MUMBAI (Reuters) – Billionaire Mukesh Ambani is in talks to buy a controlling stake in JM Financial Asset Management, which oversees $ 1.8 billion in assets, a source with direct knowledge of the situation said on Monday.
Deal with JM Financial would give Mukesh a share of the attractive fund management industry in India, which has attracted investors looking to capitalize on India’s rapidly growing population and a savings rate of over 30% .
Mukesh and his estranged younger brother Anil ended a non-compete pact this month, allowing Mukesh to invest wherever he sees opportunity, with financial services, power and infrastructure on its target list.
Talks with JM Financial are in their early stages and terms of a deal have not been finalized, said the source, who could not be identified because he was not authorized to speak to the media.
The source said the value of the transaction could represent 8% of the assets under management of the unit of financial services firm JM Financial, supporting a Mint newspaper report. This would indicate an investment of approximately $ 144 million.
JM Financial Asset Management, one of India’s oldest private-sector mutual fund companies, which opened in 1994, has denied plans to sell.
âThere is no truth in this. The JM Financial mutual fund is an important part of the JM Financial Group portfolio and we remain focused and determined to develop this business, âBhanu Katoch, CEO of JM Financial Asset Management, told Reuters.
According to its website, the mutual fund manager has a base of 10,000 distributors covering 52 locations in India.
StreetSight data on JM Financial, click on r.reuters.com/dup37k
Energy giant Reliance Industries, the flagship of Mukesh Ambani, the world’s fourth richest man with an estimated net worth of $ 29 billion, declined to comment.
As of 6.30am GMT, shares of Reliance were up 0.7% and JM Financial 20% to a 5-week high of Rs 38.15. JM Financial stock trades were approximately 14 times the normal daily volume.
âThis makes sense as Reliance has a lot of liquidity and financial services is one of the most attractive industries in India right now,â said Gajendra Nagpal, Managing Director of Unicon Financial Intermediaries.
âFrom a long-term perspective, Reliance has a large retail network and may be looking to leverage that to reach a large number of people. “
The Indian fund market will manage $ 520 billion in assets by 2015, up from $ 135 billion last September, according to forecasts from the Boston Consulting Group.
The agreement of the American fund manager T. Rowe Price Group Inc to buy a stake in the Indian fund UTI Mutual Fund and the acquisition of DBS Cholamandalam Asset Management by the financial services unit of the engineering firm Larsen & Toubro are among recent high profile deals in the industry.
According to forecasts by Goldman Sachs, Reliance Industries, India’s largest listed company, is expected to generate free cash flow of $ 18 billion between this year and the fiscal year ending March 2014, giving it a lot firepower for the investment.
The company, which has interests in oil and gas exploration, petrochemicals and textiles, has sought acquisitions as it seeks to expand its business and gain a foothold abroad.
Reliance said in April it would pay $ 1.7 billion to form a joint venture with Atlas Energy in one of the most promising natural gas fields in the United States. It also bought a stake in Indian freight services company Deccan 360 to help boost its retail operations.
Mukesh Ambani, a chemical engineer by training who dropped out of an MBA program at Stanford University to join Reliance in 1981, was previously unable to engage in financial services activities such as fund management or l insurance, because Anil’s Reliance Capital was already operating in the sector.
But, after a bitter 5-year feud that divided India’s richest family, the brothers this month struck a surprise truce by ending the non-compete agreement that had been a source of unrest. acrimony between them.
(Additional report by Nishant Kumar; Editing by Ranjit Gangadharan and Ian Geoghegan)