By M.C. Govardhana Rangan
Nov. 16 (Bloomberg) -- 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 as 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.
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 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, a 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 people said. Shinsei will own 75 percent of the business and Jhunjhunwala will hold 15 percent, they said. The remainder will be owned by employees. Jhunjhunwala, in a telephone interview, declined to give details on the plan. Shinsei's Tokyo-based spokesman Donald Macintyre declined to comment.
Sethuram reports to Sanjay Sachdev, India head of Shinsei Corporate Advisory.
`Numero Uno'
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 Nov. 14 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 percent this year, trimming its market value to $5.5 billion. The 85-member Topix Banks Index has fallen 32 percent.
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, which makes equipment for power generation from non-conventional sources. The shares have surged 36 times since Jhunjhunwala invested in January 2004.
Other holdings include Crisil, the local unit of Standard & Poor's, where Jhunjhunwala holds a 7.6 percent stake according to regulatory filings. The stock has risen more than fivefold since January 2005, to 3,200 rupees. In a 2005 interview, Jhunjhunwala said he bought the shares in January 2002 at 150 rupees.
In June 2004, India's Mid-Day newspaper named Jhunjhunwala ``numero uno in terms of market influence.''
Market Swells
India's stock market has doubled in value over the past year to $1.66 trillion, as the key Sensitive index rose 44 percent and companies including DLF Ltd. and Cairn India Ltd. sold shares for the first time.
Wall Street securities firms including Goldman Sachs Group Inc. and JPMorgan Chase & Co. have set up mutual fund operations in India to cater to the nation's growing class of investors. Per-capita income in India jumped 40 percent in the four years to March 31, as annual economic growth averaged 8.6 percent.
JPMorgan, which sold its first Indian fund in February, has 21.6 billion rupees ($549 million) of assets under management in the nation and is launching more plans. Goldman Sachs got government approval last month to invest 2 billion rupees in an asset management venture.
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