India's JM Financial Ltd says former Citi Chief Executive Vikram Pandit and his business partner, Hari Aiyer are to buy a 3 percent equity stake in the financial services company through an issue of warrants.

JM Financial also said it would set up a fund jointly with Pandit's firm to buy distressed assets. The fund is targeting an initial capitalization of $100 million, JM Financial said in a statement late on Thursday.

(Reporting by Aditi Shah. Editing by Jane Merriman)