L&T Finance Holdings Ltd and HSBC Asset Management (India) Private Ltd (HSBC AMC) on Thursday reached a definitive agreement whereby they will acquire 100% of the shares of L&T Investment Management Ltd for or around $ 425 million. ??3,191 crores. The proposed acquisition is subject to regulatory approvals.
With assets under management (AUM) of ??803 billion and over 2.4 million active folios, L&T Mutual Fund is currently the 12th largest asset management company in India as of September 2021. On the other hand, HSBC AMC had assets under management of ??117 billion.
Commenting on the sale, Dinanath Dubhashi, Managing Director and CEO of L&T Finance Holdings, said: “Over the past 10 years, L&T Mutual Fund has earned the trust of stakeholders across the spectrum, supported by consistent performance. and stable. Taken alongside the recent capital increase, it provides us with enough ammunition to increase the pace of retailing our loan portfolio, which is one of our long term goals. ”
The divestiture of the mutual fund business is in line with L&T Finance Holdings’ strategic objective of unlocking value from its subsidiaries to strengthen its balance sheet. While HSBC is studying strategic growth plans in India.
In July 2010, L&T Financial Services gained access to the mutual fund industry in India after acquiring DBS Chola. In addition, L&T Finance Ltd, a subsidiary of L&T Finance Holdings Ltd, had acquired ??Fidelity Indian mutual funds 8,881 crore assets under management in 2012.
According to HSBC AMC, the proposed acquisition will be funded from existing resources and will have minimal impact on HSBC’s Common Equity Tier 1 ratio. HSBC expects the acquisition to be immediately accretive to the group’s earnings once finalized and to achieve a return on investment of over 10% over the medium term.
Noel Quinn, CEO of HSBC Group, said: “This transaction strengthens our business in India and strengthens our status as one of Asia’s leading wealth managers. The combination of L&T Investment Management Ltd with our existing Indian asset management business gives us the scale, scope and capabilities to capture some of the 15-20% annual growth in the asset management market. expected in India over the next five years. ”
The Indian mutual fund industry has grown rapidly in recent years. According to data available from the Association of Mutual Funds of India (Amfi), the MF industry’s assets under management have increased from ??16.50 trillion as of November 30, 2016 to ??37 34,000 billion as of November 30, 2021, an increase of more than two in five years.
Notably, last year, global financial services group Manulife acquired a 49% stake in Mahindra & Mahindra Financial Services’ wholly owned subsidiary, Mahindra Asset Management Company for ??265 crores. AMC’s average assets under management were approximately ??5,396 crore at the time of acquisition, thus valuing it at approximately 10% of assets.
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