JAPAN’S Nomura asset management company(AMC) has picked up a 35% strategic stake in LIC Mutual Fund for Rs 308 crore, valuing the seventh largest fund house at Rs 800 crore.
This valuation amounts to less than 2.5% of the total assets under management of Rs 32,415 crore of LIC MF Asset Management Company (AMC) as on June 2009. The sale of 35% stake involves both fresh issue of equity and secondary sale. Following this agreement, LIC will hold 45%, and LIC Housing Finance 20%. Nomura will hold the balance 35% stake in the AMC. As a part of the deal, Nomura will bring in expertise in equity management — an area where LIC MF has lagged behind. “India is a very big market and there is a huge value in finding a local partner.By building on LIC’s outstanding brand image and customer network, we will be able to apply best practices to our combined business through our extensive experience as a global asset manager”, said Takumi Shibata,Deputy President and COO, Nomura Holdings.
According to T S Vijayan, Chairman, Life Insurance Corporation, the agreement does not envisage any increase in Nomura’s stake. However, if any party decides to sell its stake, the others will have the right of first refusal. He said LIC had no plans to list LICMF since the cash requirement of the mutual fund business was limited. Nomura has indicated that it would use the services of LICMF to manage some of the investments that it would lead into the Indian markets.
Of the Rs 308 crore brought in by Nomura, the shareholders of LIC MF (LIC Hosuing finance and GIC Housing Finance) have got Rs 228 crore. The remaining Rs 80cr will be infused as fresh capital into LIC MF AMC. The valuation has not been so impressive compared to the other M&A deals in the asset management business in the past since LIC MF has a predominantly debt portfolio.
However, LIC claimed it was satisfied with the valuation that received and was focused more on the growth opportunities that the joint venture would offer. “The valuation is in line with valuations in the mutual fund industry. Besides our portfolio consists largely of debt schemes” said Sushobhan Sarkar, CEO, LIC MF AMC.
