Mukesh Ambani may buy MF firm

With JM mutual find valued at 8% of assets under management, Ambani would have to pay around Rs685 crore

Mukesh Ambani, who controls India’s most valuable company Reliance Industries Ltd (RIL), is in talks to buy a majority stake in JM Financial Asset Management Pvt. Ltd, his first attempt to enter Anil Ambani’s territory since the estranged brothers scrapped a “non-compete” agreement between them a week ago.

Negotiations are under way for a deal that values JM Financial Asset Management, the money manager controlled by investment banker Nimesh Kampani, at around 8% of its assets under management, which equals Rs685 crore, said two officials close to the development who didn’t want to be named.

If the acquisition goes through at that valuation, it would be one of the biggest in India’s mutual fund industry.

JM Financial manages assets worth Rs8,569 crore in a total of 27 investment plans.

The non-compete agreement, which was torn up in a move towards possible reconciliation between the brothers, had prevented Mukesh and Anil Ambani from entering each other’s businesses.

Anil Ambani controls Reliance Capital Asset Management Ltd, the country’s largest money manager.

The acquisition of JM Financial will give Mukesh Ambani, 53, a direct licence to enter the mutual fund industry, which has Rs7.7 trillion worth of assets under management.

“As a policy, we do not comment on speculation,” a spokesperson at Reliance Industries said in response to a query from Mint.

Nimesh Kampani’s son Vishal Kampani also termed it “speculation”.

“JM Financial mutual fund forms an important part in the JM Financial group portfolio and we remain focused and committed towards growing this business,” he said over the phone.

Vishal Kampani, who was holding the position of a director in the asset management firm, resigned from his position on 12 March. On 14 March, the fund house informed investors of his resignation.

Bhanu Katoch, chief executive officer of JM Financial Asset Management, also called news of the attempted acquisition speculative in reply to an email from Mint.

JM Financial mutual fund, a part of the Nimesh Kampani-controlled JM Financial group, is one of the country’s first asset managers.

It started operations in December 1994 with the launch of three funds—JM Liquid Fund (now JM Income Fund), JM Equity Fund and JM Balanced Fund.

The non-compete agreement between the Mukesh Ambani company and Reliance Anil Dhirubhai Ambani Group (R-Adag) had restrained the elder brother from venturing into the potentially lucrative financial services space.

Reliance Capital, a part of R-Adag, is engaged in asset management, life and general insurance, consumer finance and other capital market-related businesses.

Reliance Capital Asset Management is the largest mutual fund in the country with assets worth Rs1.11 trillion.

The talks with Mukesh Ambani follow three years after Nimesh Kampani sold his 49% stake in the joint venture investment banking company JM Morgan Stanley Securities Pvt. Ltd to Morgan Stanley for $445 million (Rs2,069.25 crore as of today). “If a partner does not want to be with you, one has to move on,” Nimesh Kampani said then.

JM Financial Asset Management is a loss-making entity in the otherwise profitable JM Financial group. Last year, the money manager made a loss of Rs5 crore.

Under its star fund manager Sandip Sabharwal, JM Financial Asset Management made most of its investments when the stock market was nearing its peak.

Sabharwal, who was known for his aggressive style of investment, has since left the fund.

JM Financial has been on the lookout for a buyer for a couple of months now, said one of the two officials mentioned above.

JM Financial would help its new owner get a decent headstart in the mutual fund business, given that it has a near-full suite of products besides a licence, althoughit hasn’t invested much inexpanding outside the top eight cities, the person said.

People familiar with the situation said JM Financial had earlier talked with the Indiabulls group, which has an asset management licence but has not commenced business for over a year.

But Gagan Banga, chief executive officer of India-bulls, denied they had been in talks.

“We are assessing the regulatory changes and its impact on the industry. We would wait for things to settle down before taking a call on this,” he said.

Valuations typically depend on the portfolio of products held by the asset manager. The higher the equity assets, higher would be the valuation, because companies earn more commission income from the sales and management of equity funds compared with debt funds.

Traditionally, such deals have been struck at 3-4% of the assets under management.

In January, US-based asset management firm T. Rowe Price Global Investment Services Ltd bought a 26% stake in UTI Asset Management Co. Pvt. Ltd for $140 million, around 3.25% of its average assets under management.

Valuation of asset managers plunged after the market decline of 2008.

In July 2009, Nomura Asset Management Co. Ltd bought a 35% stake in LIC Mutual Fund Asset Management Co. Ltd at 2.4% of its total assets.

In September, the financial services unit of engineering firm Larsen and Toubro Ltd announced plans to buy DBS Cholamandalam Asset Management Ltd for Rs45 crore, valuing the firm at about 1.6% of assets under management.

Following the market plunge in 2008, the assets under management of JM Financial had dipped to Rs3,758 crore in March 2009, of which Rs1,480 crore was in equity, before increasing last year when the market recovered.

Source: http://www.livemint.com/2010/05/30233553/Mukesh-Ambani-may-buy-MF-firm.html

LIC Mutual ties up with Nomura for fund management

Life Insurance Corporation of India Mutual Fund (LIC MF) and Nomura Asset Management Company of Japan are entering into a joint venture for adoption of better technology and management of funds.

The approval from the regulatory authorities has been obtained and completion of other formalities isunder process, according to Mr Ravi Chaudary, Chief Marketing Officer, LIC MF.

Addressing the press, after inaugurating the new area office of LIC MF here on Wednesday, he said that the Fund enjoyed a market share of 5.66 per cent and was in the 6 {+t} {+h} position in the country with funds under management to the tune of Rs 42,303.96 crore, spread across 27 products, as at the end of March 2010.

The year on growth has been 83.19 per cent, much higher than the industry growth at 51.6 per cent, he said.

The awareness level about the advantages of the mutual fund is still to spread and LIC MF has taken seriously the education of investors, conducting the programmes in vernacular languages in different parts of the country, to reach out especially the small and medium investors, he further said.

Currently, there are 26 Area offices and 4 more would be coming up shortly. There are plans to open 100 business centres.

A Web site is also to be launched shortly.

Source: http://www.thehindubusinessline.com/2010/05/29/stories/2010052952661300.htm

Equity Index Funds Gain More than Equity Diversified Funds

Equity Fund categories were able to deliver positive returns over the one week period ended 28 May 2010, despite facing losses during the previous week. Equity Diversified fund category gained 1.55%, Tax Savings funds rose 1.64% and Index funds climbed 2.56%. Equity index fund category has delivered better returns than the equity diversified fund category over the one week ended 28 May 2010. Among sector funds, Infotech Funds category was the biggest gainer by 2.74%, followed by FMCG Funds by 2.35%, Auto Fund by 1.79%, Pharma Funds by 1.46%, Banking Funds by 1.30%, Telecom Fund by 0.18% and Media Fund by 0.07%.

Among the sub categories in the debt fund category, Floating Rate Income Funds – Short Term & Long Term and Ultra Short Term Funds gained 0.09% each, Liquid Funds and Short Term Income Funds surged 0.08% and 0.05% over the week end period. While Gilt – Medium & Long Term, Gilt – Short Term and Income Funds lost 0.26%, 0.08% and 0.07%.

The BSE Sensex rose 417.45 points or 2.54% to 16863.06. The S&P CNX Nifty gained 135.40 points or 2.75% to 5066.55.

Major buying was seen in Realty, which gained 4.15%, followed by Oil (3.42%), Power (3.26%), IT (3.06%) and FMCG (2.97%) and Tech (2.30%). However, Consumer Durables dropped 2.15%.

Mid-cap stocks moved up 1.01%, to 6756.01 during the week end period. While the small-cap shares rose 0.94%, to 8494.45 during the week end period. Mid-Cap and Small-Cap index underperformed the Sensex and Nifty.

Equity Diversified Funds

Equity Diversified Fund category gained 1.55% over one week period ended 28 May 2010. This category was able to come out of the losses it incurred during the previous week. Among the schemes in the equity diversified category, Taurus Ethical Fund gained the maximum of 3.47%, followed by JM Equity Fund which climbed 3.17%, HDFC Growth Fund rose 2.84%, ICICI Pru Target Returns Fund & IDFC Enterprise Equity Fund - A jumped 2.75% each among others. Tata Growing Economies Infrastructure – Plan A and Sundaram BNP Paribas Entertainment Opportunities were the worst performers in this category, losing 2.76% and 0.71% respectively.

Tax Savings Funds

Tax savings Funds category gained 1.64% over one week period as on 28 May 2010. This category moved into the positive territory after witnessing loss of 3.18% during the previous week end period. HDFC Long Term Advantage Fund and JPMorgan India Tax Advantage Fund were the top performers with a return of 2.61% and 2.59% respectively during one week period. Among the other schemes in the category, Axis Tax Saver Fund rose 2.54%, Birla Sun Life Tax Plan climbed 2.50% and ICICI Pru Tax Plan surged 2.20% among others. JM Tax Gain Fund and Edelweiss ELSS Fund ended as the worst performers in this category with a return of 0.24% and 0.70% respectively over one week period.

Index Funds

The Index Fund category gained 2.56%, over one week period ended 28 May 2010. All the schemes in this category gained during the week end period, compared with a loss during the previous week end period. HDFC Index Fund-Nifty Plan was the highest gainer in this category as its NAV appreciated by 2.80%. JM Nifty Plus Fund and ICICI Pru Index Fund-Nifty Plan were the next highest gainers by 2.79% and 2.77%. Among the other schemes in the category, SBI Magnum Index Fund climbed 2.75%, LICMF Index Fund – Nifty Plan & UTI-Nifty Index Fund surged 2.74% each and Franklin India Index Fund-NSE Nifty Plan added 2.72%. IDBI Nifty Index Fund and HDFC Index Fund-Sensex Plus Plan were the worst performers in this category as they witnessed a gain of only 1.72% and 2.02% respectively.

Sector Funds

Pharma Funds category gained 1.46% over one week period ended 28 May 2010. All the schemes in this category gained, while Reliance Pharma Fund ending as the top performer with 1.86%.

Bank Funds category gained 1.30% over one week period ended 28 May 2010. ICICI Pru Banking & Financial Services Fund rose 1.77% and Religare Banking Fund climbed 1.73%.

FMCG Funds category rose 2.35% over one week period ended 28 May 2010. SBI Magnum SFU – FMCG Fund was the top performer in this category. In terms of NAV performance, the fund's NAV gained 3.27% over the one week period.

Infotech Funds category rose 2.74% over one week period ended 28 May 2010. ICICI Pru Technology Fund was the top performer in this category. In terms of NAV performance, the fund's NAV gained 3.63% over the one week period.

Hybrid Funds

Among the sub categories in the hybrid fund category, Asset Allocation Balanced Funds surged 1.25%, Equity Oriented Balanced Fund by 1.20%, Debt Oriented Balanced Fund by 0.43%, Monthly Income Plans by 0.22% and Arbitrage Funds by 0.12% during the one week period ended 28 May 2010.

UTI-Variable Investment Scheme and SBI Magnum NRI Investment Fund-Flexi Asset gained 1.61% and 0.89% respectively under asset allocation balanced fund category.

All the schemes in the equity oriented balanced fund category gained during the week end period. HDFC Children's Gift Fund-Investment Plan was the highest gainer in this category as its NAV appreciated by 1.98%. Sundaram BNP Paribas Balanced Fund was the next highest gainer by 1.97%. Among the other schemes in the category, Escorts Balanced Fund climbed 1.93%, HDFC Balanced Fund surged 1.90% and ING Balanced Fund added 1.65%.

LICMF Children's Fund was the highest gainer in debt oriented balanced fund category as its NAV appreciated by 1.46%. UTI Unit Linked Insurance Plan was the next highest gainer by 0.71%. Among the other schemes in the category, UTI-Retirement Benefit Pension Plan climbed 0.70%, Tata Young Citizens Fund surged 0.65% and Templeton India Pension Plan added 0.57%. SBI Magnum Children Benefit Plan and DWS Money Plus Advantage Fund were the losers in this category by 0.23% and 0.03%.

Exchange Traded Funds (ETFs)

Gold ETF category gained 1.63% during the week end period. SBI Gold Exchange Traded Fund was the only scheme in this category to gain by 1.61%, while the other schemes in this category gained by 1.63%.

The other ETF category gained 1.73% during the week ended 28 May 2010. Shariah BeES, Nifty BeES and Kotak Nifty ETF were the top performers by 2.98% each. The only debt ETF i.e. Liquid BeES witnessed gained of 0.06%. PSU Bank BeES & Kotak PSU Bank ETF lost 0.07% each during the week end period and ended as the worst performers in this category.

Source: http://www.apollosindhoori.cmlinks.com/MutualFund/MFSnapShot.aspx?opt=9&SecId=10&SubSecId=22,24