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Reliance Capital may sell 20% in AMC to foreign firm

19 Jan 2010 Evaluate

Anil Ambani-controlled Reliance Capital is looking to sell up to 20% stake in Reliance Mutual Fund to a strategic foreign partner. The company is likely to appoint investment banks JP Morgan and UBS as advisors to the transaction. Reliance Capital holds 93.37% in Reliance Capital Asset Management Company, India’s largest mutual fund house by assets under management (AUM).

In 2007, the AMC had sold 5% stake to New York-based Eton Park for Rs 500 crore. Eton Park Capital Management is a hedge fund founded by former Goldman Sachs partner Eric Mindich. The deal with Eton Park was valued at 13% of the AMC’s assets.

The valuation Reliance Capital is currently looking for is at a premium to recent transactions involving stake sale in asset management companies. Last November, Baltimore-based firm T Rowe Price had bought 26% stake in UTI AMC, the country’s fourth-largest MF, for around Rs 652 crore, valuing UTI AMC at around Rs 2,500 crore or 3.25% of its AUM then.

The deal is likely to be sealed within the next two months. By bringing in a strategic partner, Reliance Capital will add international distribution muscle and will also be able to attract international institutional and retail fund flows to India. This move will also unlock substantial value for Reliance Capital, as the entire sale proceeds will flow to the company,” said the executive.

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