Standard Chartered calls off UBS MF deal

Standard Chartered calls off UBS MF deal

Standard Chartered Plc. abandoned a Rs467 crore sale of its Indian mutual funds business to UBS AG and will look for a new buyer.

This follows the Reserve Bank of India’s refusal, sent in Wednesday’s communication, declining to approve the deal.

On 25 December, Mint exclusively reported that the RBI has decided to turn down the proposal by UBS to acquire Standard Chartered Asset Management Co. Pvt. Ltd over possible money laundering through UBS by Hasan Ali Khan, a Pune- based stud farm owner who was under investigation in India by the income tax department.

Standard Chartered, the parent company of Standard Chartered Bank in India, sent a notice to stock exchanges in London and Hong Kong, where it is listed, saying it will not proceed with the proposed sale.

It did not give any reason other than saying the “contract with UBS...has expired. Standard Chartered will now seek a new buyer."

Both banks have declined repeated requests by Mint to discuss the RBI’s concerns over the deal, which added to concerns by the finance ministry.

The notice said that during 2007, the mutual funds business has continued to grow and operate normally. On 28 December, Mint also reported exclusively that Standard Chartered employees had been promised hefty bonuses for sticking around until the UBS deal was complete and that a new buyer is likely to be pursued.

The UBS acquisition, for $118 million (Rs464.9 crore), was signed in January and subject to regulatory approvals.

For the British parent, the mutual fund business in India was unique as this is the only country where it is present in the asset management business.

It started the mutual fund business in 2000 and, initially, it was a debt fund house, offering only debt-based schemes. Standard Chartered started equity fund management in 2005. For an asset management company, equity assets bring in more fees and better valuation also.

The seven-year fund now stands 13th in terms of assets under management. It managed Rs14,295 crore of assets as on 30 November. This is slower than, say, its peer HDFC Asset Management Co. Ltd, which also started the same year, and manages Rs47,000 crore in assets and is India’s No. 4 company by that measure.

The Indian mutual fund industry has 32 companies managing Rs5.37 trillion of assets as on 30 November.

Standard Chartered ranks among the top 25 companies in the London Stock Exchange’s FTSE-100 index in terms of market capitalization. UBS is one of the world’s leading financial firms and wealth manager.