Nippon Life to buy 26% in Rel MF

In Biggest FDI Flow In MF Industry, Japanese Co To Pay $286M For Stake

Mumbai: Japanese insurance major, Nippon Life Insurance, will buy a 26% stake in Reliance Mutual Fund, the Anil Ambani-controlled group's asset management business, for about Rs 1,450 crore ($286 million). This is the single-largest foreign direct investment (FDI) in the MF industry, and also the largest deal in this sector. 

    The transaction values Reliance MF, India's second largest fund house by assets under management (AUM), at about $1.1 billion. This is the second deal between the Japanese insurance major and the Anil Ambani-promoted Reliance Group after it earlier picked up a 26% stake in Reliance Life Insurance. Reliance MF is an arm of Reliance Capital. 
    Nippon Life, also called Nissay, is a 122-year-old life insurer which manages over $600 billion (Rs 30 lakh crore) in assets, among the largest total assets in the world for any life insurer. As of September 30, 2011, Reliance MF managed a little over Rs 93,000 crore in assets across mutual funds, client accounts and hedge funds. As of December 31, Reliance MF's average AUM was about Rs 82,300crore, data published by AMFI, the fund industry trade body, showed. The memorandum of understanding (MoU) between the two groups was signed in Mumbai on Thursday by Nippon Life president Yoshinobu Tsutsui and Reliance Capital chairman Anil Ambani. Morgan Stanley was the financial advisor to Nippon Life in this acquisition. 
    Under the deal, no new shares will be issued and USbased hedge fund Eton Park will continue to have a 5% stake in the Indian asset manager, Nippon Life will have 26% while the remaining 69% will be with Reliance Capital. Eton Park has been a stakeholder in the company since 2007, when it paid Rs 501 crore to get this minority interest. The funds that the company got from the current deal will be used in its other businesses, like commercial lending, mortgage finance, etc, officials said. 
    Ambani said that the mutual fund partnership with Nippon Life strengthens the relationship between Reliance Group and its Japanese partner further and "takes it to a new level". Nippon Life said that since the opening up of the Indian MF sector to foreign players, it has grown rapidly. Speaking to TOI, Sam Ghosh, group CEO, Reliance Capital, said that after this partnership, Reliance MF would advise and manage Nippon Life's investments in India, and would also explore the opportunity for the Japanese major to distribute its products in Japan and other south Asian markets. In addition, "like in life insurance, Nippon Life would also extend their technical support in terms of systems and products," Ghosh said. 
    Last March, Osaka-based Nippon Life signed an agreement with Reliance Group to acquire a 26% stake in Reliance Life Insurance at an aggregate value of Rs 3,062 crore ($680 million). The transaction had valued the Indian life insurer at about Rs 11,500 crore ($2.6 billion). In Thursday's strong market, the RCap stock closed at Rs 330, up 3.7% on the day. Since touching a 52-week low at Rs 226, the stock is currently up 46%.