Companies & Sectors
Reliance Cap in talks for stake sale in general insurance arm

Reliance Capital, the financial services arm of Anil Ambani-led Reliance Group, has already sold 26% stake in each of its mutual funds and life insurance units to Nippon Life

 
Mumbai: Financial services provider Reliance Capital group has begun talks to sell 26% equity in its general insurance unit to a foreign partner, and is open to selling further stake in life insurance and mutual fund units, reports PTI.
 
"We are in talks for sale of 26% stake in general insurance business to a foreign strategic partner," Reliance Capital CEO Sam Ghosh told PTI in an interview.
 
Without disclosing any names or potential deal size for Reliance General Insurance stake sale, Ghosh said that nothing has been finalised as yet and talks are still continuing.
 
Reliance Capital, the financial services arm of Anil Ambani-led Reliance Group, has already sold 26% stake in each of its mutual funds and life insurance units to Japanese financial services major Nippon Life.
 
Reliance Capital chief said the group is open to the idea of selling further stake in its life insurance unit, Reliance Life, as also in mutual funds arm, Reliance Capital Asset Management Company, at an appropriate time and the understanding with Nippon Life in this regard is "open-ended".
 
Nippon Life, one of the world's largest financial services group with assets under management of over $600 billion (more than Rs30 lakh crore), is a major player in life insurance and asset management businesses in Asia, but is not present in general insurance segment.
 
Currently, foreign investment is capped at 26% in the insurance business in India, but there are no such caps in the mutual funds segment. However, the government is considering increasing the foreign investment limit in the insurance sector to 49%.
 
Asked whether the group would be open to the idea of Nippon having a higher stake in Reliance Life when government hikes insurance FDI cap to 49%, Ghosh said: "The two companies have an understanding that if the market is opened up further, they would discuss the issue at that time." 
 
"Any decision in that regard will be taken only after the government further opens the sector and current understanding between the two partners is open-ended," he said.
 
Asked whether Reliance Cap would consider higher stake for Nippon Life in its mutual fund business as well, Ghosh said that the understanding was same for Reliance Capital Asset Management Company as well.
 
"Currently, there are no discussions underway for a hike in Nippon's stake in RCAM (Reliance Capital Asset Management Company), although there is no FDI cap in this business, but the understanding is open-ended between the two partners on this front," he said.
 
Nippon holds 26% stake in RCAM, which it acquired for about Rs1,450 crore. Besides, Nippon has also purchased a 26% stake in Reliance Life for over Rs3,000 crore.
 

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SEBI relaxes mutual fund exposure limit for housing finance companies

SEBI decided that an additional exposure not exceeding 10% of net assets of the scheme shall be allowed only to HFCs as part of financial services sector for prudential limits in debt oriented schemes

 
Mumbai: Providing more leeway for housing finance companies, market regulator Securities and Exchange Board of India (SEBI) has relaxed the investment limit for such entities in debt mutual funds, reports PTI.
 
The decision to relax the investment limit for housing finance companies (HFCs) was taken by SEBI at its board meeting held in October.
 
"... in light of the important role played by the housing finance companies (HFCs) in the housing sector, it has been decided that an additional exposure not exceeding 10% of net assets of the scheme shall be allowed only to HFCs as part of financial services sector for prudential limits in debt oriented schemes," SEBI said in a circular today.
 
The total investment in HFCs shall not exceed 30% of the net assets of the scheme.
 
SEBI said the relaxation would be subject to certain conditions such as that the securities issued by HFCs were rated 'AA' or above. Also, the HFCs should have been registered with the National Housing Bank (NHB).
 
In October, the market regulator had said the decision to relax investment limit was taken after taking into consideration the important role played by HFCs in fulfilling the social objective of increased home ownership and supporting the economy by creating demand for construction of new homes.
 
Certain debt mutual fund schemes, such as long-term Fixed Maturity Plans are a preferred route for the NBFC (Non-Banking Finance Company) sector to raise medium to long term funds at attractive rates.
 
Under the regulatory framework, NBFCs include HFCs.
 

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MFs allowed to levy brokerage, transaction costs but with limit

SEBI said mutual fund houses can levy brokerage and transaction costs, with a ceiling of 0.12% for cash market transactions and 0.05% for derivatives dealings

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has allowed mutual fund (MF) houses to levy certain amount of brokerage and transaction costs on investors with regard to execution of trades, reports PTI.
 
In a circular, the regulator said that fund houses can levy brokerage and transaction costs, with a ceiling of 0.12% for cash market transactions and 0.05% for derivatives dealings.
 
"The brokerage and transaction cost incurred for the purpose of execution of trade may be capitalised to the extent of 12 basis points and 5 bps for cash market transactions and derivatives transactions, respectively," SEBI said.
 
According to the regulator, any payment towards brokerage and transaction costs over and above prescribed limit would be borne by the asset management company (AMC) or by the trustee or sponsors.
 
Besides, mutual funds can charge additional expenses of up to 0.30% of daily net assets, if the new inflows from places other than to top 15 cities are 30% of the gross new inflows in the scheme, or are 15% of the average assets under management (year to date) of the scheme, whichever is higher.
 
SEBI said expenses charged under these clauses would have to be utilised for distribution expenses incurred for bringing inflows from such cities.
 
Among other measures, the fund houses would have to calculate the net asset value (NAV) of the scheme on daily basis and publish the same in at least two daily newspapers with nation-wide circulation.
 
Also, any exit load charged by the fund houses would have to be credited to back to the scheme.
 
This measure, along with capping of the total additional expenses at 0.2% in normal case, are expected to encourage long term holding, reduce churn and align the interests of the fund houses and distributors with that of the investors.
 
These particular steps would not result in any additional cost to the investors, but the provision for additional expenses of up to 0.3% for inflows from smaller cities could make the investments costlier at the investors' end.
 
In case of a fund of funds scheme, the total expenses of levied on the scheme would be capped at 2.50% of the daily net assets of the scheme.
 

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