Shares of Anil Ambani-owned Reliance Capital Ltd jumped as much as 6% in intraday trade on Friday after the company said it will exit the mutual fund business by selling its entire stake in Reliance Nippon Life Asset Management Ltd (RNAM) to its foreign partner Nippon Life Insurance.
“Reliance Capital Ltd today (on Thursday) announced it has signed binding definitive agreements with Nippon Life Insurance of Japan to exit its stake in Reliance Nippon Life Asset Management Ltd,” said a statement by Reliance Capital.
Reliance Capital will sell its entire 42.88% stake to Nippon Life Insurance of Japan and other financial investors in the joint venture. The company will receive about Rs 6,000 crore — at Rs 230 per share — through the stake sale. The funds will be used to reduce its outstanding debt by 33%.
The transaction price represents a premium of 15.5% to the minimum 60-day price as specified under the Takeover Regulations by the Securities and Exchange Board of India (Sebi).
Nippon will increase its shareholding to 75%–the maximum permissible promoter stake for listed companies. Public shareholders currently own a 14.25% stake. “The monetisation of the RNAM stake is part of our value unlocking strategy. We expect this transaction, together with the other deals underway, to substantially reduce Reliance Capital’s debt by over 50% in the current fiscal year,” the statement quoted Ambani as saying.
JM Financial Ltd acted as the adviser to Reliance Capital for the transaction. Nippon Life Insurance had made an initial investment in RNAM in 2012. The company will continue to run its operations as is without any change in structure and management. Nippon Life Insurance, a 130-year-old company, is one of the largest life insurance companies in Japan, managing assets of over $700 billion, revenues of over $70 billion and core operating profit of $6.8 billion.
According to Value Research, a mutual fund tracking company, Reliance Mutual Fund had total assets under management of Rs 2.25 lakh crore as on 30 April. In March quarter, Reliance Nippon Asset Management reported 34% year-on-year rise in net profit at Rs 151 crore.
At 11:15am, Reliance Capital shares were trading at Rs 135, up 2.3%, on BSE.
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Source: News18