Mumbai: In the largest FDI in the financial services sector, Japanese insurance firm Nippon Life Insurance Company will acquire 26% stake in Reliance Life Insurance for $680 million (approximately Rs3,062 crore).
“Nippon Life Insurance will invest an aggregate value of Rs3,062 crore ($680 million) to acquire a 26% strategic stake in Reliance Life Insurance. This is the largest FDI in Indian financial services sector as well as insurance,” Reliance Capital CEO Sam Ghosh said on Monday.
The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs11,500 crore ($2.6 billion).
Reliance Capital currently holds a 100% stake in Reliance Life. The holding company has till now invested Rs3,000 crore in its life insurance venture.
However, the deal is subjected to approval by insurance regulator Irda and the Japanese regulator, Ghosh added.
When asked about the time frame to get approvals, he said, “We hope it happens as quickly as possible”.
Nippon is the 6th largest life insurer in the world and the largest private life insurance company in Japan and Asia.
Commenting on the development, Reliance Capital chairman Anil Ambani said, “At this time, our thoughts are with the people of Japan, bravely facing an unprecedented natural catastrophe. We pray for strength to the country, its people and our new partners and the entire Nippon Life family, to overcome the trauma of the tragic loss of life and devastation caused by this calamity”.
Answering queries on Reliance Life’s initial public offer plans, Ghosh said, “We will, I think, discuss IPO at a later date. At this point, if you notice 26%, IPO is not a possible option”.
As per the current rules, a foreign entity can hold up to 26% stake in an Indian insurance firm. Reliance Capital wholly owns Reliance Life, a business it acquired from AMP Sanmar in 2005.
Nippon Life Insurance President Kunie Okamoto said,“We both share the same passion and philosophy and, together, we believe we can develop a strategic partnership to help Reliance Life Insurance become a world-class insurance company in India”.
Reliance Life is the largest insurer amongst the 22 private life insurers in India in terms of the number of individual policies sold.
It has sold over 7 million policies through its network of nearly 1,250 offices and over 2,15,000 advisors, according to a company statement.
Reliance Life managed assets of over Rs17,000 crore ($3.7 billion) as of 31 December, 2010.
Shares of Reliance Capital were up 5.87% at Rs542.10 on the BSE at 1320 hours.