Reliance Capital mulls to exit MF business

ADAG group company Reliance Capital intends to exit the mutual fund space by selling its 42.88 per cent stake to its JV partner Nippon Life Insurance company in order to reduce their debt.

Nippon Life of Japan and Reliance Capital each hold 42.88 per cent stake in Reliance Nippon, with the balance 14 per cent being held by retail investors. This ownership change will also call for a 26 per cent open offer for retail investors by Nippon Life.

The deal is expected to fetch Reliance Capital approximately Rs. 8,000 crore which would help Reliance Capital reduce its debt by 40 per cent, which stands at Rs. 18,000 crore. Reliance Capital is expected to command a premium to the current market price of Rs. 205 per share due to change of control to its joint venture partner. At the current market price, Reliance Capital’s stake is valued in excess of Rs. 5,000 crore. Reliance Nippon Life AMC came out with an IPO in November 2017 and got listed at a price of Rs. 252 per share.

Reliance Mutual Fund is the fifth largest mutual fund house in the country. It had assets under management (AUM) of Rs. 2.39 lakh crore as of January 2019. This deal would make Nippon Life the largest among four foreign-owned mutual fund companies in India. Nippon Life is the largest AMC in Japan and also a Fortune 100 company.