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Reliance Capital plans asset management unit IPO as billionaire Ambani seeks funds

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MUMBAI (NewsRise) -- Anil Ambani-backed Reliance Capital plans to sell a 10% stake in its asset management unit through an initial public offering, marking the billionaire's latest effort to raise funds for his businesses.

The board of Reliance Capital, the finance arm of Ambani's business, has approved the listing of Reliance Nippon Life Asset Management, Chief Executive Sundeep Sikka said at a press conference on Wednesday. The company will list on the exchanges by March, he said.

The plan to list the asset management unit comes as Ambani faces mounting pressure from his telecom business saddled with billions of dollars in debt. The group's flagship Reliance Communications is struggling to service its debt of $6.9 billion amid losses caused by intense competition in India's telecom market. Rating agencies have cut the company's credit rating multiple times over the past one month, citing fears of a potential default.

Last week, the mobile phone carrier said it has received a seven-month reprieve from its lenders to service the debt. Ambani is looking to sell stakes in the company's tower unit to Canada's Brookfield Infrastructure and merge the core wireless business with Aircel, owned by Malaysia's Maxis Communications, to pare off 60% of the debt by September.

In a rare media briefing last Friday, Ambani said he doesn't plan to use funds from any of the group companies to pay off the debt in the telecom business.

Meanwhile, another unit Reliance Infrastructure has received the regulatory approval to raise 25 billion rupees ($388 million) through an IPO of its infrastructure investment trust Reliance InvIT. Earlier this year, Reliance Capital said it is looking to list its commercial and home finance businesses as well.

Reliance Capital will sell an additional 15% stake in the asset management unit in the next three years, CEO Sikka said. According to local media reports, the IPO may get a valuation of 200 billion rupees.

Reliance Nippon Life Asset Management, 49% owned by Japan's Nippon Life Insurance, has more than $55 billion of assets under management. In the fiscal year ended in March, the company's total income increased 9% to 14 billion rupees, while profit before tax grew 16% to 6 billion rupees.

Reliance Nippon's IPO plans come as a number of insurance companies and asset managers are looking to ride the boom in India's stock market.

Earlier this year, UTI Asset Management said it is seeking regulatory approval for an IPO this year and plans to list the stock in the next financial year. Last year, ICICI Prudential Life Insurance, a unit of India's largest private sector lender ICICI Bank, raised as much as $910 million through an initial public offer that was subscribed nearly 11 times the number of shares offered.

Indian companies raised as much as $4 billion through such share sales last year, roughly 85% more from a year earlier, making it the best in six years, according to data from Thomson Reuters.

Shares of Reliance Capital closed 4.03% higher in Mumbai trading, while Reliance Communications lost 3.73%. The benchmark BSE S&P Sensex closed 0.26% higher.

--Dhanya Ann Thoppil

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