Mumbai Hinduja family-led IndusInd Bank Ltd has emerged as one of the top contenders to buy IDFC Asset Management Company Ltd, which manages assets worth approx. 1.3 trillion, two people directly aware of the development said on condition of anonymity.
IDFC Limited’s Mutual Fund business is among the top 10 asset management companies in India.
“IndusInd Bank has held discussions with the bankers of IDFC Limited (for the proposed sale of the AMC business). IndusInd is definitely in the top three,” said one of the above persons, adding that IndusInd Bank could be “in a good position” with funds of around $1 billion towards the planned acquisition of IDFC AMC.
“The formal bidding process will be completed in March and an announcement will be made later,” this person said.
An IndusInd Bank spokesperson declined to comment on the deal.
“The number of retail folios is increasing steadily as small investors are increasingly preferring to generate income from equity investments through the MF route. IndusInd Bank has the required capital but does not have its own AMC. This is the reason why IndusInd is actively searching for a well established fund house from which the bank can potentially earn regular additional income through fees, apart from the interest income earned from its lending business. Apart from that,” said the person above.
IDFC AMC being a major MF player keen to monetize its fund business, it has attracted the attention of many domestic and international suitors.
An IDFC spokesperson also declined to comment on the ongoing negotiations for the deal.
“From the initial list of 15 potential buyers, the investment banker (appointed by IndusInd Bank) has been narrowed down to a list of 8-10 potential buyers for the proposed acquisition of the MF business owned by IDFC Ltd.,” the first person said. ,
Several domestic and foreign asset managers have also approached the investment banker of IDFC to place their bid to buy the mutual fund arm of IDFC Ltd.
on January 27, Mint reported that AMCs including Nippon Life India Asset Management Ltd and Axis Asset Management Company Ltd are among financial services firms in the race to acquire the mutual fund business of IDFC Ltd in a deal that may be worth 7,000 crore-10,000 crore, which would make it the biggest acquisition ever in the mutual fund space of the country.
IndusInd Bank recently raised capital for its expansion plans and in December the Reserve Bank of India approved Life Insurance Corporation of India, the country’s largest insurer, to increase its stake in IndusInd Bank from 5.29% to 9.9%.
This equity stake sale will bring in more funds for IndusInd Bank to finance its expansion plans.
IndusInd Bank is keen to enter the mutual fund business to be able to create a new fee-based income channel. If its IDFC AMC takeover plan is completed, IndusInd Bank will get a ready running MF business without the need of obtaining a mutual fund license from the Securities and Exchange Board of India. IDFC AMC already holds a license which can be transferred in the name of IndusInd if the transaction is successful.
Citigroup Global Markets has been appointed by IDFC Ltd to find potential buyers and the proposed deal is likely to be concluded in three-four months, according to the first person.
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