In the past three months, the stock of Reliance Nippon Life has outperformed the market by surging 38 per cent after Nippon Life Insurance on May 23, 2019 signed binding definitive agreement with Reliance Capital (Rcap) to increase stake in RNAM up to 75 per cent. In comparison, the S&P BSE Sensex has gained just1 per cent during the same period.
Japan’s Nippon Life had launched an open offer to acquire 14.6 per cent public shareholding of RNAM at a price of Rs 230 per share. Nippon Life currently holds 42.88 per cent stake, while Rcap holds 32.12 per cent stake in the asset manager. The Japanese firm has announced that it plans to hike its stake to 75 per cent.
Depending upon how much shares it is able to garner through the open offer, it will buy the remaining from Rcap, as part of an agreement inked between the two joint venture partners.
The open offer closed on August 5, 2019 and the company has fixed August 21 as last date for communication of rejection/ acceptance and completion of payment or refund of equity shares.
Analysts at HDFC Securities have ‘neutral’ rating on RNAM as the brokerage firm is concerned about the loss of investor confidence which debt schemes face given significant write-downs/offs on exposures to stressed corporates.
“Additionally, given the current inter-promoter deal structure, we believe an offer-for-sale (OFS) by Rcap is imminent. Lastly, the macro environment remains challenging and thus despite our positive bias towards Nippon Life as sole promoter, increased credibility to raise HNI/institutional capital,” the brokerage firm said in Q1FY20 result review.
“Management indicated that they plan to leverage Nippon’s Life’s global network to shore up offshore assets under management (AUM). Recent announcement of a fund-of-fund in tech space in collaboration with few Japanese partners highlights the potential to shore up offshore AUM in future,” analysts at JM Financial said in a company update.
RNAM remains confident about the recovery of exposures of ADAG group on the back of shareholder agreement to repay any outstanding amount on ICDs out of proceeds of share sale, it added.
At 12:52 pm, the stock was up 4 per cent at Rs 241, as compared to a 0.47 per cent decline in the S&P BSE Sensex. A combined 1.3 million shares changed hands on the counter on the BSE and NSE till the time of writing this report.