Aditya Birla Capital and Nippon Life initiate talks to merge life insurance business through joint venture

Aditya Birla Capital is believed to be in discussion with Japan-based Nippon Life for merger of respective insurance ventures if the former emerges as successful bidder for life insurance venture of debt-ridden Reliance Capital Ltd (RCL), sources said.

Nippon Life, who is 49 per cent partner in Reliance Nippon Life Insurance Company (RNLIC), may consider a merger between Reliance Nippon Life and Birla Sun Life Insurance, a part of Aditya Birla Capital.

RNLIC is a subsidiary of debt-ridden Reliance Capital which is undergoing the insolvency resolution process.

As per the IRDAI guidelines, an entity cannot float two life or non-life insurance entities. As a result, it would be mandatory for Birla Sun Life to merge with Reliance Nippon Life Insurance if its promoters emerge as successful bidder during resolution process of RCL.

Aditya Birla Capital did not respond to the query sent by PTI in this regard.

According to sources, Nippon Life will face dilution of stake in the merged entity from the current 49 per cent to about 15 per cent based on valuation of both insurance entities.

The last date for submitting binding bids for Reliance Capital Ltd (RCL) and its subsidiaries is November 28.

RCL had offered two options to all the bidders. Under the first option, companies could bid for Reliance Capital Ltd, including its eight subsidiaries or clusters. The second option gave the bidders freedom to bid for its subsidiaries individually or in a combination.

RCL has eight businesses that are on the block. These include general insurance, life insurance, health insurance, securities business and asset reconstruction, among others.

The Reserve Bank of India (RBI) had on November 29 last year superseded the board of RCL in view of payment defaults and serious governance issues.

The RBI appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm.

Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under the IBC.

The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The RBI subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the NCLT.

In February this year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.