Nippon Life Insurance Company, also called Nissay, signed a Memorandum of Understanding (MoU) with Reliance Capital for acquiring the stake in the Anil Ambani Group firm's fund management unit, Reliance Capital Asset Management

Company, the company said in a statement.

The transaction pegs the valuation of Reliance Capital Asset Management at around Rs 5,600 crore ($1.1 billion).

Commenting on the development, Reliance Capital Chairman Anil D Ambani said: "We are delighted to have Nippon as our strategic partners in the mutual fund business. They are already our partners in the life insurance business."

This is the largest Foreign Direct Investment (FDI) deal in any Indian asset management company till date. "This investment is our second capital alliance with Reliance Group following the investment in Reliance Life last year. Through this investment, we believe that we can strengthen our business relationship with Reliance Group," Nippon Life President Yoshinobu Tsutsui said.

This deal further expands Reliance Capital's partnership with Nippon Life. In October last year, Reliance Capital completed a 26 per cent stake sale in life insurance venture Reliance Life to Nippon Life for over Rs 3,000 crore.

Cheering the deal, shares of Reliance Capital advanced by 5.09 per cent to Rs 334.05 apiece on the BSE. They were later trading at Rs 331.80, up 4.39 per cent, at 1:50 PM.

In September last year, Reliance Capital and Nippon signed a Memorandum of Understanding for strengthening the business relationship between the two companies, including a strategic partnership across all Reliance Capital-promoted financial businesses.

Reliance Capital has interests in telecom, power, entertainment and infrastructure, among other businesses.

Reliance Capital Asset Management (RCAM) is the second-largest asset management company in India in terms of assets under management, with a market share of 13 per cent. It managed Rs 93,148 crore ($19 billion) as of September 30, 2011, across mutual funds, managed accounts and hedge funds. The average assets under management of RCAM for the quarter ended September 30, 2011, stood at Rs 90,661 crore ($18.5 billion).

Nippon Life is a Fortune 100 company and the seventh-largest life insurer in the world. It is a leading private life insurer in Asia and Japan.