Monetising subsidiaries as expected…. Nippon Life is raising its stake in Reliance Capital :: ICICI Securities, link

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Monetising subsidiaries as expected….
Nippon Life is raising its stake in Reliance Capital Asset Management
Company from the current 26% to 49%. However, the same is expected
in tranches. In the first tranche, it has acquired a 9% stake for | 657 crore
to reach 35%. This deal values the AMC at | 7300 crore on an AAUM of
| 122050 crore as on September 2014, which is the same (| 7390 crore on
FY16E AUM) as we had valued in our SOTP target. The balance 14% will
be acquired gradually by Nippon Life. However, the valuation for that will
depend on the AUM as on the date of the purchase.
The deal valued the AMC at 6% of its AAUM as on September 2014 as
the equity proportion in AUM is ~28%. Capital gains to the tune of over
| 550 crore out of deal is estimated. Accordingly, we raise our PAT
estimate for FY15E by 48% to | 1140 crore vs. | 772 crore earlier.
Stake sale in line with actions expected in near term
As stated in our Q2FY15 update, the management plans included:
1) Stake sale in the general insurance business up to 26% in the near
future and up to 49% for both general and life (as and when the limits for
foreign ownership are raised from 26% to 49%.
2) Stake sale in the asset management business over a period of time
We continue to expect consolidated PAT to grow at 19% CAGR to | 1052
crore over FY14-16E as maintained in our FY16 estimates. As Reliance
Capital’s stake in AMC falls to 58% vs. 67%, we revise AMC’s share in
SoTP value per share to | 173 vs. | 200 earlier. However, with surging
capital gains, we maintain our SoTP target price of | 562 and maintain
BUY on the stock.

LINK
http://content.icicidirect.com/mailimages/IDirect_RelianceCapital_QC_Nov14.pdf