Nippon Life takes cover in India

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Japan’s Nippon Life Insurance is to acquire a 26% strategic stake in Reliance Life Insurance valued at ₹30.6 billion (US$680 million). The acquisition will be made through a fresh subscription of equity shares and a purchase of shares from the promoters of Reliance Life.

Japanese_parasolNippon Life is Asia’s biggest life insurance company and its investment in Reliance Life is the largest foreign direct investment in India’s financial services and insurance sector.

Devastation caused by the earthquake and tsunami which struck Japan on 11 March has not thwarted the deal. “Nippon Life went ahead with signing on 14 March despite the calamities and this reflects that they see a lot of value in this investment,” said Upendra Joshi, a partner at Khaitan & Co who advised Nippon Life.

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“It is at times like this when we realize how dedicated and focused Japan is and how sincere its people are,” said Vandana Shroff, a senior partner at Amarchand Mangaldas, who, along with partner Ravindra Bandhakavi, advised Reliance Capital and Reliance Life on the deal. “Even during these dark hours we saw hardly any blips in ongoing transactions.”

The deal promises to grant Nippon Life an untapped insurance market and lend Reliance Life the industry knowledge necessary to develop sophisticated insurance products and practices.

“Nippon Life is the biggest insurance player in Japan with deep local penetration,” Joshi told India Business Law Journal. “As Japan’s largest insurer, it is feeling the need to look outward, and India, with its burgeoning markets and young population, was a natural investment choice. The buying power of the average Indian is increasing and so is the awareness of insurance needs.”

The deal is expected to close by 30 September, once approvals from the Reserve Bank of India and the Insurance Regulatory and Development Authority of India have been received.

Mitsubishi UFJ Morgan Stanley Securities in Tokyo were bankers to Nippon Life, which was advised by Anderson Mori & Tomotsune and Khaitan & Co. Reliance Life was advised by Deutsche Bank in Singapore and Deutsche Equities India in Mumbai.

The insurance sector in India is heavily regulated and dominated by a handful of players. For these reasons, major investments in the sector are relatively rare. “Most insurance companies already have joint ventures with foreign partners and thus new investments may be sparse,” said Joshi.

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