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Sunday, April 17, 2011

Reliance Life Insurance's deal with Nippon Life may get delayed

Nippon Life, which announced a deal to pick up 26% stake in Reliance Life Insurance just around the time the Tsunami struck Japan might have to wait a bit longer before the deal goes through. As per local rules in India, a company needs to be in existence for 10 years before it can divest any stake. Reliance Life completes 10 years in January 2012, and if the deal is to be completed before that, it will need special approval from the regulator IRDA. Reliance Life came into existence by buying the erstwhile AMP Sanmar.

Nippon Life is to pay Rs 3062 crores for a 26% stake, valuing the company at around 12250 crores.

In our humble opinion, the valuation seems way too inflated given the scale of operations of Reliance Life. But then, the Japanese are well known for overpaying!

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