Japan's Nomura has bought a 35% stake in LIC Mutual Fund in a deal which values the Indian fund firm at Rs 800 crore ($163 million). The deal gives Nomura an entry into one of the fastest growing mutual fund markets and offers LIC Mutual Fund, which is largely a debt manager, international exposure and equity fund management expertise.
"It is very important to have a local partner with a strong reputation here. Life Insurance Corp is the best brand in India with respect to customer confidence," said Takumi Shibata, deputy president and chief operating officer of Nomura Holdings.
The deal values the Indian fund firm, a unit of state-owned Life Insurance Corp, at about 2.5% of average assets of Rs 32,410 crore as of June.
The company, India's largest life insurer, is a household name in the country, managing $167 billion, and has sold more than 200 million individual life policies.
The valuation is lower than the 4-5% that most Indian fund managers have fetched because more than 90% of LIC Mutual's assets are in low margin fixed-income funds, analysts said.
Nomura, which managed $192 billion in March under its fund management arm, already runs a brokerage, investment bank and a large back office in India.
Assets of Indian funds industry have risen by more than half over the past two years to 5.8 trillion, luring the likes of JPMorgan, South Korea's Mirae Asset and France's Axa.
More than 20 firms, including Credit Agricole and UBS are considering entering India's fiercely competitive fund market, forecast by Boston Consulting Group to manage $520 billion by 2015.
VCCircle adds: The share-holding pattern of the new company formed would be: LIC 45%, LIC Housing Finance 20% and Nomura 35%.
LIC Housing Finance had last month announced that it would sell its holding in LIC Mutual Fund for 138 crore to Nomura. GIC Housing Finance, which held a 11.2% stake also exited the firm, by selling its stake for Rs 89 crore. The deal values LIC Mutual Fund at Rs 800 crore.