War erupts between Nippon Life, RCAP Administrator and Aditya Birla Sun Life over RNLIC stake

The sale of Reliance Capital`s (RCAP) 51 per cent stake in Reliance Nippon Life Insurance Company (RNLIC), in the ongoing Corporate Insolvency Resolution Process, has pitched Nippon Life of Japan against RCAP Administrator and Aditya Birla Sun Life Insurance.

Miffed at the entry of Aditya Birla Sun Life in the bidding process of RNLIC, and that too so close to the binding bids submission deadline, Nippon Life, a 49 per cent stakeholder in RNLIC, has made it clear to the Administrator and Aditya Birla Sun life that it is not interested in merging with Aditya Birla Insurance or sell its stake, at any cost.

A source close to the development revealed that Nippon Life - Japan has communicated its resentment and reservations to the RCAP Administrator, Aditya Birla Sun Life and its foreign partner, Sun Life Financial Inc.

Nippon Life is keen on acquiring RCAP`s 51 per cent stake in RNLIC, through a strategic partner, as Indian Insurance rules do not allow a foreign company to have an equity stake of more than 74 per cent in an Indian Insurance entity.

The sources revealed that the entry of Aditya Birla Sun Life seems to have upset the plans to Japnese Insurance major. In case Birla Sun Life succeeds in acquiring 51 per cent stake of RCAP in RNLIC, it will have to merge the RNLIC with its existing insurance company i.e. Birla Sun Life Insurance, due to the IRDA guidelines of no cross holding being allowed between the two insurance companies.

In case of merger of RNLIC with Birla Sun Life, Nippon Life`s stake would be hugely diluted to below 10 per cent in the merged entity, and it would lose all the shareholder and the governance Rights that exist in terms of nominating the CEO, equal representation on the Board, member of the audit committee, and the Veto rights on the reserved matters, in the RNLIC.

According to a source, Nippon Life, in a letter to the RCAP Administrator, has said that merging with another insurance entity or selling its stake, is not an option for them. It has expressed its intention to stay invested in the Indian Insurance market as a committed long term player.

Nippon Life has also told the Administrator that the company was surprised at the entry of Aditya Birla group in the RNLIC bidding process, as they had held various meetings with the Administrator and discussed their plans to bid for RNLIC`s remaining 51 per cent stake by forging partnership with a strategic investor.

Nippon Life is believed to be in talks with some Indian companies, including Torrent Group, to form a strategic partnership, in order to bid for RCAP`s 51 per cent stake in RNLIC, but Aditya Birla`s entry has upset Nippon`s plans and complicated the matter for them.

According to sources, Nippon Life is also comfortable with a scenario where RCAP`s 51 per cent is acquired by someone like Hindujas, who are the bidder for RCap under Option I CIC plan, as they see the potential of getting IndusInd Bank as a Banca partner, which is key to the growth of life distribution business.

RNLIC currently has no Banca partner, which restricts its reach and access, impacting the growth of business.

A source said that it would be interesting to see how this war for the acquisition of RNLIC`s stake pans out between the Nippon Life and Aditya Birla.

The last date to submit the binding bids for RCAP and its subsidiaries is November 28.

Notably, Reliance Capital and its multiple subsidiaries, including RNLIC, are undergoing RBI governed Corporate Insolvency Resolution Process. Nippon Life, Japan, is a 49 per cent stakeholder in RNLIC.

Initially, RNLIC had not received even a single non-binding bid from any prospective applicant, but few weeks back, Aditya Birla Capital suddenly entered the fray and submitted an Extension of Interest (EOI) for RCAP`s 51 per cent stake in RNLIC.

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