Nippon to invest Rs1350 cr in Reliance Cap; stock up

NEW DELHI: Shares of Reliance Capital Ltd surged over 5% on Thursday after reports suggested that Japan's Nippon Life Insurance Co plans to invest about 20 billion yen or Rs 1350 cr in Reliance Capital Asset Management, the fund management unit of Reliance Capital.

According to reports, Nippon Life has agreed to buy a 26 percent stake in the Reliance Capital subsidiary and the Japanese company will announce the investment later in the day.

"It is a decent deal and more of strategic in nature as Reliance Capital had also sold its 26% stake in Reliance Life to Nippon in 2011," said Dhirendra Kumar, CEO, Value Research.

Reliance Capital agreed in March last year to sell a 26 percent stake in its life insurance business to Nippon Life for $680 million, valuing the business at $2.6 billion.

"Reliance AMC has its own strength and commands premium to the standard valuation in the industry given its strong presence in the retail space. In an environment where things are pretty hostile for AMCs, it has attained a leadership position,” added Dhirendra.

At 12:35 p.m., shares of the company were trading 4% higher at Rs 330.55. The stock has hit a high of Rs 334.05 and a low of Rs 322.40 so far in trade. The stock has already rallied over 40% so far in the month of January.

Technical View: Vijay Bhambwani, Author, CEO, BSPLindia.com

The stock is likely to go up in the absolute near term. It also reflects the market with a mild lag. So at close to Rs 325, there is headroom left maybe up to 330-335 levels odd before it starts to react downwards.