Japan's Nippon Life Insurance Co has bought a 26 per cent stake in Reliance Capital Asset Management Ltd, the mutual fund arm of the Anil Ambani-controlled Reliance Capital, for Rs1,450 crore ($290 million), the companies said in separate statements today.
The deal values India's second-largest fund house at nearly Rs5,600 crore ($1.1 billion), or 6 per cent of RCom's assets under management of Rs93,148 crore, as of September. The deal is subject to regulatory approvals, the company said.
''We are delighted to have Nippon as our strategic partners in the mutual fund business. They are already our partners in the life insurance business,'' Ambani said in a statement.
This is one of the highest valuations for a mutual fund stake sale in India. The deal also comes at a time when valuations in the insurance market are sluggish.
There are 44 fund houses in the country average assets under management (AUM), totalling Rs682,000 crore at the end of December. Since the capital market regulator banned collection of entry loads in August 2009, the industry's total asset size has remained in the range of Rs600,000-700,000 crore, owing to dwindling sales and vanishing investor folios.
Reliance Capital, India's second-largest asset management company with assets under management of Rs90,661 crore ($18.5 billion) as of end-September 2011, had a 13 per cent share of the mutual fund market.
This is seen as the latest move by Nippon, Japan's largest and the world's seventh-largest private insurer, to expand overseas as its domestic market shrinks with an ageing population.
Nippon had, last year, bought a 26 per cent stake in Anil Ambani's Reliance Life Insurance, for $680 million, taking the Indian company's value to $2.6 billion.
Most of India's private-owned general and life insurers have a foreign partner.
Anil Ambani, younger brother of India's richest man Mukesh Ambani, has been looking for buyers for a stake in flagship Reliance Communications or its units to cut over $6 billion in debt.