Global financial major HSBC is buying out L&T Investment Management, the managers to L&T Mutual Fund, for about Rs 3,200 crore (around $425 million). This makes the deal the largest ever buyout in India’s fund industry. It also marks a rare instance of a foreign financial major buying an Indian fund manager.
As of September-end, total assets managed by L&T MF were a little over Rs 80,300 crore, while HSBC was managing about Rs 11,300 crore, AMFI data showed. For HSBC, the blended cost of acquisition of L&T MF was about 4% of the total assets, which industry players feel is a good price for the acquirer.
In recent years, several global financial majors have sold their MF business in India to a local entity, including Principal Financial Group, JP Morgan, Deutsche Bank, Goldman Sachs, Fidelity and Morgan Stanley. In recent years, US financial major Invesco’s buyout of Religare MF in 2018 was the only exception to this predominant trend in the domestic fund industry.
Additionally, according to the contours of the latest deal, HSBC will be buying the entire fund house and not just the schemes and the AMC licence — a trend seen in several of the recent acquisitions. HSBC India CEO Hitendra Dave said that this acquisition underscored the British financial services major’s commitment to double down on its focus to grow its India business. “We will continue to play to our strengths and favourably grow our wealth management business in India,” Dave said.
The acquisition, subject to regulatory approval, will be another milestone as HSBC delivers on its strategy of becoming a leading wealth manager in Asia, a release from the UK financial services major said. “Strengthening HSBC’s asset management business in India will add to its ability to serve the wealth needs of its customers in the country as well as those of its growing non-resident Indian customer base across the world,” it said. Recently, HSBC said it was acquiring French financial major AXA’a Singapore arm.
Interestingly, exactly a decade ago, L&T MF had bought the Indian fund management business of Fidelity. Since then, it had grown its asset base organically.
In the last 10 years, several of the global financial services majors have sold their local fund house to Indian entities. In 2013, HDFC MF had bought Morgan Stanley’s MF business in India and SBI MF bought Daiwa’s India MF arm. Then in 2014, Kotak MF bought Pine-Bridge MF, while Aditya Birla MF bought ING MF in India. In 2015, Reliance MF bought Goldman Sach’s India MF arm and Prameriac MF bought Deutsche MF India. In 2016, Edelweiss MF bought JP Morgan MF’s India arm, while earlier this year Sundaram MF bought out Principal Financial Group’s India fund management arm.
