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Reliance Mutual Fund raises $71 mn from ADIA, other anchor investors

24 October, 2017

Reliance Nippon Life Asset Management Co Ltd on Tuesday raised Rs 462.67 crore ($71.08 million) by selling shares to a bunch of anchor investors ahead of the first initial public offering by an Indian mutual fund manager.

India’s third-largest mutual fund manager allotted 18.36 million shares at the upper end of the Rs 247-252 per share price band, according to a stock-exchange filing. The IPO opens on Wednesday and closes on Friday.

The anchor investors included the sovereign wealth funds of Abu Dhabi and Kuwait. Abu Dhabi Investment Authority bought shares worth Rs 35 crore ($5.37 million) while Kuwait Investment Authority purchased Rs 10 crore of shares.

MSD India Fund, the India-focussed hedge fund under Michael Dell’s private asset management firm MSD Capital, acquired shares worth Rs 10 crore ($1.53 million).

Earlier this year, VCCircle had reported that MSD Capital, which makes debt and equity investments in both public and private companies, raised an additional $50 million to take its total corpus to $163.3 million.

Other foreign funds and investors participating in the anchor allotment include Copthall Mauritius Investment, BNP Paribas Arbitrage, Singapore-based Valiant Partners, FIL Investments (formerly Fidelity), Threadneedle Investments and Eastspring Investments.

Anchor investors are institutional investors who accept a one-month lock-in period for a sizeable allocation of shares and support a public offering. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.

Indian asset managers that acquired Reliance Nippon Life shares were HDFC Mutual Fund, Aditya Birla Sun Life Mutual Fund, SBI Mutual Fund, DSP BalckRock Mutual Fund, IDFC Mutual Fund and IIFL Mutual Fund. ICICI Prudential Life Insurance Co and Bajaj Allianz Life Insurance also invested.

Reliance Nippon Life, a joint venture between industrialist Anil Ambani-led Reliance Group and Japan’s Nippon Life, is seeking Rs 15,422.4 crore ($2.36 billion) in valuation through the IPO. The total IPO size is pegged at Rs 1,542.24 crore at the upper end of the price band. The issue will result in a 10% stake dilution on a post-issue basis.

The IPO comprises a fresh issue of 24.48 million shares and a sale of 36.72 million shares by promoter entities. Nippon will sell 25.49 million shares while Reliance Capital will offload the remaining. The IPO would bring parity to the holding of both partners at 42.88% each. Currently, Nippon holds a 49% stake.

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 promoters will get three years from the date of listing to meet the 25% minimum public shareholding norms by the capital markets regulator.

Reliance Nippon Life had filed its draft red herring prospectus on 18 August. It received regulatory approval for the IPO on 5 October. VCCircle had first reported the company’s plans to go public as well as merchant banker appointments.

The company joins a list of more than two dozen firms that are awaiting regulatory approval for their IPOs or already have an approval to launch their public issues.

Reliance Nippon Life acts as the adviser for India-focussed equity funds and fixed-income funds in Japan and Korea. It also manages offshore funds through its subsidiaries in Singapore and Mauritius, catering to investors across Asia, the US and Europe.

The company’s assets under management grew 25% to Rs 3.59 trillion ($55.1 billion) in the year through March 2017. This includes mutual fund AUM of Rs 2.11 trillion. Its total income rose 9% to Rs 1,436 crore and profit before tax increased 16% to Rs 581 crore in 2016-17.

Reliance Capital’s other businesses include life and general insurance, stockbroking, wealth management, home finance, distribution of financial products and asset reconstruction. Last month, Reliance Capital received approval from stock exchanges to spin off and separately list its home finance unit.

JM Financial, Nomura, CITIC CLSA and Axis Capital are the global coordinators and book running lead managers to the IPO. Edelweiss, IIFL, SBI Caps and Yes Securities are the other merchant bankers.

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Reliance Mutual Fund raises $71 mn from ADIA, other anchor investors

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