Reliance Capital, the financial services arm of Anil Ambani-led Reliance group, is keen on inducting a bank as a minority third partner in its life insurance venture, a top company official has said.
"We are thinking of offering a minority a stake to a banking partner in Reliance Life Insurance," said Sam Ghosh, CEO, Reliance Capital. "Both we and our partners (Nippon Life) have agreed to offer a stake of about 5% to a banking partner to expand and deepen the reach of our products."
Japan's Nippon Life Insurance company, in one of the largest foreign direct investment (FDI) deals in India's financial sector, had acquired 26% stake in Reliance Life for Rs. 3,062 crore, pegging the latter's valuation at Rs. 11,500 crore.
Ghosh said Reliance Capital's plans to list its life insurance business are critically linked to the change in policy lifting the cap on FDI in the insurance sector.
Last month, the Cabinet had approved the politically contentious move to hike FDI ceiling to 49% from 26% in India's rapidly growing private insurance sector, which was being hobbled by lack of capital.
Key allies and the opposition parties have vowed to resist the reforms when they come up for voting, especially in the Rajya Sabha, where the government does not enjoy a majority.
"The IPO issue can come up only when the FDI cap is raised to 49%. At this point, a domestic IPO does not make any sense," Ghosh said.
Reliance Capital has also sold a 26% stake in its asset management and mutual fund unit to Nippon Life for Rs. 1,450 crore.
Ghosh said that the company has made an overall net profit of Rs. 401 crore for the July-September quarter and each of the businesses this quarter did very well compared to the same quarter in the previous financial year.
"The profit at our asset management business (mutual fund) has been flat, primarily due to lower assets under management (AUM) in the first and second quarter this year as compared to higher AUMs in the same quarter last year," Ghosh said. "This quarter AUMs is at Rs. 86,000 crore and going forward into the next few quarters, it will be much higher resulting in increased profits," he added.