July 31 (Bloomberg) -- Sabre Capital Worldwide Inc. and Temasek Holdings Pte aim to raise 250 billion rupees ($5.3 billion) through a joint-venture mutual fund that will invest in Indian equities and bonds.

Lotus India Mutual Fund has received approval from the Securities & Exchange Board of India to start operations,

Sabre Capital, founded by former Standard Chartered Plc Chief Executive Rana Talwar, said today in a joint statement with an affiliate of Temasek, Singapore's state-run investment company.

``We aim to be among the top five in terms of size, scale and distribution,'' Talwar told reporters in Mumbai. ``We aim to have assets under management of 250 billion rupees within the first few years of operations.''

The venture will compete for investors' money with Standard Chartered Plc, HSBC Holdings Plc and other asset management arms in tapping a $775 billion economy the government forecasts will expand at a sustained pace of 8 percent a year, the fastest after China among the world's 20 biggest economies.

``We will grow organically, but will consider acquisitions only if the fit is right,'' said Talwar.

Overseas funds have bought a net $2.82 billion in Indian stocks and $50.7 million in bonds this year after investing a record $9.46 billion in them last year.

India's fund management industry had 2.76 trillion rupees ($59 billion) of assets under management as of May 31. Rajiv Maliwal, a Singapore-based managing director at Sabre, predicted last year that the size of the industry will rise to as much as $140 billion in five years.

`Lot of Interest'

``There's a lot of interest to invest in India,'' said Desmond Soon, who helps manage $300 million at Pacific Asset Management Co. in Singapore. ``It's one of the largest emerging economies, it has high GDP growth, there's an emerging middle- class.'' India's corporate governance standards are ``slightly better'' than China's, Soon said.

Overseas banks and asset managers are trying to tap rising incomes and an expanding middle class estimated by New York- based consulting firm McKinsey & Co. at 216 million people. Per capita incomes more than doubled in the 10 years to March 2006.

Lotus India Mutual will be ``heavily focused'' on retail investors, Talwar said. The fund plans to seek the market regulator's approval to offer investors an equity plan and a debt plan. It expects to be receive approval within a few weeks.

India's benchmark Sensitive Index has declined 14 percent since reaching a record on May 10 after doubling over the previous 12 months. India's central bank has raised its key interest rate three times this year to a four-year high to stem inflation.

Lotus India is betting on the country's long-term potential, Talwar said. ``By 2020, India will one of the major economies of the world,'' he said.

Temasek Holdings

Temasek, whose Fullerton Fund Management Co. is participating in the venture with Sabre Capital, has invested in Indian companies ranging from ICICI Bank Ltd., the country's second-largest bank, to Apollo Hospitals Enterprise Ltd., its biggest health-care company.

``India is a key component of the Fullerton Asia bouquet,'' said Gerard Lee, chief executive officer of Fullerton. Fullerton sees ``huge potential in India.''

Temasek, which has investments of about S$103 billion ($65 billion), is expanding outside of Singapore in a bid to lift returns that averaged 6 percent a year in the last decade. It earlier set up the $100 million Merlion India fund with Standard Chartered Private Equity to provide capital to promising Indian companies to grow within and beyond India.

Mark Lee, a Singapore-based spokesman for Temasek, couldn't be reached for comment on his office phone.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net . and Sumit Sharma in Mumbai at sumitsharma@bloomberg.net

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