 employees and serving nearly 14 million customers worldwide. The company has revenues of over USD 70 billion and core operating profit of USD 6.8 billion. Total assets managed by Nippon Life Insurance are almost twice the size of the Indian mutual funds industry.

Nippon Life Insurance had made initial investment in RNAM in 2012.

Nippon said that RNAM will continue to run its operations without any change in structure and management.

Reliance Capital in February had invited Nippon Life Insurance to make an offer to acquire up to 42.88 percent stake held by Reliance Capital in Reliance Nippon Life Asset Management Ltd.

The company had said that it expects that the stake sale, among other things will help reduce its debt of Rs 12,000 crore.

“This substantial 50-60 percent reduction in our debt, will be achieved by monetisation of 43% stake in Reliance Nippon and 49% stake in Reliance General Insurance, along with several non-core investments,” the company said in a statement in February.