In the first tranche, Nippon will invest a little over $100 million for a 9-percent stake, taking the valuation of Reliance Capital Asset Management to $1.2 billion.
The investment in the next tranche will be at a future valuation, sources said.
The boards of directors of both the companies - Nippon Life Insurance and Reliance Capital Asset Management - approved the stake increase by the Japanese partner, subject to regulatory approvals, a Reliance Capital statement said.
"Taking advantage of the strengthened capital relationship, we are also aiming to further develop our asset management business globally, with an eye to realising group synergies, including with our other business partners from around the world."
The company said the two groups intended to conclude the stake sale this fiscal. "Subsequently, Nippon Life Insurance will have an option to increase its stake further by an additional 14 percent, to reach 49 per cent, in tranches."
Welcoming the decision, Reliance Capital chief executive Sam Ghosh said: "We strongly believe their expanded role in the Company will accelerate our growth, reach and performance."
Immediately after the announcement, the shares of Reliance Capital gained over 4 percent at Rs.503.80 on the Bombay Stock Exchange.
Nippon Life president Yoshinobu Tsutsui said their collaboration had benefited both groups. "We look forward to strengthening this relationship and using the collective experience of the two corporations to the advantage of the two global economies.”
Nippon Life is already a strategic partner in the Reliance asset management arm, by acquiring a 26-percent stake for $240 million) in 2012. This had pegged the valuation of Reliance Capital Asset Management company at $920 million.
Also called Nissay, Nippon Life is a 125-year Fortune Global 100 company and manages nearly $500 billion worth of assets. It is the 7th largest life insurer in the world and the the top private life insurer in Asia and Japan.
The Japanese company's revenues total $59 billion, with a profits of over $2.5 billion. It has over 10 million policies in Japan.
Reliance Capital Asset Management Company on the other hand, is the largest in India, managing $36 billion as on Sep 30, across mutual funds, pension funds, managed accounts and offshore funds.