Nippon Life Insurance Company, Japan’s largest life insurer, said on Tuesday it will raise its stake in Reliance Capital Asset Management (RCAM) to 49 per cent from 35 per cent for Rs 1,196 crore ($184 million).
Nippon Life would become the co-sponsor in RCAM and the firm would be renamed Reliance Nippon Life Asset Management as part of the deal.
The transaction, which values RCAM at Rs 8,542 crore ($1.3 billion), would complete a previously announced deal.
The Japanese insurer had originally picked a 26 per cent stake each in RCAM and group firm Reliance Life Insurance Company for $290 million and $680 million in 2012 and 2011, respectively. The original deal valued RCAM at Rs 5,600 crore ($920 million then).
In November last year, Nippon had said it planned to raise its holding in RCAM to 49 per cent in two tranches. It bought an additional 9 per cent stake for Rs 657 crore ($108 million) in the first tranche, valuing RCAM at Rs 7,300 crore ($1.2 billion then). Tuesday’s deal marks the second tranche of 14 per cent.
RCAM is now valued at 3.51 per cent of its assets under management, a shade higher than what Nippon paid for the firm last year (3.3 per cent of AUM) but still far below the valuation of 6 per cent of AUM three years ago.
The company was valued at Rs 10,000 crore in 2008 when global investment firm Eton Park invested Rs 500 crore to acquire a 5 per cent stake just weeks before the stock markets crashed worldwide because of the sub-prime crisis in the West.
RCAM runs the country’s third-largest mutual fund house behind HDFC and ICICI Prudential, as per data compiled by industry body AMFI.
Shares of Reliance Capital jumped 5 per cent to close at Rs 398.80 in a flat Mumbai market on Tuesday.