Anil Ambani-led Reliance Group plans to come out with an initial public offering (IPO) during this fiscal year for its mutual fund arm, which is expected to value the company at about Rs. 20,000 crore. It could be the first initial public offering by a major asset management company (AMC) in India though smaller rival UTI MF's IPO plans have been in the works for a long time. "We would like to do it soon, but at the outer limit it would be done by March this fiscal," Sundeep Sikka, executive director and CEO, Reliance Nippon Life Asset Management, told reporters here following the board meeting.
The board of Reliance Nippon Life Asset Management (RNAM) on Wednesday approved a proposal to list its shares on the stock exchanges, the company said.
The company will use the funds raised from the IPO to grow the business as well as look for inorganic opportunities, Mr. Sikka said. Nippon will also be participating in the IPO.
"As a part of financial inclusion, we have been creating wealth for mutual fund unit holders. Now we also believe it's an opportunity for retail investors to participate as equity shareholders in the AMC," he said.
"Along with further consolidations happening in the economy we would like to be ready to take advantage of suitable acquisitions," he added.
The company would soon initiate the process to appoint merchant bankers, lawyers, and auditors to manage its IPO.
Reliance MF is the third largest player in 42-member strong mutual fund industry. RNAM has assets under management (AUM) of Rs. 3.6 lakh crore, including Rs. 2.11 lakh crore for the mutual fund.
Typically, asset management companies are valued at 5 per cent of AUM, which is likely to value Reliance MF at about Rs. 20,000 crore and a 10 per cent stake sale could fetch Rs. 2,000 crore, analyst and market sources said.
As per market regulator Sebi's listing norms, the company has to dilute a minimum of 10 per cent to list on stock exchanges which will increase to 25 per cent in three years.
Without divulging valuation details, Mr. Sikka said the aim is to dilute 10 per cent stake by March and further 15 per cent over three years as per Sebi norms.
This would be the first IPO by a Reliance group firm in about a decade since Reliance Power's public offer in 2008.
Reliance Nippon Life Asset Management is a subsidiary of Reliance Capital with Nippon Life Insurance Company as its strategic partner. Reliance Capital holds 51 per cent stake in RNAM.
UTI MF's public issue will allow a partial exit to four of its investors - State Bank of India, Life Insurance Corporation, Bank of Baroda and Punjab National Bank.