Reliance Capital sells mutual fund business to JV partner Nippon
MUMBAI: Reliance Capital has signed definitive binding agreements with Japanese partner Nippon Life Insurance to sell its stake in Reliance Nippon Life Asset Management (RNAM), the Anil Ambani group company said on Thursday. The deal would get the cash-strapped Reliance Capital Rs 6,000 crore ($860 million) and help it pare debt substantially.
This amount includes stake sale proceeds, both from what Reliance Capital will receive from Nippon and through an “offer for sale” to other financial investors. Reliance Capital currently holds a 42.88 per cent stake in RNAM, while Nippon holds a similar quantum. Reliance Capital will fully exit the mutual fund business.
Meanwhile, as part of the transaction, Nippon Life will make an open offer to other public shareholders as per the regulatory requirements at Rs 230 a share, but at the same time will hold its stake at the level permissible for promoters at 75 per cent, the press release said. The offer price has been set at 15.5 per cent premium calculated at the minimum 60-day price.
Reliance Capital said the entire proceeds of Rs 6,000 crore will be used to bring down its debt by 33 per cent.
Anil D Ambani, chairman, Reliance Group, said, “I am delighted that our longstanding and most valued partner, Nippon Life Insurance, is increasing its stake in RNAM to 75 per cent. The monetisation of the RNAM stake is part of our value unlocking strategy. We expect this transaction, together with other deals underway, to substantially reduce RCAP’s debt by over 50 per cent in the current financial year.”
Reliance Capital and its subsidiaries have gone through ratings downgrades recently, with rating agencies raising concerns over the liquidity profile of the group and delays in raising funds from asset monetisation.
Debt to be pared down by 33%
Reliance Capital said the entire proceeds of Rs 6,000 crore will be used to bring down its debt by 33 per cent. “We expect this transaction, together with other deals underway, to substantially reduce debt by over 50 per cent in the current financial year,” Anil Ambani, chairman, Reliance Capital said.