The deal could pave the way for the Japanese company to acquire a stake in LIC Asset Management Company.

Sources close to the development said that Nomura could hold up to 26 per cent in the joint venture. The other option being explored was to adopt a holding company structure.

"We have zeroed in on Nomura group and have signed a non-binding agreement with them. The talks are at a preliminary stage and the details of the deal are yet to be worked out," said a senior LIC executive. Nomura executives declined comment.

LIC MF is placed ninth in the industry sweepstakes and manages assets worth Rs 18, 633 crore. UTI MF, which is in the process of launching an initial public offer, manages assets worth Rs 50,771 crore at the end of June.

Investment banking sources said the company was valued at 7-8 per cent of its AUM -- or around Rs 4,000 (based on present AUM) -- when it first pitched for a pre-IPO placement.

Market players said due to the current market conditions, it has become difficult to ascertain the valuations of asset management companies.

In March this year, Standard Chartered Bank sold its MF business to IDFC for $205 million, which amounted to 5.67 per cent of its AUM at the end of February.

In December 2007, Reliance Capital Asset Management sold a 5 per cent stake for Rs 501 crore to Eton Park, a global hedge fund. This deal valued Reliance Capital AMC at 13 per cent of its assets managed at that time.

Nomura Group with interests mainly in asset management, broking and investment banking has presence across 30 countries.