Japan's Sumitomo Mitsui Trust Bank is picking 2.77 per cent stake in Reliance Capital Ltd., the flagship firm of Anil Ambani-led Reliance Group, through a preferential allotment, as per a stock market disclosure.
Sumitomo Mitsui Trust Group is the fourth largest bank in Japan (in terms of market capitalization and corporate loans) and Japan’s largest financial institution, managing assets of $ 682 billion with assets under custody of $ 1.8 trillion as of September 2014.
As part of the agreement, Sumitomo Mitsui Trust Bank will be taking an initial 2.77 percent strategic stake in Reliance Capital for Rs 371 crore ($ 58.4 million) through preferential allotment, with a lock-in period of one year. The investment is being made at Rs 530 per share.
“We believe Sumitomo Mitsui Trust will play an important role in the future of our company, through their all-round support and long standing experience, and will help accelerate our growth as we tap new opportunities and expand our existing businesses," Anil Ambani, chairman, Reliance Group, said.
“We are very pleased to be strategic alliance partners with Reliance Capital, which is one of India’s leading financial institutions. We are particularly delighted to collaborate on a number of business initiatives that are proposed, and thereby contribute toward the development of the Indian financial industry through our collaboration with Reliance Capital, which we believe will be a very successful one," said Hitoshi Tsunekage, president, Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank and Reliance Capital will collaborate in providing solutions for their clients, including those in the area of M&A opportunities in India and Japan, and will assist each other in distribution of their respective financial products through their networks.
Reliance Capital will support clients of Sumitomo Mitsui Trust Bank in their supply chain financing and advisory needs in India. Sumitomo Mitsui Trust Bank will support Reliance Group across its various listed group companies by providing wide range of financial and other services in Japan and Asia Pacific region, the release added.
Reliance Capital also reiterated its intention for entering the banking sector with the support of Sumitomo Mitsui Trust Bank as strategic partner, as and when the Reserve Bank of India's policies permit formation of the same. It was in the race for a banking licence which was later awarded to IDFC and micro-lender Bandhan.
Single foreign investors can pick up to 10 per cent stake in Indian banks which means that as an when Reliance Capital does gets a licence to open a bank Sumitomo Mitsui may pick as much as 10 per cent stake in the venture.
This marks yet another partnership for Reliance Capital with a Japanese firm. Earlier it had roped in Nippon Life.
Nippon had acquired 26 per cent in Reliance Life Insurance Co Ltd for Rs 3,062 crore ($680 million) in 2011 and a similar stake in Reliance Capital Asset Management (RCAM) a year later for $290 million.
Last month the partners extended this alliance which seeks to give Nippon as much as 49 per cent in RCAM. In the first tranche, Nippon Life has agreed to invest Rs 657 crore ($108 million) to acquire an additional stake of 9 per cent in RCAM to take its holding to 35 per cent. The transaction pegs Reliance Capital Asset Management’s valuation at Rs 7,300 crore ($1.2 billion). Subsequently, the Japanese firm will have an option to raise the stake further by an additional 14 per cent, to reach 49 per cent, in tranches.
