Reliance Capital Ltd, the financial services arm of Anil Ambani-led Reliance Group, is exiting the mutual fund business by selling its entire stake in Reliance Nippon Life Asset Management Ltd (RNAM) in order to pare debt.
The company will sell its entire 42.88% stake to Nippon Life Insurance of Japan and other financial investors in the joint venture, it said in a statement. It didn’t name the financial investors.
Nippon, which also owns 42.88% of the joint venture, will increase its shareholding to 75%–the maximum permissible promoter stake for listed companies. Public shareholders currently own a 14.25% stake currently.
Separately, Nippon Life will make an open offer to the public shareholders of RNAM at Rs 230 per share.
Reliance Capital said it will receive proceeds of about Rs 6,000 crore ($860 million) by selling its stake. It will use the entire amount to reduce its outstanding debt by 33%.
The transaction price represents a premium of 15.5% to the minimum 60-day price. RNAM’s shares were trading at Rs 225, up 3% on a buoyant Mumbai market following the election results.
Reliance Nippon Life had raised Rs 1,542.24 crore ($238 million) via its initial public offering that was subscribed 81 times as it became the first asset management firm in India to go public in October 2017.
Nippon had originally picked up a 26% stake in the Indian asset management firm for $290 million in 2012, valuing it at Rs 5,600 crore ($920 million) then. It bought 9% more in 2014 and an additional 14% the following year.
“The monetisation of the RNAM stake is part of our value unlocking strategy. We expect this transaction, together with other deals underway, to substantially reduce Reliance Capital’s debt by over 50% in the current financial year,” said Anil Ambani, chairman, Reliance Group.
JM Financial Ltd acted as the adviser to Reliance Capital for the transaction.
Reliance Group’s woes
Earlier this year, the country’s Supreme Court held Anil Ambani guilty of contempt of court after the Reliance Group’s telecom arm, Reliance Communications, failed to pay dues worth around Rs 550 crore ($78 million) to telecom equipment maker Ericsson.
Reliance Communications turned to the bankruptcy courts for debt resolution and the Reliance Group has been trying to monetise assets to pare its debt.
A month later, the cash-strapped Reliance Communications said it would completely exit the telecom business to concentrate on the real estate sector in future.
The other Reliance Group companies include Reliance Infrastructure Ltd, Reliance Power Ltd, Reliance Naval and Engineering Ltd, and Reliance Home Finance Ltd.
In February, Reliance General Insurance Company Ltd had re-filed draft documents for an initial public offering, less than three months after regulatory approval for its previous proposal lapsed.