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Reliance Capital Asset Management, controlled by Anil Ambani, has sold a 5 per cent stake to Eton Park Capital Management in a deal that for the first time puts a value on India's largest mutual fund.
US-based Eton Park will pay Rs5bn ($127m) for the stake in Reliance's mutual fund - valuing it at Rs100bn - and provide capital for the group as it looks to launch an overseas fund aimed at luring foreign institutional investors.
A senior Reliance official said: "India is super hot and at one level there are non-resident Indians who should be investing in our products in a much greater way, which again requires us to have an overseas presence. And again it's not just restricted to NRIs - we can target international investors of any shape or hue."
India's mutual fund industry is booming, with total assets under management in the country rising to Rs5,379bn at the end of November, up nearly 60 per cent since January.
The industry used to be dominated by the state-run group UTI Asset Management Company but it has since been overcome by aggressive private operators.
These include Reliance and Prudential ICICI Asset Management, a joint venture between Prudential of the UK and ICICI, the leading domestic private sector bank.
Reliance's growth, in particular, has been rapid, from $100m of assets under management in 2001 to about $20bn as of November.
New entrants include Prudential Financial, the second largest US life assurer, which last week said it would buy a 61 per cent stake in a mutual fund joint venture with DLF, India's largest developer.
Reliance said the investment by Eton Park, a hedge fund founded by former Goldman Sachs Group partner Eric Mindich, valued the mutual fund at 13 per cent of assets under management, twice the valuation of previous such deals in the industry.
Mr Mindich said: "We share Reliance Capital's excitement on the growth prospects of the industry."
Indian companies are increasingly selling small stakes in unlisted companies as a way of obtaining a market valuation for units buried in larger entities.
Reliance Capital Asset Management is part of the larger Reliance Capital group, which has $15bn in assets.