JM Financial plans insurance foray

Deal likely in the next few months.

Nimesh Kampani-owned JM Financial is planning to enter the insurance business. The listed entity, which holds 51 per cent in the investment banking arm of JM Morgan Stanley, has already held discussions with a couple of global giants and a deal is likely to be struck over the next few months.

Though JM Financial Chairman Nimesh Kampani refused to comment, sources close to the development said the foreign partner would pick up a 26 per cent stake, the maximum permitted in the life insurance venture. JM Financial will either hold the remaining 74 per cent stake or rope in a domestic partner.

The sources said the proposed venture was a logical extension of JM Financial's activities.

"JM Financial is present in almost all sectors of financial services, barring banking and insurance. It is into investment banking, retail distribution, NBFC and mutual funds. An entry into the insurance business makes immense sense as there is a clear link between this and its asset management business," the sources pointed out.

An entry into the insurance business and a strong presence in asset management will help the company venture into the pension business in the future and transform itself into a financial powerhouse.

JM Financial also has a partnership with Morgan Stanley, called JM Morgan Stanley Securities. It has two wholly owned subsidiaries, JM Morgan Stanley Retail and JM Morgan Stanley Fixed Income.

JM Financial is sitting on reserves of nearly Rs 200 crore following the acquisition of a stake in the company by two hedge funds: Tiger Global and Blue Ridge. These hedge funds bought 13 per cent each for a combined Rs 175.5 crore. They bought 4.2 million preferential shares at Rs 418 apiece.

As part of a restructuring process, it has set up JM Financial Commtrade, a commodity trading and broking company. In addition, it plans to float a private equity arm, JM Financial Investment Management, to manage other investment activities.

To begin with, it will float three funds ""one each for private equity, real estate and infrastructure.