Nippon Life to buy another 9% in RCAM for Rs 657 cr

Rs 657-cr deal values Anil Ambani company at Rs 7,300 cr; Japanese firm to increase stake to 49% in phases

Japan’s Nippon Life Insurance will acquire an additional nine per cent stake in Anil Ambani’s Reliance Capital Asset Management (RCAM) for Rs 657 crore, the two companies have said. The deal values RCAM, which operates in the mutual fund, pension fund and offshore fund segment, at Rs 7,300 crore.

The deal is part of an agreement through which the Japan-based insurance major will increase its shareholding in India’s leading asset manager to 49 per cent.

“The transaction is expected to be completed this financial year, subject to the receipt of regulatory approvals. Subsequently, Nippon Life Insurance will have an option to increase its stake further, by an additional 14 per cent, to 49 per cent in tranches,” the companies said.

DEAL ACTION

• 49% Stake Nippon Life plans to have in the Indian fund management company
• 9% Japanese firm to buy in first tranche for Rs 657 crore before the end of the current financial year
• Rs 7,300 cr Value of Reliance Capital Asset Management (RCAM)
• Rs 2.18 lakh cr RCAM’s total AUM, of which mutual fund AUM is Rs 1.22 lakh crore
• Earlier Nippon had picked up 26% in RCAM for Rs 1,450 crore in 2012
• Functioning area RCAM operates in the MF, pension fund and wealth management space

Shares of Reliance Capital, RCAM’s parent firm, closed four per cent higher at Rs 501.

Besides asset management, the Anil Ambani group firm has interests in insurance, commercial finance, broking and asset reconstruction. At its current market price, Reliance Capital’s market capitalisation is about Rs 12,300 crore.

Nippon’s existing 26 per cent stake in RCAM was acquired in 2012, for about Rs 1,450 crore. Nippon, which manages assets worth $50 billion, also has stake in Reliance Capital’s insurance arm, Reliance Life Insurance.

“Our partnership with Reliance Group is an example of successful collaboration between two big corporations and countries. We look forward to strengthening this relationship and using the collective experience of the two corporations to the advantage of the two global economies,” said Yoshinobu Tsutsui, president, Nippon Life Insurance.

Nippon’s decision to increase stake in Reliance Capital’s asset management arm comes at a time when larger asset management companies (AMCs) are seen consolidating operations, while a few smaller companies are exiting the business. Through the past year, three small players have been acquired by large AMCs — PineBridge Mutual Fund was acquired by Kotak Mahindra AMC; Morgan Stanley’s domestic mutual fund business by HDFC MF; and ING MF by Birla Sun Life AMC.

With assets under management of Rs 1.22 lakh crore (as of September this year, Reliance MF is the third-largest AMC. HDFC MF is the largest fund house, with assets of Rs 1.41 lakh crore, followed by ICICI Prudential (Rs 1.28 lakh crore). The overall assets under management of the Indian mutual fund sector stand at about Rs 10 lakh crore.

RCAM’s total assets, it including pension fund and wealth management business, stand at Rs 2.18 lakh crore.