India's third-largest mutual fund manager Reliance Nippon Life Asset Management (RNAM), operated by Anil Ambani-led Reliance Group, has received the Securities and Exchange Board of India’s approval for an initial public offering (IPO).
The capital markets regulator gave its final observation to RNAM’s draft proposal on 5 October. This makes the mutual fund arm of Reliance Capital the 33rd company to receive the regulator’s clearance for IPO this calendar year, information on SEBI’s website showed.
The company had filed its draft proposal on 18 August. The IPO comprises a fresh issue of 24.48 million shares and an offer for sale of 36.72 million shares. The firm aims to raise Rs 1,350-1,800 crore, as per disclosure in the draft document.
VCCircle was the first to report on the company's plans to go public. The firm, which runs Reliance Mutual Fund, joins more than two dozen companies that are either awaiting SEBI's nod for their IPOs or have already secured it.
Japanese partner Nippon is offloading 25.49 million shares while the remaining offer for sale comprises stake sale by Reliance Capital.
The IPO would bring parity to the holdings of both partners, at 42.88% each. Currently, Nippon holds 49% stake.
The asset management company’s plan to float an IPO comes amid hectic activity in the markets. Driven by liquidity and fund inflows, markets have been buoyant of late, encouraging several firms to go public. Together, these companies have have raised more than Rs 31,000 crore via the IPO route this year. And most of them have listed at a premium.
Primary market activity in India picked up pace in mid-2014, when the BJP-led government took over. In 2015, 21 companies had raised about Rs 14,000 crore, as per stock-exchange data. Last year, 26 companies tapped the markets and raised a total of Rs 26,500 crore, the highest in six years.
Reliance Nippon Life AMC
The company’s assets under management (AUM) grew 25% to Rs 358,059 crore ($55.1 billion) as on 31 March 2017. This includes mutual fund AUM of Rs 210,891 crore. Its total income rose 9% to Rs 1,436 crore and profit before tax increased 16% to Rs 581 crore in 2016-17.
RNAM acts as an adviser to India-focussed equity funds and fixed-income funds in Japan and South Korea. It also manages offshore funds through its subsidiaries in Singapore and Mauritius, catering to investors across Asia, the US and Europe.
Reliance Capital, led by billionaire Anil Ambani, owns a 51% stake in the asset management company while Japan’s Nippon Life Insurance Company holds the remaining. The Japanese insurer had originally picked up a 26% stake in the asset management firm for $290 million in 2012, valuing it at Rs 5,600 crore ($920 million then).
Nippon Life increased its stake in two stages—it first bought a 9% stake for Rs 657 crore in 2014 and purchased another 14% in 2015 for Rs 1,196 crore in a transaction that valued the Indian asset manager at Rs 8,542 crore.
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.
Earlier this week, group firm Reliance Nippon General Insurance Co Ltd had filed for an IPO. The company aims to float the issue, which is worth roughly Rs 1,500 crore and will result in a 25% stake dilution, in early 2018.
In August, IIFL Special Opportunities Fund bought a 2.59% stake in RNAM for $60 million (about Rs 390 crore) through a secondary market purchase. The deal valued Reliance Nippon Life at around Rs 15,000 crore.
IIFL Special Opportunities Fund acquired the stake from US-based hedge fund Eton Park Capital Management. As of March 2016, Eton Park held 4.43% in the company.
IIFL Special Opportunities Fund mainly invests in companies before or during their IPOs.
IIFL Asset Management has achieved the final close for both of its Special Opportunities Funds. The first fund had raised $250 million and announced closure in May while the second fund marked its closure in July at $216 million.
IIFL Special Opportunities Fund is a closed-ended scheme under Category II, which includes alternative investment funds like private equity and debt funds.
In May, it picked up a 1.59% stake in ICICI Lombard General Insurance Company Ltd for $49.94 million.