Reliance Capital is selling stake in Reliance Nippon Life Asset Management and retail investors can subscribe to the offer on Thursday at a price above Rs 266.74.
Investors could buy shares of Reliance Nippon Life Asset Management and SBI Life Insurance in the share sales by their promoters on Thursday and Friday as both companies are trading at huge discount to their peers, said analysts. On Wednesday, shares of Reliance Nippon Life AMC declined 3.2 per cent to Rs 276.50. SBI Life lost 1.13 per cent to close at Rs 798.75.
Reliance Capital is selling stake in Reliance Nippon Life Asset Management and retail investors can subscribe to the offer on Thursday at a price above Rs 266.74. On Wednesday, the offer for sale reserved for institutional investors was subscribed 1.3 times. Though the floor price was fixed at Rs 262 per share, average bids from institutional investors came in at Rs 266.74.
Reliance Nippon shares have rallied 40 per cent in the last two months with Japan’s Nippon Life set to take charge of the management from Anil Ambani’s Reliance Group. Reliance Nippon currently trades at 35 times its trailing 12-month earnings as against HDFC Asset Management’s Price to Earnings ratio of 56 times.
“Compared with HDFC AMC valuations, Reliance Nippon has enough room for upside considering its healthy growth in AUMs, strong return ratios, asset-light business and stable investment management fees with rising equity contribution,” said Paras Bothra, VP-equity research, Ashika Stock Broking.
In the other share sale, the country’s largest lender State Bank of India is selling 4.5 per cent stake in SBI Life Insurance at a floor price of Rs 770 a piece. Analysts said the fair value of the stock is about Rs 900-910 per share. Retail investors will get to participate in the two-day share offer on Friday.
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“Valuations for SBI Life remains at discount from HDFC Life and hence comfort on risk reward remains high” said Pritesh Bumb, analyst, Prabhudas Lilladher. “We estimate EV (enterprise value) CAGR (compounded annual growth rate) growth of 19 per cent over FY20 & FY21 with strong RoEVs (Return on Enterprise Value) of 19 per cent and retain ‘buy’ with a target price of Rs 906”.
SBI will raise up to Rs 3,465 crore by offloading up to 4.5 per cent stake in SBI Life to bring down the promoter shareholding as per regulatory norms. The share sale process consists of a base issue of selling up to 3.5 per cent with an option to additionally sell up to 1 per cent of the total issued and paid-up equity share of SBI Life.
Kajal Gandhi, analyst at ICICI Sec, valued the stock at Rs 920 citing steady performance. “Strong distribution network, cost control and focus on high-margin protection business and rising persistency are expected to result in healthy operating RoEV at 18 per cent in FY20-21.”
