A REPORT ON

NIPPON (ACQUIRER)
VS
RELIANCE AMC
(TARGET)
Submitted in partial fulfilment of the requirements for the degree of
Master of Business Administration (MBA) by
SMRUTI RANJAN MOHANTY- 313SM1004

SCHOOL OF MANAGEMENT
NIT ROURKELA
APRIL -2015

SL. No.
CHAPTERS
PAGE NO.
1.
3
TRENDS IN MERGER AND ACQUISITION ACTIVITY IN
INDIA AND WORLD
1.1.1
4
NIPPON LIFE
1.1.2
4
RELIANCE AMC
2.
5
INDUSTRY/ SECTOR DETAILS
3.
5
MARKET OVERVIEW
4.
6
DEAL BETWEEN NIPPON LIFE & RELIANCE AMC DETAILS
5.
6.

ANALYSIS OF THE DEAL

NIPPON PRODUCT PORTFOLIO
CONCLUSION
REFERENCE

7
8
9
9

1. TRENDS IN MERGER AND ACQUISITION ACTIVITY IN INDIA AND WORLD

India in the recent years has showed tremendous growth in the M&A deal. It has been
actively playing in all industrial sectors. It is widely spreading far across the stretches of all
industrial verticals and on all business platforms. The increasing volume is witnessed in
various sectors like that of finance, pharmaceuticals, telecom, FMCG, industrial
development,

automotive

and

metals.

The volume of M&A transactions in India has apparently increased to about 67.2 billion USD
in 2010 from 21.3 billion USD in 2009. At present the industry is witnessing a whopping
270% increase in M&A deal in the first quarter of the financial year. This increasing
percentage is mainly attributed to the increasing cross-border M&A transactions. Over that
increasing interest of foreign companies in Indian companies has given a tremendous push to
such

transactions.

Large Indian companies are going through a phase of growth as all are exploring growth
potential in foreign markets and on the other end even international companies is targeting
Indian companies for growth and expansion. Some of the major factors resulting in this
sudden growth of merger and acquisition deal in India are favorable government policies,
excess of capital flow, economic stability, corporate investments, and dynamic attitude of
Indian

companies.

The recent merger and acquisition 2011 made by Indian companies worldwide are those of
Tata Steel acquiring Corus Group plc, UK based company with a deal of US $12,000 million
and

Hindalco

acquiring

Novelis

from

Canada

for

US

$6,000

million.

With these major mergers and many more on the annual chart, M&A services India is taking
a revolutionary form. Creating a niche on all platforms of corporate businesses, merger and
acquisition in India is constantly rising with edge over competition.

1.1 COMPANY DETAILS

1.1.1 Nippon Life
Nippon Life is a 122 year Global Fortune 100 company, and manages over USD 600 billion
(Rs 30 Lakh crore) in assets, amongst the largest total assets in the world for any life insurer.
The company is the 7th largest life insurer in the world and the Number 1 private life insurer
in Asia and Japan.
Nippon Life Insurance, also called Nissay, is Japan's largest private life insurer with revenues
of Rs 3,49,834 crore (US$ 80 billion) and profits of over Rs 12,199 crore (US$ 3 billion).
The company, which has over 14 million policies in Japan, offers a wide range of products,
including individual and group life and annuity policies through various distribution channels
and mainly uses a face-to-face sales channel for its traditional insurance products. Company
primarily operates in Japan, North America, Europe and Asia and is headquartered in Osaka,
Japan.
1.1.2 Reliance AMC
Reliance Capital Asset Management is the second largest AMC in India, in terms of AUM.
The fund house managed Rs. 93,148 crore (US$ 19 billion) as on September 30, 2011, across
mutual funds, managed accounts and hedge funds.
The average assets under management (AAUM) of RMF, for the quarter ended September
30, 2011 stood at Rs. 90,661 crore (US$ 18.5 billion).
RCAM is the only AMC in India to have been chosen to manage both, the public funds
sponsored by the Indian government - the Provident Fund and Pension Fund.
The company offers a well-rounded portfolio of products, that meet varying requirements,
and constantly endeavors to launch innovative products and customer service initiatives to
enhance value for its investors.

2. Insurance sector in India

The insurance industry of India consists of 52 insurance companies of which 24 are in life
insurance business and 28 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is sole national reinsurer, namely, General Insurance Corporation of India. Other stakeholders in Indian
Insurance market include agents (individual and corporate), brokers, surveyors and third
party administrators servicing health insurance claims.
Out of 28 non-life insurance companies, five private sector insurers are registered to
underwrite policies exclusively in health, personal accident and travel insurance segments.
They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance
Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance
Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more
specialised insurers belonging to public sector, namely, Export Credit Guarantee Corporation
of India for Credit Insurance and Agriculture Insurance Company Ltd for crop
insurance.(source: ibef.org)

2.1 Market Size

India's life insurance sector is the biggest in the world with about 36 crore policies which are
expected to increase at a compound annual growth rate (CAGR) of 12-15 per cent over the
next five years. The insurance industry plans to hike penetration levels to five per cent by
2020, and could top the US$ 1 trillion mark in the next seven years.
The total market size of India's insurance sector is projected to touch US$ 350-400 billion by
2020 from US$ 66.4 billion in FY13.
The general insurance business in India is currently at Rs 77,000 crore (US$ 12.41 billion)
premium per annum industry and is growing at a healthy rate of 17 per cent.
The Rs 12,606 crore (US$ 2.03 billion) domestic health insurance business accounts for
about a quarter of the total non-life insurance business in the country. (source: ibef.org)

Source: IBEF.org

3. DEAL BETWEEN NIPPON LIFE & RELIANCE AMC DETAILS

Nippon life insurance to acquire 26 per cent stake in reliance capital asset
management.

Transaction pegs reliance capital asset management valuation at approx. Rs 5,600

crore (us$ 1.1 billion).

Nippon life insurance to invest Rs 1,450 crore (us$ 290 million) for 26 per cent stake.

Largest investment in any Indian asset management company till date.

Largest FDI in Indian mutual fund sector till date.

Nippon life manages assets of over us$ 600 billion (Rs 30 lakh crore).

Nippon life total assets amongst largest in the world for any life insurer.

Nippon life has already invested Rs. 3,062 crore (us$ 680 million) for 26 per cent
stake in reliance life insurance.

Transaction pegged reliance life insurance valuation at Rs 11,500 crore (us$

2.6billion).

4. ANALYSIS OF THE DEAL

With acquiring reliance Amc Nippon life had increased its presence in Indias Insurance
sector. After bringing in Nippon Life as strategic partner in its life insurance and asset
management businesses, Reliance Capital is now looking to expand further this
partnership and would help the Japanese financial services giant bring part of its USD 600
billion assets under management to India. R-Cap would work to grow its Nippon's
investments portfolio in India and help Nippon make and manage sizeable and
meaningful investments in India in near term. The focus will be to get a sizeable part of
their assets to India.

5. NIPPON PRODUCT PORTFOLIO

Nippon Life Benefits delivers a full range of health benefit programs to companies of
all sizes.

Medical
Comprehensive, affordable and worry-free plans for companies and their employees.

Dental
Plans designed with preventive care in mind, and members can use the dentist of their
choice.

Life
Insurance that gives members and their families added security should the unexpected
occur.

Disability
Complete coverage for both short-term and long-term disability.

Vision
Includes allowances for eye exams, glasses, and contacts lenses.

Wellness
Custom solutions that help boost organizational health while helping employees
improve their personal health and well-being.

Prescription Drugs
Nippon Life Benefits offers the convenience of CVS Caremark Health Systems and
its 60,000 participating pharmacies nationwide.

Care Management
Utilization Management, Case Management, and Disease Management solutions.

Employee Assistance Program (EAP)

Offers the resources and tools to help employees live their healthiest, most productive
lives.

6. CONCLUSION
With a long product portfolio and being the largest player in insurance industry in Asia
and japan and the7th largest player in the world. Nippon life had increase its portfolio by
acquiring a major chunk in reliance amc, which has a dedicated and experienced
management team, thus diversifying its portfolio and providing new and innovative plans
and products to its customers. With this M&A reliance will increase its share price in the
Indian market also its presence in India and globally.

Reference:
1. http://articles.economictimes.indiatimes.com/keyword/nippon-life
2. RCAM-Nippon Release June 2014

3. http://www.mergersandacquisitions.in/merger-and-acquisition-in-india.htm
4. www.policyholder.gov.in/indian_insurance_market.aspx