Nippon to increase stake in RCap asset manager to 49%

Japan's Nippon Life Insurance Company has agreed to buy an additional 14 per cent stake in Anil Ambani-promoted Reliance Capital's fund management arm - Reliance Capital Asset Management.

The transaction is expected to be done before the end of this financial year. Nippon Life Insurance will invest Rs 1,196 crore ($184 million) in Reliance Capital Asset Management. This will raise its stake in Reliance Capital Asset Management from 35 to 49 per cent.

The transaction will value Reliance Capital Asset Management at Rs 8,542 crore. Shares of the parent company, Reliance Capital, rose five per cent to Rs 398.8. This takes Reliance Capital's market capitalisation above the Rs 10,000 crore mark.

After Nippon Life Insurance increases its stake, Reliance Capital Asset Management will be renamed Reliance Nippon Life Asset Management.

This will be Nippon Life Insurance's third investment in Reliance Capital Asset Management. In January 2012, it had picked a 26 per cent stake for Rs 1,450 crore, valuing Reliance Capital Asset Management at Rs 5,600 crore. In November 2014, Nippon Life Insurance picked an additional nine per cent for Rs 657 crore. This valued Reliance Capital Asset Management at Rs 7,300 crore.

Reliance Capital Asset Management said the latest deal will give it "the highest valuation till date for any asset management company in the country."

Anil Ambani, chairman of Reliance Group, said, "Both Reliance Capital and Nippon Life Insurance have enjoyed an extraordinary relationship in the past few years and we see this mutual respect and commitment growing stronger with time. Together, we are determined to grow our businesses multi-fold and have stronger footprint in India and abroad."

RAISING THE GAME

• January 2012: Nippon Life Insurance picks up 26% stake in Reliance Capital Asset Management for Rs 1,450 crore. This values Reliance Capital Asset Management at Rs 5,600 crore
• November 2014: Nippon Life Insurance buys additional 9% for Rs 657 crore. This values Reliance Capital Asset Management at Rs 7,300 crore
• October 2015: Agrees to buy another 14% for Rs 1,196 crore. This will value Reliance Capital Asset Management at Rs 8,542 crore

At the end of June, Reliance Capital Asset Management managed assets of Rs 2.43 lakh crore ($38.3 billion).

At the end of September, the company's mutual fund business stood at Rs 1.52 lakh crore.

Yoshinobu Tsutsui, president of Nippon Life Insurance, said, "We believe this investment will further strengthen the ties of both companies, achieve perpetual growth, and contribute to further economic development of India and Japan."

Nippon Life Insurance manages assets of over $520 billion globally. It will end up paying Rs 3,303 crore for the 49 per cent stake in Reliance Capital Asset Management. Since 2012, Reliance Capital Asset Management's valuations have increased by over 50 per cent, and its mutual fund assets have grown nearly 85 per cent.

Interestingly, Nippon's decision for a larger share of the Rs 13 lakh-crore Indian asset management business is in contrast to some other foreign players that have exited the business by selling to domestic players.