By selling its entire stake to (Reliance Nippon Asset Management) RNAM’s foreign partner Nippon Life Insurance, the celebrated flagship company of Anil Ambani, Reliance Capital has decided to step down from the mutual funds business.
The financial services business of ADAG (Anil Dhirubhai Ambani Group) is all set to sell its 42.88 per cent stake to Nippon Life Insurance of Japan and other financial investors in the joint venture.
Simultaneously, the shares of Reliance Nippon AMC surged 7.93% to Rs 235 today after the Reliance Capital surrendered its 100% stake to Nippon. On the other hand, as per the reports, Nippon Life has planned to make an offer to the public shareholders of RNAM at Rs 230 per share.
Nippon, which also owns 42.88% of the joint venture, will increase its shareholding to 75%–the maximum permissible promoter stake for listed companies, as required under SEBI regulations.
The firm will also reach the maximum permissible promoter shareholding of 75% for listed companies. The transaction price represents a premium of 15.5% to the minimum 60-day price, as per the SEBI.
Hence, Reliance Capital’s stake sale development came after the credit rating company CARE (Credit Analysis & Research Ltd) chopped the creditworthiness of the former by few notches, citing reduced fund raising ability amid defaults by RCL’s subsidiaries.
In a statement given on 20 May, the CARE Ratings said, “The revision in the ratings of RCL factors in the recent developments including default by its subsidiaries ‘Reliance Home Finance Limited’ (RHFL) and ‘Reliance Commercial Finance Limited’ (RCFL), which is expected to further reduce the group’s financial flexibility and diminish RCL’s ability to raise funds from the markets.”
Adding on, the other Reliance Group companies include Reliance Infrastructure Ltd, Reliance Power Ltd, Reliance Naval and Engineering Ltd, and Reliance Home Finance Ltd.