Reliance Cap to buy AMP Sanmar for Rs 100cr

IRDA objects to ADAE move of buying firm through Reliance Life.

Reliance Capital will acquire AMP Sanmar Life Insurance Company for Rs 100 crore. Since the Chennai-based life insurance entity has net free assets of Rs 60-65 crore, Reliance Cap will pay a premium of Rs 35-40 crore.

Net free assets essentially denote the book value of an insurance company, calculated after deducting losses from its share capital. AMP Sanmar has a capital base of Rs 217.5 crore.

The non-banking finance arm of the Anil Dhirubhai Ambani Enterprise (ADAE) had initially decided to acquire AMP Sanmar through Reliance Life Insurance Company.

But it was not possible as Reliance Life Insurance was not a legal entity since it did not have a licence from the Insurance Regulatory and Development Authority (IRDA).

IRDA Chairman CS Rao told Business Standard since Reliance Life Insurance was not a legal entity, it could not acquire AMP Sanmar.

"It is important for Reliance to identify the acquirer as the next step will be the due diligence exercise to be undertaken by the insurance regulator," he added. Declining to comment on the actual value of the deal, Graham Meyer, AMP Sanmar CEO, said it had not been a distress sale.

This implied that the acquisition would take place above the net free assets.