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    Reliance Capital to exit MF biz, use funds to cut debt

    Synopsis

    RNAM will continue to remain a public limited company after the open offer.

    Mutual funds shooting themselves in the foot?Getty Images
    Shares of Reliance Capital were trading 2.34 per cent higher at Rs 131.35 apiece on
    Mumbai: Reliance Capital, the financial services business of the Anil Dhirubhai Ambani group (ADAG), has decided to exit mutual funds by selling its entire stake in to its partner Nippon Life Asset Management.

    Reliance Capital will sell its 42.88 per cent stake to Nippon Life Insurance of Japan and other financial investors in the joint venture. Nippon Life will also make an open offer to public shareholders of Reliance Nippon Asset Management (RNAM) at Rs 230 per share, as required under Sebi regulations, and reach the maximum permissible promoter shareholding of 75 per cent for listed companies.

    This represents a premium of 15.5 per cent to the minimum 60-day price as specified under Sebi Takeover Regulations. Reliance Capital will receive Rs 6,000 crore through sale of its shareholding to Nippon Life Insurance at Rs 230 a share, and the simultaneous Offer for Sale (OFS) to other financial investors. The entire proceeds of about Rs 6,000 crore will be utilised to reduce Reliance Capital’s outstanding debt by 33 per cent.
    reliance cap-graph

    Reliance Nippon Life had raised Rs 1,500 crore through an initial public offering (IPO) that was subscribed 81 times and it was the first asset management company in India to go public in October 2017.

    Reliance Nippon is the fifth largest asset management company in the country, managing assets worth Rs 2.33 lakh crore. This is the largest FDI in India’s financial services industry from Japan.
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    “The monetisation of the RNAM stake is part of our value unlocking strategy. We expect this transaction, together with other deals underway, to substantially reduce RCAP’s debt by over 50 per cent in the current financial year,” said Anil Ambani, chairman, ADAG. Shares of Reliance Nippon AMC surged 7.93 per cent to Rs 235 on the news of the stake sale.

    On May 24, Reliance Capital will do an OFS for 8.66 per cent of its stake in Reliance Nippon Life Asset Management at a floor price of Rs 218 per share. If the offer for OFS is oversubscribed by 5.25 per cent of the paid up equity, the rest of the 3.41 per cent stake will also be allotted to investors on May 27.

    The existing management will continue to be led by Sundeep Sikka, executive director and CEO, Reliance Nippon Life Asset Management Company. RNAM will continue to remain a public limited company after the open offer.




    ( Originally published on May 23, 2019 )
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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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