Japan's financial services firm Nomura is set to acquire a 35 per cent stake in LIC mutual fund and according to market reports more than half of that is coming through purchase of stake held by LIC Housing Finance in the company.
According to a Reuters report, Nomura which, had bought over Lehman Brothers after its collapse, is buying 19.3 per cent held by LIC Housing Finance in the mutual fund arm for a consideration of Rs 138 crore.
With this, LIC Mutual Fund, which has so far been the only public sector mutual fund company without a strategic foreign investor , will finally have a partner.
“We have been in talks with them for quite some time now and are looking for a strategic tie up with them,” said Sushobhan Sarker, CEO LIC Mutual Fund. However, denying to give further details he said, “We will disclose Nomura’s role into the company only after the deal gets finalised.”
LIC mutual fund had a total assets under management (AUM) of Rs 28,598 crore in May 2009, of which equity funds account for only Rs 1,226 crore.
At Rs 138 crore for a stake of 19.3 per cent, the deal values the company at Rs 715 crore, which is only 2.5 per cent of the total AUM of the mutual fund.
If the deal happens at this value then it will the lowest valuation that a mutual fund house has got of all deals in the sector until now.
In March 2008, Standard Chartered Mutual Fund sold off its business to IDFC Mutual Fund for Rs 825 crore. This valued the company at 5.8 per cent of its AUM.
In December 2007, Reliance Capital AMC sold a 5 per cent stake in the company to Eton Park for Rs 501 crore which valued the company at 13 per cent of its AUM then.
According to experts, an asset management company is typically valued the AUM it holds, the break up of equity and debt in its AUM and growth rate of its assets.