Nippon Life buys 26% in RCAM for Rs 1,450 cr

The Memorandum of Understanding (MoU) to acquire 26 per cent stake in RCAM was signed between Anil Ambani,chairman,Reliance Capital and Yoshinobu Tsutsui,president,Nippon Life here. The deal values Reliance Capital Asset Management at Rs 5,600 crore or 6.6 per cent of its average assets under management (AUM) of Rs 84,300 crore at the end of the quarter ended December 2011.

The valuation is however far lower than what the asset management company (AMC) commanded in 2007 when it sold 5 per cent stake to Eton Park,a US-based hedge fund,for a consideration of $127 million (Rs 501 crore) which valued the AMC at Rs 10,000 crore or 13 per cent of its AUM then.

However,the valuation received by RCAM from Nippon Life (on the basis of AUM) is the highest that any AMC has received in recent times.

In December 2010,Natixis acquired 25 per cent stake in IDFC for $61.1 million valuing it at 5.5 per cent of its AUM while UTI AMC’s 26 per cent stake purchase by T Rowe Price for $142.4 million valued it at 3.5 per cent of its AUM.

Even though this deal is the largest investment received by an Indian AMC,it reflects the swing in market mood that has led to falling valuations.

In 2007,Robeco picked up 49 per cent stake in Canbank Mutual Fund and the deal was valued at 10 per cent of the assets under management.

Typically,an asset management company is valued on three factors — the AUM that it holds,the break up of equity and debt within those assets under management,and the growth rate of its assets.