Reliance Nippon Life’s Rs 1,542-Crore IPO Opens On October 25

Reliance Nippon Life Asset Management Company Ltd. will launch its three-day initial public offering on October 25 to raise Rs 1,542 crore as it bets on a shift from investments in gold and real estate to mutual funds and insurance.

India’s third largest asset manager will sell shares at Rs 247-252 apiece in what will be the first IPO by such a company.

Offer Details

• The company plans to sell 6.12 crore shares or 10 percent of its stake.
• About 40 percent of the total shares will be a fresh issue worth Rs 290 crore and the rest an offer for sale.
• The IPO values the company at Rs 15,000 crore.
• JM Financial, CLSA India, Nomura Financial and Axis Capital are the book running lead managers to the offer.

“With money coming into the banking system post demonetisation, we have seen that the asset management industry has helped retail investors in creating wealth,” said Sandeep Sikka, chief executive officer of Reliance Nippon Life AMC. Only 3 percent of Indians invest in mutual funds. “With fixed deposit rates and interest rates going down, we see more money flowing into the mutual funds in the future,” he said.

Post the offer, Anil Ambani’s Reliance Capital and Nippon Life will remain equal shareholders with a total stake of about 86 percent. “As per SEBI listing regulations, all companies need to have a minimum public shareholding of 25 percent. Post the IPO, the company will need to dilute a further 11 percent in the next three years,” said Sikka.

The company plans to use the proceeds for acquisitions. “We will expand our network to 500 branches across India over the next three years. The money will also be invested in technology and branding,” he said.

Reliance Nippon Life acquired Goldman Sachs business last year. The company will keep eyeing such opportunities for inorganic growth, Sikka said. “There are too many players in the industry right now, and we do see some consolidation happening further.”

It will loan Rs 125 crore to its subsidiary Reliance AIF, which manages six schemes, of which four are closed for subscription. The company will look to launch six to 10 new alternate investment fund schemes in the next three financial years.