Nippon Life Insurance to hike stake in Reliance Capital from 26 percent to 49 percent

Japan based Nippon Life Insurance on 26 November 2014 announced to hike its stake in Anil Ambani-led Reliance Capital Asset Management (RCAM) from 26 percent to 49 percent. As part of it, Nippon will invest 675 crore rupees for the first tranche of 9 percent stake in RCAM.

As a result of the first tranche of investment, the total value of RCAM will reach 7300 crore rupees which is the highest valuation till date for any asset management company in India. The transaction is expected to be completed within the financial year 2014-15, subject to regulatory approvals.

Nippon’s existing 26 per cent stake in RCAM was acquired in 2012, for about 1450 crore rupees. Nippon also has stake in Reliance Capital’s insurance arm, Reliance Life Insurance.

Consolidation in MF industry
Nippon’s decision to increase stake in Reliance Capital’s asset management arm comes at a time when larger asset management companies (AMCs) are seen consolidating operations, while a few smaller companies are exiting the business.

Through the 2013, three small players have been acquired by large AMCs — PineBridge Mutual Fund was acquired by Kotak Mahindra AMC; Morgan Stanley’s domestic mutual fund business by HDFC MF; and ING MF by Birla Sun Life AMC.

With assets under management, HDFC MF is the largest fund house, with assets of 1.41 lakh crore rupees, followed by ICICI Prudential with assets worth 1.28 lakh crore rupees and Reliance MF is the third-largest AMC.

However, when pension fund and wealth management is included then RCAM becomes the largest asset manager in India with a total assets of 2.18 lakh crore rupees.

The overall assets under management of the Indian mutual fund sector stand at about 10 lakh crore rupees.

About Nippon Life and RCAM
Nippon Life manages over 500 billion US dollars (30 lakh crore rupees) in assets which is the highest in the world for any life insurer. The President of Nippon Life Insurance is Yoshinobu Tsutsui.

On the other hand, RCAM manages mutual funds, pension funds, managed accounts and offshore funds. The CEO of Reliance Capital is Sam Ghosh