Bloomberg / Mumbai
India’s debt-ridden Anil Ambani group will exit the asset management business by selling shares in its joint venture to Japanese partner Nippon Life Insurance Co, which will take a controlling stake in India’s fifth-biggest mutual fund.
Ambani’s Reliance Capital Ltd signed a binding definitive agreement to sell 32.12% of Reliance Nippon Life Asset Management Ltd for Rs45.2bn ($649mn) to the Japanese insurer, taking the latter’s shareholding to 75%, the companies said in statements yesterday.
The partners currently hold 42.88% each in the company. Reliance Capital will offer the rest of its stake to other investors to ensure the minimum free float requirement of 25% is met, it said.
The deal with Nippon Life is critical for embattled tycoon Ambani as he tries to bolster the finances of his last stronghold, Reliance Capital.
The businessman is facing a number of challenges in his conglomerate with telecom services provider Reliance Communications Ltd facing insolvency proceedings, while his power, defence and infrastructure units too have battled piling debt, bankruptcy cases and regulatory snags.
Nippon Life, on its part, is following a trend of Japanese insurers acquiring businesses in faster-growing markets abroad to boost profitability as a shrinking population and rock-bottom interest rates curtail opportunities at home.
Nippon Life will make a mandatory open offer at Rs230 a share.
Reliance Capital is in the process of selling assets to bolster its finances after cash dwindled to Rs110mn as of March, according to CARE Ratings.
A unit of Moody’s Investors Service and two other local firms have slashed ratings of Reliance Capital or its short-term instruments, citing holdups in asset sales including asset management company, impacting liquidity and risks on loans to unprofitable affiliates.
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