New Delhi: The biggest listed developer in India, DLF Ltd, is partnering with Prudential Financial Inc., one of the largest life insurance companies in the US, for an asset management company as it looks for businesses with high returns on low investment.
The new company will be called DLF Pramerica Asset Managers Pvt. Ltd. Pramerica is the brand name used in India and some other countries by Prudential Financial, which has operations in the US, Asia, Europe and Latin America.
Prudential will have a 61% stake in the proposed firm and DLF will hold the remaining. This is not the first time DLF has teamed up with Prudential. In February, DLF signed an agreement with Prudential’s international insurance arm for a life insurance joint venture.
“We are looking at this business only as a good investment,” Rajiv Singh, vice-chairman, DLF Ltd said. “Life insurance coupled with asset management will be a formidable business,” he said. Singh, however, said that DLF had no plans of entering into the non-banking financial services business.
The asset management venture will make a total investment of $50 million (about Rs200 crore) in the business. DLF’s investment in the business will not be more than Rs70-80 crore, Singh said.
DLF expects to get clearance from the regulators soon so it can start operations next year. In India, asset management companies have to get regulatory approval from the market regulator, the Securities and Exchange Board of India (Sebi) which formulates policies and regulates mutual funds.
The asset management joint venture will be based in Mumbai and will provide mutual fund and investment products, including domestic and eventually international mutual funds, to Indian retail and institutional clients.
Mutual funds are often seen as a more conservative tool as they invest in a basket of assets by collectively pooling the resources of many investors managed by a professional asset manager. Investors who want high returns normally put their money in hedge funds or pick stocks with high returns over a short time frame.
“India is an important market with enormous potential for the company,” said Stephen Pelletier, president and chief executive officer of Prudential Financial Inc.’s international investments unit. “DLF has a strong branding, excellent reputation, knowledge of local marketplace and management strength. So they are ideal partners for us,” he said.
The mutual fund industry in India started in 1963 with the creation of the Unit Trust of India, a government-linked fund. In 1987 it was opened up partially and public sector banks and insurance companies started their own mutual funds. The private sector was allowed to set up asset management companies in 1993 and now several international players such as Franklin Templeton Investment and Fidelity have also entered the industry.
Mutual fund companies in India managed assets of Rs3.26 trillion as of March 2007, according to the Association of Mutual Funds in India. Prudential Financial has around $637 billion of assets under management as of 30 September 2007, according to a company statement. The company offers products and services including life insurance, retirement-related services and real estate services.
Prudential Financial is not associated with the UK-based Prudential Plc. which has formed a joint venture company, ICICI Prudential Life Insurance Ltd with ICICI Ltd.