Reliance MF, BlackRock lead race for IDFC AMC

Potential buyers may offer up to Rs2,500 crore for IDFC Asset Management

Anirudh Laskar
Updated9 May 2018
Rajiv Lall, chairman IDFC Financial Holding Co. Ltd. Photo: Aniruddha Chowdhury/Mint
Rajiv Lall, chairman IDFC Financial Holding Co. Ltd. Photo: Aniruddha Chowdhury/Mint

Mumbai: BlackRock Inc., the world’s largest asset manager, and Anil Ambani-controlled Reliance Nippon Life Asset Management Ltd are front runners to buy IDFC Asset Management Co. Ltd, two people directly aware of the development said.

The first round of bidding for IDFC Mutual Fund, which manages Rs70,000 crore worth of assets, happened on Tuesday, with Reliance Mutual Fund and BlackRock emerging as top bidders, the people said, requesting anonymity.

If Reliance AMC acquires IDFC Mutual Fund, the Anil Ambani-controlled company will become the country’s largest asset management company with combined assets of around Rs3.15 trillion. On the other hand, the acquisition will help BlackRock maintain its presence in India after exiting a mutual fund joint venture with DSP Group on Monday.

Potential buyers for IDFC Asset Management are likely to offer Rs2,000-2,500 crore, the people cited earlier said, although the company’s owners have sought a valuation of around Rs4,000 crore. Bidders are ascribing a lower price because of the asset manager’s declining profitability and failure to retain some top executives, they said.

IDFC Mutual Fund’s profit plunged by 44% to Rs54 crore in the financial year ended 31 March from Rs97 crore in the previous year. The asset manager had reported a profit of Rs110 crore in the year ended 31 March 2016.

“Profitability is a key factor in the latest valuation matrix,” said one of the two people. “The churn at IDFC Mutual Fund has been huge in the past few years, which shows some kind of instability in operations.”

Graphic: Paras Jain/Mint
Graphic: Paras Jain/Mint

IDFC Mutual Fund, the country’s 11th largest AMC, is a unit of IDFC Financial Holding Co. Ltd.

“A process is being run and the board of IDFC will make a decision after we receive bids from various parties,” said Rajiv Lall, chairman of IDFC Financial.

While Reliance Nippon AMC declined to comment, a spokesperson for BlackRock’s Asia Pacific operations said the company is not involved in this deal.

Bhavin Patadia, a senior manager of IDFC Mutual Fund’s equity fund management team, quit last month. In November, Sandeep Prabhani quit as head of operations. In 2016, Kalpen Parekh, managing director of sales and marketing at IDFC Mutual Fund, resigned and in the previous year, Kenneth Andrade quit as chief investment officer.

IDFC Securities Ltd is advising IDFC Financial on the deal.

“The deal is expected to be announced within 7-10 days and may be closed within two months,” said the first person cited above.

On 19 August, when Reliance Nippon AMC listed its shares on exchanges through a Rs1,800 crore IPO-cum-offer for sale, the company said that a part of the proceeds were to be used for acquisitions and strategic initiatives.

New York-based BlackRock, which manages assets worth $6.32 trillion assets worldwide, has agreed to sell its 40% stake in DSP BlackRock Investment Managers Pvt. Ltd to joint venture partner DSP Group, valuing DSP BlackRock MF at around Rs5,000 crore.

“Both BlackRock and Reliance have their funds ready to buy IDFC AMC. IDFC AMC has to take a call fast. They are asking for too high a valuation,” said the second person.

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