Nippon-Reliance Capital Asset Management deal gets CCI nod

Under the proposed deal Nippon Life Insurance Company would first acquire 9% additional stake of RCAM for about Rs 657 cr

The Competition Commission of India (CCI) has approved Japanese financial services giant Nippon’s proposed deal to hike its stake in India’s top fund house Reliance Mutual Fund to 49 per cent in multiple tranches.

According to the fair trade regulator, the proposed deal would “neither result in the elimination of a competitor, nor alter the structure of market for mutual funds, asset management services and portfolio management services”.

The Japan-based firm already holds 26 per cent stake in Reliance Capital Asset Management Limited (RCAM), which it had acquired for Rs 1,450 crore in 2012 while valuing the company at Rs 5,600 crore at that time.

Under the proposed deal Nippon Life Insurance Company would first acquire 9 per cent additional stake of RCAM for about Rs 657 crore.

Further, Nippon would have the option to hike its stake to 49 per cent in multiple tranches at prices to be determined on the basis of future prevailing assets and profitability of the company that are expected to be higher than the current levels.

RCAM runs Reliance MF and is part of Anil Ambani-led Reliance Group's financial services arm, Reliance Capital.

In an order released today, CCI said that "the proposed combination is not likely to have an appreciable adverse effect on competition in India".

"It is noted that the acquirer (Nippon) and the target enterprise (RCAM) are engaged in similar services, that is asset management services and portfolio management services," the CCI said.

"However, it is observed that the acquirer does not provide the said services in India, except through the Target Enterprise, and therefore, there is no horizontal overlap between the services provided by the Acquirer and the Target Enterprise, in India," the regulator added.

Further, the CCI said an acquisition of up to 49% shares "is not likely to give rise to any adverse effect on competition in India since the acquirer already holds 26% stake in the target enterprise and an increase in the shareholding up to 49% by the acquirer will not bring about a change in control over the target enterprise."

Nippon Life manages over USD 500 billion (Rs 30 lakh crore) in assets, highest in the world for any life insurer.

RCAM is the largest asset manager in India, in terms of Asset Under Management, managing Rs 2,18,338 crore (USD 36 billion) as on September 30, 2014, across mutual funds, pension funds, managed accounts and offshore funds.

The deal was entered between the parties in November, last year, following which a notice was filed by Nippon in December seeking the fair trade watchdog's approval.