Bringing an end to almost a month's speculation, Japan's Nomura Holdings Inc bought 35 per cent stake in India's LIC Mutual Fund Asset Management Co Ltd (LICMF AMC), a unit of the country's largest insurer, the Life Insurance Corporation of India Ltd (LIC) for about Rs308 crore ($63 million), valuing the fund house at Rs880 crore. (See: LIC MF to sell 35 per cent stake to Nomura: reports)

As per the agreement between both parties signed in Mumbai on Saturday, the acquisition will be carried out by the Nomura Asset Management Co Ltd, a subsidiary of Nomura Holdings Inc.

Out of the Rs308 crore proceeds, Rs80 crore will go to LICMF and the rest to the existing shareholders of the asset manager.

The deal involves issue of fresh equity as well as secondary sale. On closing of the deal, LIC will hold 45 per cent stake in the LICMF AMC, Nomura would have 35 per cent and the remaining 20 per cent will be held by LIC Housing Finance.

Nomura Holding's deputy president and chief operating officer Takumi Shibata said: "It is vital to have a local partner with a strong reputation here. With LIC's exceptional brand image, we will be able to apply best practices to our combined business through our extensive experience as a global asset manager.''

LICMF's average assets under management for June 2009 were Rs32,415 crore, about 4.8 per cent of the total mutual fund assets and the seventh-largest in India.

Atushi Yoshikawa, Nomura Asset Management's CEO said: ''India is one of the fastest growing markets for asset management in Asia and is key to Nomura's push to be the world-class asset-management firm.''

Tokyo-based Nomura is a leading financial services group comprising Nomura Holdings and its subsidiaries with worldwide reach, focusing on domestic retail, global markets, global investment and merchant banking and asset management. The company has presence in 30 countries including India and employs around 18,000 people. Nomura Asset Management had assets worth $192 billion as of March 2009.

Under the deal, Nomura will provide the much needed expertise in equity management to LICMF. LICMF will continue to manage the assets, while the chief operating officer and chief investment officer (equity) will be from Nomura. Nomura also mentioned that LICMF would manage some of Nomura's investments in Indian markets.

LIC chairman T S Vijayan said the agreement does not envisage any increase in Nomura's holding in LICMF although, if any party decides to sell its stake, the others will have the right of first refusal.

Vijayan said that LICMF would also be looking at launching an offshore fund as there is enough appetite for Indian stocks among overseas investors.

The valuation of LICMF's assets at Rs880 crore is around 2.7 per cent of the total assets under its management which is lower compared to 4-5 per cent for earlier similar deals, apparently due to LICMF's large portfolio of debt assets. However, LICMF seems contented as it is eyeing mainly the growth prospects in equity funds and international exposure together with its experienced partner.

LIC, India's largest domestic institutional investor, has invested over Rs8,000 crore in equities during the first quarter and booked a profit of Rs2,800 crore. Earlier LIC announced that it would invest Rs50,000 crore in equity market this fiscal. (See: LIC plans to invest Rs50,000 crore in equities in 2009-10)