The deal has valued SAMC at about Rs 201 crore (Rs 2.01 billion). A Sundaram Finance release said the joint venture would be named Sundaram BNP Paribas Asset Management Company.
The transaction is expected to be completed in the first quarter of 2006 after the relevant regulatory clearances come through.
BNP has agreed to buy SMAC's equity shares (face value of Rs 10) at a price of about Rs 136 a share.
In mid-2002, Sundaram Finance had bought about 39 per cent of SMAC from its erstwhile overseas partner, Newton, at a price of Rs 18 a share.
SMAC managing director TP Raman said the two deals were not comparable as they had been arrived at in different circumstances.
BNP will also take a 49.9 per cent stake in Sundaram Finance Trustee Company for Rs 3.46 lakh to meet mutual fund guidelines.
The size of funds managed by SAMC stands at about Rs 2,870 crore (Rs 28.7 billion) up from Rs 800 crore (Rs 8 billion) in mid-2002. About 60 per cent of the funds managed are in equity schemes.
SMAC's assets under management received a boost of about Rs 1,000 crore (Rs 10 billion) recently through the public offer of two equity schemes.
Even when Sundaram Finance parted ways with Newton, it had indicated that it was open to a tie-up in future. In this case, BNP Paribas had approached Sundaram Finance for a stake in the asset management company.
In a Sundaram Finance release, Gilles Glicenstein, chairman of BNP Paribas Asset Management, said, "We believe that the Indian market is one of the most exciting and rapidly developing markets in the world; it has already shown substantial growth and has potential for much more."