Anil Ambani’s Reliance Group has decided to put on the block its stake in Reliance Nippon Life Asset Management, a prized asset operating in the Rs 24-trillion domestic mutual fund (MF) industry.
On Thursday, Reliance Capital said it had invited equal joint venture partner Nippon Life Insurance of Japan to acquire its 42.9 per cent stake in the asset manager.
Reliance Nippon Life Asset Management, commonly referred to as Reliance MF, has the highest market capitalisation among the seven listed companies belonging to the Anil Ambani group.
The proposal to divest its entire holding in the mutual fund arm comes at a time when the group is under severe stress due to its huge debt pile and pressure from lenders.
At the current market price, the value of Reliance Capital's stake is Rs 4,908 crore - a little over one-fourth of the company's net outstanding debt of Rs 18,000 crore.
Market players say the actual deal valuations could be significantly higher as the existing shareholders would expect a control premium for handing over the management of the country's fifth-largest fund house.
The shares of Reliance MF hit 20 per cent upper limit to close at Rs 187 on the BSE following the announcement by Reliance Capital, valuing the asset manager at Rs 11,447 crore. Reliance MF was valued at Rs 15,422 crore at the time of its maiden offering in November 2017. Sources say Reliance Capital could seek valuations higher than those during the initial public offering (IPO).
If the deal goes through, Japan's Nippon Life will end up with a 85.76 per cent stake in Reliance MF. The deal will also trigger an open offer as it will result in change of ownership. Under the Securities and Exchange Board of India's (Sebi's) takeover code regulation, the open offer will have to be made to public shareholders of Reliance Nippon MF, who hold 14.25 per cent.
Following the open offer, Nippon Life will again have to bring down its stake to at least 75 per cent to comply with the 25 per cent minimum public shareholding norm.