Housing finance arms of public sector insurance firms GIC and LIC are selling a significant minority stake in LIC Mutual Fund Asset Management Co and LIC MF Trustee Co for around Rs 227 crore ($ 48 million). The two firms have not disclosed who is buying the stake but there have been reports that Japan’s Nomura (which got a strong foothold in Indian I-banking business by acquiring the local arm of Lehman Brothers) has been eyeing as much as 35% in LIC MF, the country’s seventh largest mutual fund house.
According to disclosures made to the stock exchanges, GIC Housing Finance is selling out its entire holding of 11.2% in LIC MF Asset Management and also its entire holding of 3% in LICMF Trustee Co for Rs 89 crore. This transaction values LIC MF at around Rs 750-800 crore. As of May end LIC MF had assets under management (AUM)of Rs 28,598 crore which means the deal has been struck at around 2.8% of AUM.
It is not clear how much stake did LIC Housing Finance owned. According to the disclosure, it is selling 1,730 equity shares of Rs 10,000 each of LIC MF (out of its total holding of 3,930 equity shares) besides 2,000 equity shares of Rs 10 each of LIC MF Trustee Co (out of total holding of 3,600 equity shares). Moreover, a wholly owned arm LICHFL Care Homes is selling total holding of 1,200 equity shares of LIC MF Trustee Co.
The transactions would fetch LIC Housing Finance around Rs 138 crore. If the valuations fetched by GIC Housing Finance is considered, it could mean than LIC HF is selling around 15-18% in LIC MF out of the holding of around 35-40%. In total this would imply a transaction where the investor is buying around 30% in LIC MF.
There were strong market buzz that Nomura is in talks to buy around 35% in LIC MF. Reports suggested that the deal will be struck at 6% of AUM or around Rs 1,700 crore. But the deal appears to have sealed at a much lower level.
But it is much higher than Religare- Lotus India deal which was rumoured to have been done at just around 1% of AUM last November when market had sunk to there years lows. One and half years ago (just before the global markets tanked) hedge fund Eton Park had picked up a 5% stake in Reliance Capital Asset Management for $127 million at 13% of AUM, considered very aggressive valuation.