Mumbai: Reliance Capital Ltd (R-Cap), the financial services arm of the Anil Ambani-led Reliance Group, is looking to establish a firmer grip on overseas markets with its asset management business through its newly expanded partnership with Nippon Life Insurance Co.
Nippon, Japan’s largest and the world’s seventh largest life insurer, had picked up a 26% stake in R-Cap’s life insurance business for Rs 3,062 crore in March.
On 1 September, R-Cap announced it had entered into an understanding with Nippon Life to expand the scope of the collaboration across all R-Cap-promoted financial businesses, including asset management, and Nippon Life could also come in as a strategic investor.
“We are exploring three areas of collaboration,” Sam Ghosh, chief executive officer of R-Cap, said on Friday. “Nippon Life can help distribute some of our asset management products in overseas markets where they are strong, like South-East Asia and Japan.”
The asset management arm of R-Cap has over the past 12 months started operations and advisory services in overseas markets, including Singapore, Malaysia, Dubai and Mauritius.
Through this collaboration, R-Cap is also looking to enhance its asset management portfolio in India by helping manage a “few billion dollars” of Nippon Life’s money meant for investment in India through its various equity and debt-linked products.
Reliance Capital Asset Management, a part of R-Cap, is the largest asset management firm in India, managing around Rs 1.04 trillion across mutual funds, pension funds, managed accounts and hedge funds.
Nippon Life has around $600 billion of investments around the world.
If indeed R-Cap could get a few billion dollars of Nippon Life’s money to manage, it would be a “decent sum”, said V.K. Sharma, head of private broking and wealth management at HDFC Securities Ltd.
“It can be a mutually beneficial relationship between R-Cap and Nippon Life,” Sharma said. “However, the market will not ascribe any value to developments that can take place in the future. It will wait for the exact nature of the partnership to evolve.”
On Friday, R-Cap’s shares gained 1.01% to close at Rs 401.55 on the Bombay Stock Exchange, outperforming the 1.22% fall in the benchmark index, the Sensex. Its shares have lost 50.07% in past 12 months, significantly underperforming the Sensex’s 18.62% fall.
Another analyst with a Mumbai-based brokerage said a lot of positives could come out of this relationship. He did not want to be identified as he is not authorized to speak to the media directly.
Nippon Life clearly believes in R-Cap’s potential, he said, as it was so far sticking to its commitment of investing in its life insurance business despite the situation in Japan after the earthquake and tsunami and the global macroeconomic conditions.
“However, R-Cap has made a lot of plans in the past that subsequently dropped off the plate, so we need to wait and watch for exact details,” this analyst added.
Other than these two areas, the two companies will also evaluate a proposal for Nippon Life to pick up a stake in the asset management business, which is R-Cap’s biggest.
“Once the life insurance venture happened, we thought of extending the partnership (with Nippon Life) to other areas as well since we felt it was better to try and work with one partner,” Ghosh said.
The exact contours of the extended partnership with Nippon Life will emerge over the next three-four months and discussions around this are currently under way, Ghosh added.