NipponLife turns against stake sale in RNLIC

Mumbai: 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.