Nomura Holdings, the Japanese investment banking major, is set to pick up a 35% stake in LIC Mutual Fund. The board of its parent firm, state-owned Life Insurance Corp (LIC), has approved to induct Nomura as a strategic partner, reports Business Standard. LIC will now decide on steps like valuation and terms & conditions of the deal with Japan's largest brokerage house. For this it has formed four-member committee to be headed by LIC Chairman TS Vijayan, with others like Exim Bank Chairman TC Venkat Subramanian and GIC Chairman Yogesh Lohiya.
The buzz around Nomura picking up a stake in LIC Mutual Fund has been going around for nearly a year now. LIC Mutual Fund had assets under management (AUM) of Rs 24,104 crore in April, which grew by 9% to Rs 28,599 crore in May against the backdrop of a market rally. The deal with LIC MF, India's seventh largest mutual fund, is expected to be at 6% of AUM or
more than Rs 1,700 crore as of May's AUM.
There is a rush among overseas players to get a piece of India’s fast growing asset management business. Combined average assets under management (AAUM) of mutual funds crossed the Rs 6 trillion mark (Rs 6 lakh crore) in May, the highest ever for the fund industry since its
Buoyed by a sharp rise in value of stocks, industry AUM at the end of May jumped nearly Rs 87,000 crore or 16% over April numbers (Rs 5.5 trillion), AMFI (Association of Mutual Fund of India) data showed.
With markets back up, the valuation of asset management firms is also on the rise. UTI Asset Management Co, which was planning an IPO last year, has also decided to sell a 26% stake to a strategic player. Schroders Plc, T Rowe Price and the Vanguard Group have bid at between 5-7% of India's oldest money managers AUM.
This is in stark contrast to Religare Enterprises' acquisition of Lotus India Asset Management Co in November last year, which was reportedly done at 1% of AUM. In one of the most valuable deals in this industry, hedge fund Eton Park picked up a 5% stake in Reliance Capital Asset Management for $127 million in late 2007. The deal was done at 13% of Reliance AMC's AUM.