Mumbai: Industrial Development Bank of India (IDBI) plans to enter the mutual funds (MFs) business later this year, says S. Muhnot, managing director and chief executive officer of IDBI Capital Market Services Ltd, a 100% owned subsidiary of the bank.
The bank has filed an application for an MF licence with the capital market regulator Securities and Exchange Board of India (Sebi). “The operations should start late this year,” he says. “IDBI’s mutual fund business will be a joint venture between IDBI and IDBI Capital,” Muhnot adds.
The new business entity is yet to be named.
“The shareholding pattern has been designed and approved by the IDBI Capital board. IDBI will hold 65% stake, while IDBI Capital will own 35%,” he says.
Apart from floating an asset management company, IDBI Capital is also planning to start private equity operations later this year, says Muhnot.
“We are planning a Rs150 crore fund to start with,” he says. “This fund will make growth investments in mid-sized Indian companies with an exit cycle of about three-four years. The private equity operations, as in the case of the investment banking business, will be completely under IDBI Capital.”
On the brokerage front, the company plans to invest money and focus into expanding Paisabuilder, its online trading platform. Currently, about 20% of its profits come from the brokerage business, Muhnot says. IDBI Capital is also a major player in provident fund and pension fund management. It currently manages more than Rs13,000 crore of these funds and claims to be one of the top three in the business.
IDBI Capital is interested in having a strategic partner, preferably a foreign strategic equity partner, who can bring the FII (foreign institutional investor) business. “We have many domestic institutional clients, but there is a huge gap in terms of business from foreign clients who buy Indian equities in bulk,” Muhnot says. “We would like to have a foreign partner who can bridge this gap.”
IDBI Bank directors have discussed such a divestment in IDBI Capital, he says. “However, we have not been approached by any serious parties interested in buying a stake,” Muhnot adds. According to an internal estimate, IDBI Capital’s net worth is about Rs366 crore.
Meanwhile, Tokyo-based Shinsei Bank has also expressed an interest to enter the Indian MF market. However, when contacted, the corporate communications person at the bank did not wish to comment. Shinsei Bank has tied up with UTI Mutual Fund to float a company in Singapore.