Japan's Sumitomo Mitsui to take 2.77% stake in Reliance Capital

Reliance Capital also intends to establish new bank in India with Sumitomo Mitsui Trust Bank

Japan’s Sumitomo Mitsui Trust Bank will pick up a 2.77 per cent stake in Anil Ambani’s financial services company Reliance Capital for Rs 371 crore.

Reliance Capital, a non-banking finance company engaged in lending, asset management and insurance, said it intended to open a bank with support of the Japanese financial giant.

The company termed the investment of Sumitomo Mitsui as “initial and strategic”. It added the Japanese bank would have a one-year lock-in period for its investment in Reliance Capital.

The investment was being made at Rs 530 a share, at a premium of a little over 11 per cent to the stock price on the relevant date of Reliance Capital, a company statement said.

The deal values Reliance Capital close to Rs 13,400 crore compared with its market capitalisation of Rs 12,216 crore, based on the closing price of its stock on Wednesday.

Sumitomo Mitsui Trust Bank is the fourth largest in Japan by market capitalisation and corporate loans and Japan’s largest financial institution managing assets of $682 billion with assets under custody of $1.8 trillion as of September.

“Reliance Capital intends to establish a new bank in India with support of Sumitomo Mitsui Trust Bank as a strategic partner as and when the Reserve Bank of India (RBI)’s policies permit formation of the same,” the statement said.

During the latest round of bank licences, Reliance Capital’s application was not approved by RBI in April. The central bank issued new licences to IDFC and Bandhan Financial Services.

RBI has now invited applications for differentiated bank licences, namely, payment banks and small finance banks. It is not yet known if Reliance Capital will apply for niche licences, where the scope is limited.

According to the company, Reliance Capital will support clients of Sumitomo Mitsui Trust Bank in supply-chain financing and advisory services in India.

Sumitomo Mitsui Trust Bank will support Reliance Group across its various listed group companies by providing a wide range of financial and other services in Japan and the Asia-Pacific region.

“Sumitomo Mitsui Trust Bank and Reliance Capital will collaborate in providing solutions for their clients, including in the area of M&A [mergers and acquisitions] opportunities in India and Japan, and will assist each other in distribution of their respective financial products through their networks,” the statement said.

Another Japanese financial services major Nippon Life recently entered into an agreement with Reliance Capital Asset Management, which is a part of Reliance Capital, to raise its stake in the company to 49 per cent from 26 per cent in two or more tranches over the next two years. Nippon Life also has a 26 per cent stake in the life insurance arm of Reliance Capital, Reliance Life.

“We believe Sumitomo Mitsui Trust will play an important role in the future of our company, through their all-round support and long-standing experience, and will help accelerate our growth as we tap new opportunities and expand our existing businesses”, said Anil Ambani, chairman of the group.

“We are particularly delighted to collaborate on a number of business initiatives that are proposed, and thereby contribute toward the development of the Indian financial industry through our collaboration with Reliance Capital, which we believe will be a very successful one,” said Hitoshi Tsunekage, president of Sumitomo Mitsui Trust Bank.