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Money Management

Reliance Nippon Life Asset Management’s shares spike as Reliance invites partner to bid for its stake

Reliance Nippon Life Asset Management's share price on the Mumbai stock exchange jumped for a second day Friday after local partner Reliance Capital said Thursday it was open to selling some or all of its 42.88% stake in the joint venture to Nippon Life.

Shares of the money manager, which reported 4.14 trillion rupees ($59 billion) in assets under management as of Dec. 31, closed Friday up 6.1% to 198.45 rupees, following a 20% spike the day before.

On Thursday, Reliance Capital, in a statement to the local stock exchange, said it had "invited its partner, Nippon Life Insurance Co. Ltd., to make an offer to acquire up to (the) 42.88% stake held by Reliance Capital in Reliance Nippon Life Asset Management Ltd. (RNAM). Nippon Life Insurance Co. Ltd. already holds (a) 42.88% stake in RNAM."

A Tokyo-based spokesman for Nippon Life Asset Management declined to comment. Spokesmen for Reliance Capital couldn't immediately be reached on Friday for further comment.

Reliance Capital, in a Feb. 16 statement to the stock exchange, acknowledged that a local ratings agency had downgraded its debt "primarily due to (a) delay in monetizing … non-core investments." The company said it remains confident it will be able to do so "over the next two quarters," positioning it to bring down its debt "significantly."

Cerulli Associates, in a research note, said a recent Supreme Court ruling directed affiliate Reliance Communication to meet payments owed to Ericsson India. Against that backdrop, Reliance Capital's move to offload its mutual fund stake can be seen in the context of attempts to resolve the group's debt challenges rather than reflecting any concerns about the outlook for its money management business.

This week's rally saw Reliance Nippon Life Asset Management's share price rebounding solidly from lows of less than 140 rupees a share at the start of 2019.

Even so, the latest close remains well below both the firm's 252 rupee initial public offering price as well as the 298.70 rupee high it reached on the day of the stock's Nov. 6, 2017, debut, when it became the first money manager to list on the Mumbai stock exchange.