Aditya Birla Capital & Nippon Life Initiates Talk For A Merger
Updated On Nov 10, 2022
According to the latest reports, India-based Aditya Birla Capital and Japan-based Nippon Life are undergoing discussions regarding the merging of their insurance ventures. At present, Nippon Life has a 49% share in the debt-ridden Reliance Nippon Life Insurance Company or RNLIC which is currently ongoing an insolvency resolution process. Thus, this merger is possible only if Aditya Birla Capital successfully bids for Reliance Capital Limited’s Life Insurance venture.
Moreover, as per the guidelines of IRDAI or the Insurance Regulatory and Development Authority, any entity cannot float more than two insurance entities, be it life insurance or non-life insurance. Thus, as a result of this mandatory guideline issued by IRDAI, it is imperative for Aditya Birla Capital to merge with Nippon Life, provided the former emerges as the successful bidder.
As per discussions, the last date for submitting bids for Reliance Capital Limited or RCL and its subsidiaries is scheduled to be 28th Nov 2022. Reliance Capital Limited (RCL) has left it open for bidders to either bid for RCL and its eight subsidiaries or alternatively individually bid for its subsidiaries. These eight subsidiaries include health insurance, life insurance, securities business and asset reconstruction, and general insurance, to name a few. Furthermore, it was last year in November when the Reserve Bank of India superseded RCL’s board of directors on account of payment delays. Nageswara Rao Y, the former executive director of the Bank of Maharashtra was henceforth appointed as the administrator of RCL’s Corporate Insolvency Resolution Process (CIRP) by the Reserve Bank of India on 29th November 2021.
If the merger between Aditya Birla Capital and Nippon Life is successful, then there is a high possibility that the latter will face a major dilution in its holdings. According to reports, the former 49% stake may dip to 15% after the proper valuation of both these leading insurance entities happens.