Japanese life insurance major Nippon Life will raise its stake in Reliance Capital Asset Management to 49 percent from the existing 26 percent.
Nippon will invest Rs 657 crore for an additional 9 percent stake in the first tranche to reach 35 percent. It will acquire further 14 percent stake in multiple tranches.
The deal ups the valuation of Reliance Cap, which runs Reliance MF, to around Rs 7,300 crore or USD 1.2 billion. Nippon would eventually up its stake to 49 percent 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.
Nippon already holds 26 percent stake Reliance Cap, which it had acquired for Rs 1,450 crore in 2012 while valuing the company at Rs 5,600 crore at that time.
Nippon Life manages over USD 500 billion (Rs 30 lakh crore) in assets, highest in the world for any life insurer, while Reliance Cap is part of Reliance Capital, the financial services arm of Anil Ambani-led Reliance Group.
Reliance Cap 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.
“We welcome Nippon’s decision to further strengthen this partnership and acquire an additional stake in our asset management company. We strongly believe their expanded role in the company will accelerate our growth, reach and performance," Reliance Capital CEO Sam Ghosh said in a press statement.
Nippon Life also holds 26 percent stake in Reliance Life Insurance Company, which it had bought for Rs 3,062 crore. This deal was completed in October 2011 and it had valued the Indian insurer at over Rs 11,500 crore at that time.
Recently, Nippon gave indication that it was willing to hike its stake in Reliance Life as well once the regulations permit so.
The government has now proposed to hike FDI cap in insurance sector from 26 percent to 49 percent. The proposal has been cleared by the Union Cabinet, but needs to be passed by Parliament.
(With inputs from PTI)
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