RIL and D.E.Shaw to close deal

The Mukesh Dhirubhai Ambani Group is close to signing an equal joint venture agreement with global private equity and hedge fund company DE Shaw to enter the financial services sector, the Economic Times reported today.

The tie-up will enable the Mukesh Dhirubhai Ambani group, whose flagship is Reliance Industries (RELI.BO), to offer services like energy and carbon trading and related derivatives in which DE Shaw has expertise. It will also enter more conventional sectors such as private equity, mutual funds, and other security-linked offerings, reports said. Financial terms are not available yet and it was not clear whether the joint venture would be set up under Reliance or held directly by Mukesh Ambani.

Earlier this year, the Indian government had said that it would reconsider norms for issuing banking licences but the RBI has indicated that it would not allow industrial houses such as the Tatas or RIL to enter this sector. Whether even a JV will get such a licence is debatable. However, the JV is unlikely to encounter too many problems if it sets up a non-banking finance company or NBFC which can offer an array of services ranging from broking to investment banking. Many business groups, such as the Tatas and the Adiyta Birla Group, house an NBFC in their ranks. Unlike banks, NBFCs cannot offer checking deposits to individuals and are therefore more lightly regulated than banks.

Mukesh Ambani is on the DE Shaw, India, controlling board, an entity which oversees the operations here. The negotiations are being handled by Manoj Modi, a close lieutenant of Mr Ambani, according to ET. The JV may eventually seek a banking licence in India.



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