Anil Ambani-led Reliance Capital plans to quit the mutual fund space by selling out its 43 per cent stake in Reliance Nippon Life AMC to joint venture partner Nippon Life Insurance Company to reduce debt.

Reliance Capital has invited its partner Nippon Life of Japan to make an offer to acquire its stake of up to 42.88 per cent, said a source close to the development without revealing more details. Nippon Life currently owns 42.88 per cent with retail investors holding about 14 per cent.

The deal is expected to fetch ₹7,000-8,000 crore and help RCap reduce its ₹18,000 crore debt by about 40 per cent. The change in ownership will also call for 26 per cent open offer for retail investors by Nippon Life.

Reliance Nippon Life AMC got listed on the exchange through an IPO at a price of ₹252 a share in November 2017. At the current market price of ₹187, the 43 per cent is valued at ₹5,000 crore.

However, RCap would command premium to the current market price due to the change of control to the joint venture partner, said an analyst. Moreover, he said, Reliance Nippon is trading at 18 times its earnings due to various challenges, while HDFC AMC, the only other listed mutual fund entity, is trading at 30 times.

Reliance MF is the fifth-largest in the most crowded industry of 43 players. It has assets under management of ₹2.39 lakh crore as of January-end.

The deal would catapult Nippon Life to become the largest among four foreign-owned mutual fund companies in India. With over $700 billion in assets, the Fortune-100 company Nippon Life is the largest AMC in Japan.

Related Topics
comment COMMENT NOW