The Anil Ambani-led Reliance Group has sought to exit mutual fund business by inviting its foreign partner to buy out its 42.88 percent stake even as the threat of jail time is hanging over the head of the younger Ambani sibling. At current valuation, financial services group Reliance Capital (RCap)'s stake in mutual fund manager Reliance Nippon Life Asset Management (RNAM) is pegged at Rs 4,900 crore and the company is expecting an offer from the partner Nippon Life Insurance, media reports say. Japan's Nippon Life Insurance already holds a 42.88 per cent stake in RNAM.
"Reliance Capital has invited its partner Nippon Life Insurance to make an offer to acquire up to 42.88 per cent stake held by Reliance Capital in Reliance Nippon Life Asset Management," the company has said in a regulatory filing.
The announcement propelled the shares of RCap and RNAM to new highs on Thursday. While the Reliance Capital share rose 11.13 percent, or Rs 16.15, to settle at Rs 161.20 on the BSE, the RNAM share spurted almost 20 percent to close at Rs 187.05. The current market capitalisation of RCap's stake in RNAM is an estimated Rs 4,900 crore.
However, market circles said the transaction would also involve a control premium, thereby leading to a good mark-up over the current market price, resulting in a final valuation of up to Rs 8,000 crore, a Business Standard report said.
Trying to monetise assets
The transaction is expected to help RCap meet around 40 percent of its outstanding debt estimated at Rs 18,000 crore. The proposed share sale would also trigger an open offer for a 26 percent stake in the company, according to reports. In case the deal goes through, RNAM will become the largest wholly foreign-owned mutual fund in the country, according to experts.
Anil Ambani-led Reliance Group firms have been trying to monetise at least some assets to bring down the debt. RNAM reported a 17 percent decline in consolidated net profit at Rs 109.52 crore in the December quarter, compared with Rs 132.01 crore in the same period of the previous year. During the period, its revenue from operations declined to Rs 349.85 crore from Rs 398.98 crore, the company said. Its average assets under management (AAUM) was Rs 2.36 lakh crore during the period with over 88 lakh folios.
Anil Ambani is facing jail time in case he fails to pay telecom equipment maker Ericsson Rs 453 crore in four weeks after the Supreme Court held him guilty of contempt in failing to meet its earlier order to make the payment. He ran into trouble with vendors after his bid to sell broadband spectrum that his Reliance Communications (RCom) holds to his elder brother Mukesh Ambani's Reliance Jio failed to take off following objections from the Department of Telecom (DoT).