Nippon Life in deal to raise stake in R-Cap Asset Management

The current deal where Nippon Life will pay Rs 657 crore for a 9 per cent stake in RCAM, values the company at Rs 7,300 crore.

Japanese insurer Nippon Life on Wednesday entered into an agreement with Reliance Capital Asset Management (RCAM) to raise its stake in the company to 49 per cent from the current 26 per cent in two or more tranches over the next two years.

Nippon Life will pay Rs 657 crore for an additional 9 per cent stake in the current financial year to take its holding in RCAM (that runs Reliance Mutual Fund) to 35 per cent and will then raise its holding to 49 per cent over the next two years at a valuation based on then prevailing asset under management (AUM).

The current deal where Nippon Life will pay Rs 657 crore for a 9 per cent stake in RCAM, values the company at Rs 7,300 crore. Earlier, in March 2012, Nippon Life had bought 26 per cent stake in the company which valued it at Rs 5,600 crore.

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“We have obtained the right to additionally purchase up to 49 per cent of Reliance Asset. Within this fiscal year, we will additionally purchase a 9 per cent stake in Reliance Asset (for approximately Rs 657 crore), and raise Nippon Life’s ownership of Reliance Asset to 35 per cent. Furthermore, in compliance with applicable laws, we will consider raising it up to 49 per cent within 2 years after the completion of this transaction,” said Nippon Life Insurance in its statement.

While the markets cheered the announcement and shares of Reliance Capital rose by 4.2 per cent post the announcement, the valuation of the fund house also seem to have gone up marginally.

In the last 30 months, since Nippon first invested in RCAM, Reliance MF’s AUM has grown by 53 per cent from Rs 80,231 crore in the quarter ended March 2012 to Rs 123,385 crore in the quarter ended September 2014.