Shinsei Bank Ltd plans to team up with Indian billionaire Rakesh Jhunjhunwala to sell mutual funds in the world’s second fastest growing major economy, two people with direct knowledge of the matter said.
The business may start operations early next year, the people said, declining to be identified because the deal details are private. Shinsei hired former State Bank of India executive N. Sethuram in August as chief investment officer of its India funds unit, Shinsei Corporate Advisory Services Pvt. Ltd. Sethuram reports to Sanjay Sachdev, India head of Shinsei Corporate Advisory India Pvt. Ltd.
Billionaire Rakesh Jhunjhunwala
Joining forces with Jhunjhunwala would give Shinsei, whose stock is the second worst performer among Japanese banks this year, faster access to an industry where mutual fund assets almost doubled to $142 billion (Rs5.60 trillion) in the 12 months through October. Jhunjhunwala, 46, built a fortune that BusinessWeek magazine estimated last year at $1 billion by investing in companies such as Crisil Ltd and Praj Industries Ltd.
“It is a highly rewarding market,” said Dhirendra Kumar, managing director at Value Research India Pvt. Ltd, a New Delhi-based mutual fund tracking firm. Jhunjhunwala “is a sexy name in the markets, so at least perception-wise it could be an advantage in the early days.”
The venture has yet to be named, the sources said. Shinsei will own 75% of the business and Jhunjhunwala will hold 15% stake, they said. The remainder will be owned by employees. Jhunjhunwala, in a telephone interview, declined to give details of the plan. Shinsei’s Tokyo-based spokesman Donald Macintyre declined to comment.
The Tokyo-based bank and bigger rivals such as Mitsubishi UFJ Financial Group Inc. are turning to other Asian markets for growth as profits plunge.
Shinsei on 14 November posted a second quarter loss of 8 billion yen ($72 million) as it wrote down the value of mortgage-backed securities.
Shares of Shinsei have plummeted 48% this year, trimming its market value to $5.5 billion. The 85-member Topix Banks Index has fallen 32% already.
Jhunjhunwala, a self-professed fan of billionaire investors Warren Buffett and George Soros, rose to prominence in India with stock picks such as Praj Industries Ltd, which makes equipment for power generation from non-conventional sources. The shares of the company have surged 36 times since Jhunjhunwala invested in January 2004.
Other holdings of the Indian billionaire include Credit Rating Information Services of India Ltd (Crisil), the local unit of Standard & Poor’s, in which Jhunjhunwala has a 7.6% stake.