On 23rd May 2019, Anil Ambani had signed an agreement with Nippon Life Insurance to exit Reliance Nippon Life Asset Management Limited (RNAM). Reliance Capital is going to receive about Rs. 6000 crores at Rs. 230 per share selling 42.88% of the stake. This will reduce the debt of Reliance Capital by 50% in FY20. Nippon Life Insurance is planning to offer the stake to the public at Rs. 230 per share. This is abiding the takeover regulations of Securities and Exchange Board of India (SEBI). This price includes a premium of 15.5% to the 60-day minimum market price of the shares.
Meanwhile, earlier on 17th May 2019, in a separate statement by Reliance Capital, there was an invitation for its partner for acquisition. The company invited Nippon Life Insurance Company Limited to make an offer to acquire stakes in Reliance Nippon Life Asset Management Limited (RNAM). Reliance Capital and Nippon Life Insurance Company have an equal stake of 42.88% each. Reliance Capital has invited Nippon Life Insurance Company to acquire full 42.88% stake of it in RNAM.
After Reliance’s statement of inviting Nippon Life Insurance Company for acquisition, the share of Reliance Capital was up by about 2% at Rs. 114.5 on 17th May 2019.
Reliance Group has been in crisis since a long time but Mr Anil Ambani is trying his best to recoup the companies’ position. In March 2019, Reliance Communications’ (RCom) operational creditor, Mr Anil Ambani couldn’t repay his dues to Ericsson and had a risk to go to jail for it. His elder brother, Mr Mukesh Ambani came to his rescue by paying Rs. 460 crores to Ericsson.
RCom was defaulting on its repayments of Rs. 45,000 crores debt from past three years. Therefore, the company started selling off assets like towers and land to pay off the debt. Whereas now, Reliance’s housing finance companies are doing the same. Thus, rating agencies are downgrading the ratings of some of these companies. The agencies are also fearful of the Reliance companies defaulting like the IL&FS and DHFL.
Reliance Capital repaid their NCDs
Reliance Capital on Friday, 17th May 2019, gave a brief statement stating that it has repaid Rs. 650 crore of non-convertible bonds. These non-convertible bonds were due on the same day.
This disclosure of repayment comes when Anil Ambani-led Reliance Group Companies were facing a liquidity crisis. The debt instruments of Reliance Commercial Finance and Reliance Home Finance have been downgraded by ICRA and Credit Analysis and Research (CARE). Reliance Commercial Finance’s long term bank facilities of Rs. 12,700 crores were downgraded to CARE D from CARE BBB+. Another debt of Rs. 5000 crores of Reliance Commercial Finance were also downgraded from CARE BBB+ to CARE C. Before these down gradations, commercial papers of Reliance Capital were downgraded by ICRA. The reasons pointed out by the rating agencies were rescheduling of non-commercial debentures and setbacks in repayment of bank loans. Amidst all this, the statement of non-commercial bonds of Rs. 650 crores due on 17th May 2019 repaid came as a shock.