UPDATE 1-INTERVIEW-Principal looking to buy fund firm in India

(Adds details, background, quote)

By Nishant Kumar

MUMBAI, Nov 25 (Reuters) - U.S. firm Principal Financial Group (PFG.N: Quote, Profile, Research) is looking to acquire an asset management company in India as it wants to scale up its fund unit operations in the high-potential market, a top executive said on Tuesday.

Merchant bankers have been told to look out for possible targets in the 35-member industry, preferably with large equity assets, Rajan Ghotgalkar, Principal's country head for India, told Reuters in a telephone interview.

"Mandates have been given," Ghotgalkar said.

He said the firm was yet to finalise potential targets, but said the time was right for inorganic growth given the sharp drop in markets and ongoing financial turmoil.

"Valuations have moderated. It's a better time to buy now," said Ghotgalkar.

Principal already has a fund venture with Punjab National Bank (PNBK.BO: Quote, Profile, Research) and Vijaya Bank (VJBK.BO: Quote, Profile, Research) that manages about 70 billion rupees ($1.4 billion).

Early this month, Religare Enterprises Ltd (RELG.BO: Quote, Profile, Research) said it would buy Lotus Mutual Fund, a unit of Singapore state investor Temasek [TEM.UL] and London-based Sabre Capital Worldwide.