Pramerica Asset Managers set to buy out Deutsche AMC for Rs400 crore
The transaction would mark the fourth exit by a foreign fund manager from India since December 2013
Mumbai: Pramerica Asset Managers Pvt. Ltd is buying out Deutsche Asset Management (India) Pvt. Ltd, a money manager with 10 times the asset size of Pramerica, according to two people close to the development.
Pramerica will pay Rs.400 crore to take over the assets under management of Deutsche Asset Management, one of the two people cited above said. Both spoke on condition of anonymity.
The transaction values Deutsche Asset Management at about 1.8% of its assets under management of about Rs.22,427 crore as of March-end, and marks the fourth exit by a foreign fund manager from India since December 2013.
Pramerica Asset Managers had assets under management of about Rs.2,309 crore as of March-end. If the acquisition goes through, the US-based asset management company would vault to the 14th position among fund managers in India from 31st now.
“We do not comment on market speculation,” a spokesperson for Deutsche Bank AG’s Indian unit, which controls Deutsche Asset Management, said.
Pramerica Asset Managers’ CEO Ravi Kumar refused to come on the phone when Mint tried to reach him last week. His office said he was not authorized to speak to the media.
Market volatility, an increase in minimum net worth requirements to Rs.50 crore from Rs.10 crore and a rule requiring sponsors to invest their own money in all their open-ended schemes have put pressure on asset management companies in India’s Rs.12 trillion mutual fund industry in recent years. Many small fund houses have had to shut as a result.
Three foreign asset management companies have left India’s mutual fund market starting in December 2013. Morgan Stanley Investment Management Co. Ltd had its schemes acquired by HDFC Asset Management Co. Ltd. In May 2014, Birla Sun Life Asset Management Co. Ltd acquired the schemes of ING Investment Management (India) Pvt. Ltd and in September, Kotak Mahindra Asset Management Co. Ltd purchased the assets of PineBridge Investments Asset Management Co. Ltd.
“It’s not just about foreign firms. Even small Indian firms are struggling as the net worth requirement has gone up. It has become onerous for the fund houses as they can’t launch too many schemes till they comply with the new networth requirement,” said Vivek Prasad, partner, Price Waterhouse. “Sponsors of foreign firms abroad are now relooking at their businesses and trying to figure out whether they want to continue to focus on the AMC business, specifically in the Indian MF (mutual fund) industry.”
Prudential Financial Inc., a US-based financial services company, owns and is the sponsor of Pramerica Asset Managers.
Last year Dewan Housing Finance Corp. (DHFL) agreed to buy a 50% stake in the Indian fund manager—a proposal that’s yet to receive regulatory approval.
“These are still rumours. We are not aware of any such deal,” a senior official at DHFL said about the Pramerica-Deutsche Asset deal on condition of anonymity.
Until recently, Yes Bank Ltd was in the race to acquire Deutsche Asset Management, but market participants said it found the asking price too high.
“We were never seriously in the race and have not been in touch with them for over two months now,” Yes Bank managing director and chief executive officer Rana Kapoor said. “We figured that an organic pursuit (setting up an asset manager from scratch) is in our best interest since we have successfully built a greenfield bank and a greenfield securities company.”
Kapoor declined to comment on the price.