Mumbai: Nippon Life Insurance has written to the administrator of Reliance Capital raising concerns over the sale of the company’s stake in Reliance Nippon Life Insurance (RNLI). While the administrator has sought to sell the assets to the highest bidder, Nippon Life has said that it intends to remain invested in the life insurance company where it holds 49% stake and does not want RNLI to be merged with another life company.
The Japanese giant has raised specific concerns over the expression of interest by Aditya Birla Sun Life for Reliance Capital’s 51% stake in the company. If Birla Sun Life buys Reliance Nippon Life, it would be forced to do a merger as the insurance regulator allows a promoter to own one insurance company.
Nippon Life has a key role to play in the resolution of Reliance Capital. Besides its stake in the life insurance venture, the company also has a pledge on the shares of Reliance General Insurance through an investment made by Nippon India Mutual Fund along with Credit Suisse.
While Nippon Life has the headroom to increase stake in the life venture up to 74%, it cannot buy the entire 51% stake because of foreign direct investment regulations.
Reliance Nippon Life and Reliance General Insurance hold the maximum value in the group resolution of Reliance Capital where a large part of the net worth has been wiped off due to bad debts. Most of the private equity players who have bid are eyeing value in the insurance companies.