BlackRock exits India mutual fund business

BlackRock said it will sell its 40% stake in DSP BlackRock Investment to JV partner DSP Group, marking the exit of yet another foreign asset manager from the Indian mutual fund industry

Ami Shah, Anirudh Laskar
Updated7 May 2018
The financial details of BlackRock’s exit were not disclosed. Photo: Reuters
The financial details of BlackRock’s exit were not disclosed. Photo: Reuters

Mumbai: BlackRock Inc., the world’s largest asset manager, said on Monday it will sell its 40% stake in DSP BlackRock Investment Managers Pvt. Ltd to joint venture partner DSP Group, marking the exit of yet another foreign asset manager from the Indian mutual fund industry.

While the financial details of the deal were not disclosed, two people familiar with the transaction said DSP BlackRock Investment Managers is valued at around Rs5,000 crore.

“DSP BlackRock has total assets worth around Rs1.1 trillion, which includes mutual funds, alternative investment funds (AIFs) and assets under advisory services,” said one of the persons mentioned above.

“As of now, BlackRock is exiting the JV. BlackRock has been in talks with DSP for about a year and initially they were interested to buy DSP’s 60% stake. DSP rather chose the option of retaining its footprint in India,” he added.

They requested anonymity as they were not authorized to speak to reporters.

US-based BlackRock is the biggest asset manager in the world and, as of 31 March, the firm managed around $6.32 trillion in assets worldwide. DSP BlackRock manages assets worth Rs35,000 crore across 12 equity mutual fund schemes and Rs50,000 crore in fixed income schemes. The rest of the assets are in AIFs and under advisory services. DSP BlackRock had average assets under management (AUMs) of Rs86,000 crore as March, according to data from Association of Mutual Funds in India.

Arpwood Capital was hired by DSP to advise the company on the transaction.

Hemendra Kothari, chairman of DSP Group told Mint, “For the past few years both DSP and Blackrock have been debating who will own the majority stake in the mutual fund business because Blackrock is a leader in many international markets. On the other hand, our financial group is 150 years old, which is possibly one of the oldest in India. And DSP Group is one of the few financial groups that focus purely on investment management. We are passionate about it and have grown it phenomenally well so far.”

BlackRock had bought out Merrill Lynch’s 40% stake in the asset manager in 2008. The DSP Group’s joint venture with Merrill Lynch Investment Managers had established its retail asset management business in India in 1996.

“Going forward, by strengthening our technology, sales and training processes further, we will do even better, especially because the opportunities are huge and penetration is low. We are confident to grow our asset size by 4-5 times in the next few years. So far we have grown organically but going forward we may definitely look at acquisitions, depending on the circumstances. At the moment, we do not have any plans to have a partner in the asset management business after Blackrock’s exit,” Kothari said.

“I don’t think it is necessarily driven by business growth and market outlook. It seems like a strategic call by firms,” said Kaustubh Belapurkar, director of fund research at Morningstar Investment Adviser India Pvt. Ltd, shrugging concerns the exit was in line with previous ones by other foreign asset managers.

“Unlike earlier days, Indian mutual funds are now witnessing profitability. The industry is seeing much better days and outlook looks bright. The penetration is much better as compared to 3-4 years ago,” added Belapurkar.

In the past decade, Merrill Lynch, Goldman Sachs, Nomura, JP Morgan, Deutche Bank were among asset managers that exited the Indian asset management market because of higher costs, tighter rules and lesser knowledge local demographics.

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