Japan's largest life insurer Nippon Life Insurance is in talks with financial services firm Reliance Capital, controlled by Anil Ambani, to acquire a 26% stake into the Indian company's life insurance subsidiary for $724 million.
According to a person with information of the deal, the two companies have been in talks for more than 6 months now. “Reliance Life and Nippon Life have been in talks for more than six months. The deal was not going through because of some assessment issues. The talks got revived in the last two weeks," said the person, who declined to be identified as he is not authorized to talk to the media.
Reliance Life is the only life insurance company in which an Indian promoter owns 100% unlike many other ventures where overseas life insurers are partners. India's insurance sector laws have capped FDI at 26% although following governments have attempted to raise the foreign investment threshold.
Reliance Life MD and CEO Sam Ghosh declined to comment on the deal.
The life insurance business is highly capital intensive and takes close to 10 years for an insurer to break-even. That would mean only companies which have a cash pile or financial muscle can last the course. There have been reports of the Indian insurer planning an initial public offering and bringing in a strategic investor ahead of the planned share sale.
Earlier, Reliance Life was in talks with Swiss Life and China Life, but failed to close the deal. The company even tried to divest its stake through a public offer last year. It had approached the government to allow companies to list after carrying out five years of operation against the norm which stipulates that insurers can launch an IPO only after 10 years. Insurance companies are awaiting an adjustment to the Insurance Act, which will raise FDI to 49%.
Dai-ichi Life and Tokio Marine Life Insurance are the Japanese companies operating in India. Dai-ichi Life has tied up with Bank of India and Union Bank of India while Tokio Marine has partnered with Edelweiss for India foray.
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