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Reliance Capital — Nippon Life to acquire 26%
in Reliance Life; Raise PO, Buy
Price Objective Change
Nippon Life of Japan to acquire 26% stake in Reliance Life
Nippon Life of Japan has agreed to acquire a 26% stake for Rs30.6bn
(US$680mn) in Reliance Life (R-Life), subject to all regulatory (IRDA, RBI)
approvals. The deal values R-Life at US$2.6bn, which is +60% higher than our
estimates. Nippon Life will get one board seat in R-Life post the deal closure. RCap
has invested ~Rs31bn till date in the life insurance venture. Pre-deal, P/EV is
estimated at 3.0x FY10 BofAML est. EV, however, post deal (assuming ~10% of
cash is directly invested in life biz.) imputed P/EV (BofAML Est.) is at ~1.6x FY12
EV.
Raise PO to Rs700/shr. capturing excess cash value
We maintain our life insurance biz. value at ~Rs70bn (Rs286/shr.), as we would
like to still see improved operational performance across the sector currently
experiencing regulatory headwinds. While value of R-Life’s stake in insurance
comes down to Rs52bn (74%) post stake sale, there is an additional equity
infusion of Rs30bn at R-Cap level. Hence, aggregate value for ‘Co’. is increased
to Rs82bn, assigning only 1x to capital infusion. This is Rs12bn (Rs50/shr) higher
than our original est. Hence we raise our Price Objective by Rs50/shr. to
Rs700/shr. This is on back of a recent upgrade by 2 notches to Buy (see-
Reliance Capital, 14 March 2011).
Nippon Life – 6th largest in the world; # 1 in Asia & Japan
Nippon Life is 6th largest life insurer in the world and # 1 private life insurer in
Asia and Japan. Nippon Life has sold ~14.7mn policies (in-force) to date, while RLife
has already sold ~7mn policies to date.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Capital — Nippon Life to acquire 26%
in Reliance Life; Raise PO, Buy
Price Objective Change
Nippon Life of Japan to acquire 26% stake in Reliance Life
Nippon Life of Japan has agreed to acquire a 26% stake for Rs30.6bn
(US$680mn) in Reliance Life (R-Life), subject to all regulatory (IRDA, RBI)
approvals. The deal values R-Life at US$2.6bn, which is +60% higher than our
estimates. Nippon Life will get one board seat in R-Life post the deal closure. RCap
has invested ~Rs31bn till date in the life insurance venture. Pre-deal, P/EV is
estimated at 3.0x FY10 BofAML est. EV, however, post deal (assuming ~10% of
cash is directly invested in life biz.) imputed P/EV (BofAML Est.) is at ~1.6x FY12
EV.
Raise PO to Rs700/shr. capturing excess cash value
We maintain our life insurance biz. value at ~Rs70bn (Rs286/shr.), as we would
like to still see improved operational performance across the sector currently
experiencing regulatory headwinds. While value of R-Life’s stake in insurance
comes down to Rs52bn (74%) post stake sale, there is an additional equity
infusion of Rs30bn at R-Cap level. Hence, aggregate value for ‘Co’. is increased
to Rs82bn, assigning only 1x to capital infusion. This is Rs12bn (Rs50/shr) higher
than our original est. Hence we raise our Price Objective by Rs50/shr. to
Rs700/shr. This is on back of a recent upgrade by 2 notches to Buy (see-
Reliance Capital, 14 March 2011).
Nippon Life – 6th largest in the world; # 1 in Asia & Japan
Nippon Life is 6th largest life insurer in the world and # 1 private life insurer in
Asia and Japan. Nippon Life has sold ~14.7mn policies (in-force) to date, while RLife
has already sold ~7mn policies to date.
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