HSBC buys L&T MF, fund industry’s largest rupee 3,200 crore deal

MUMBAI: Global finance major HSBC is buying out L&T Investment Management, the managers of L&T Mutual Fund, for around Rs 3,200 crore (around $ 425 million). This makes the deal the biggest buyout ever in the fund industry in India. This is also a rare case where a large foreign finance company purchases an Indian fund manager.
At the end of September, the total assets managed by L&T MF exceeded just over Rs 80,300 crore, while HSBC managed around Rs 11,300 crore, according to AMFI data. For HSBC, the weighted cost of acquiring L&T MF was around 4% of total assets, which industry players see as a good price for the acquirer.

In recent years, several global financial majors have sold their MF businesses in India to a local entity, including Principal Financial Group, JP Morgan, Deutsche Bank, Goldman Sachs, Fidelity and Morgan Stanley. In recent years, the takeover of Religare MF by US finance company Invesco in 2018 has been the only exception to this prevailing trend in the domestic fund industry.
In addition, depending on the contours of the latest transaction, HSBC will buy the entire fund and not just the programs and the AMC license – a trend seen in several of the recent acquisitions. Speaking to TOI, HSBC India CEO Hitendra Dave said the acquisition underscores the UK financial services firm’s commitment to stepping up efforts to expand its business in India. “We will continue to build on our strengths and develop our wealth management business in India favorably,” said Dave.
The acquisition, subject to regulatory approval, will be another important step as HSBC implements its strategy of becoming one of the leading wealth managers in Asia, according to a statement from the UK financial services firm . “Strengthening HSBC’s asset management business in India will increase its ability to meet the wealth needs of its clients in the country as well as those of its growing non-resident Indian clientele across the world,” a- he declared. Recently, HSBC announced the acquisition of the finance arm of French finance company AXA’a in Singapore.
Interestingly, exactly ten years ago L&T MF bought the Indian fund management company from Fidelity. Since then, she had grown her asset base organically.
Over the past 10 years, several of the global financial services majors have sold their local fund houses to Indian entities. In 2013, HDFC MF had acquired the MF business of Morgan Stanley in India and SBI MF had acquired the MF branch of Daiwa in India. Then in 2014, Kotak MF bought PineBridge MF, while Aditya Birla MF bought ING MF in India. In 2015, Reliance MF bought the India MF branch of Goldman Sach and Prameriac MF bought Deutsche MF India. In 2016, Edelweiss MF acquired the Indian arm of JP Morgan MF, while at the start of the year Sundaram MF acquired the Indian fund management arm of Principal Financial Group.

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