"As per the terms of this pact, the Principal Finance Group, which manages $106 billion worth funds worldwide, will acquire a 50 per cent stake in IDBI's existing asset management company," Sanjay Sachdev, global manager at Principal Financial Group told Reuters. The shareholder approval will be sought subsequently, he said.

The details of this agreement, including the price of IDBI's 50 per cent stake have yet to be worked out. IDBI officials were, however, not available for comments.

The term-lending institution's asset management company has a corpus of Rs 619 crore as on March 31, 1999 and has six mutual fund schemes, which include both equity and debt schemes.

"We have two equity-linked saving schemes, IDBII-NIT 95 and IDBI Tax I-NIT 96. These are close-ended funds and their NAV is quoting around 12 per cent. IDBI Index I-NIT, an open ended passive-fund launched in June 1999, is another such equity scheme and is linked to the S&P CNX Nifty index. Its corpus is invested in the 50 scrips comprising the index, in proportion to their weightage in the index. We also have a debt fund --the IDBI Deposit I-NIT 97 and a money market fund, IDBI Call I-NIT '97," a senior official of the IDBI Investment Management Company told The Financial Express.

The Principal Financial Group recently acquired the Bankers Trust Australia Group for $1.38 billion. The deal included BT Funds Management, BT Portfolio Services and BT Margin Lending and was financed through proceeds from a private debt offering and internal sources. The acquisition brings the combined assets under management of the Principal Financial Group to more than $105.8 billion.

Established in 1879 and a member of the Fortune 500 and Fortune's Most AdmiredCompanies, the Principal Financial Group is a leading provider of a wide range of financial products and services to more than 10 million customers worldwide including retirement and investment services, life and health insurance and mortgage banking.

Insight:

A strategic move

The IDBI management has realised the importance of looking at businesses other than term lending for its future earnings. With this in mind, the FI had also decided to look for strategic partners in all current and prospective ventures whether asset management or retail finance. It makes a lot of sense for the FI to look for a strategic partner given the competititve nature of these sectors and lack of expertise within IDBI and the inability to retain talent within.

-- Aaron Chaze