Home / Companies / News /  IDFC MF in IndusInd Bank crosshairs

MUMBAI : The Hinduja family-led IndusInd Bank Ltd has emerged as one of the top contenders to buy out IDFC Asset Management Co. Ltd, which manages assets worth around 1.3 trillion, two people directly aware of the development said on the condition of anonymity.

The mutual funds business of IDFC Ltd is among India’s top 10 asset management companies.

“IndusInd Bank has entered into discussions with the bankers of IDFC Ltd (for the proposed sale of the AMC business). IndusInd is certainly in the top three," said one of the persons mentioned above, adding that IndusInd Bank may be “well-positioned" with funds of around $1 billion towards the planned acquisition of IDFC AMC.

“The formal bidding process will be completed in March and subsequently an announcement will be made," this person said.

An IndusInd Bank spokesperson declined to comment on the deal.

“The number of retail folios is steadily growing as small investors are increasingly preferring to earn income from equity investment through the MF route. IndusInd Bank has the required capital, but does not have its own AMC. That’s why IndusInd has been actively scouting for a well-established fund house from which the bank can potentially earn a regular additional income through fees, apart from the interest income that the bank earns from its loans business," said the person cited above.

IDFC AMC being a large MF player willing to monetize its funds business, has caught the attention of several domestic and international suitors.

An IDFC spokesperson also declined to comment on the ongoing deal talks.

“From an initial list of 15-odd potential buyers, the investment banker (appointed by IndusInd Bank) has narrowed down to a list of 8-10 prospective buyers for the proposed acquisition of MF business owned by IDFC Ltd," said the first person.

Several domestic and foreign asset managers have also approached IDFC’s investment banker to place their bids to buy IDFC Ltd’s mutual funds arm.

On 27 January, Mint reported that AMCs including Nippon Life India Asset Management Ltd and Axis Asset Management Co. Ltd are among financial services firms in the race to acquire IDFC Ltd’s mutual fund business in a deal that could be worth 7,000 crore–10,000 crore, which would make it the largest ever acquisition in the country’s mutual fund space.

IndusInd Bank recently raised capital to fund its expansion plans and in December the Reserve Bank of India approved Life Insurance Corp. of India, the country’s largest insurer, hiking its stake in IndusInd Bank from 5.29% to 9.9%.

This equity stake sale shall also bring in more funds for IndusInd Bank to serve its expansion plans.

IndusInd Bank is keen to enter the mutual fund business so that it is able to create a new fee-based income channel. If its IDFC AMC acquisition plan goes through, IndusInd Bank will get a ready-made running MF business without requiring to secure a mutual fund licence from the Securities and Exchange Board of India. IDFC AMC already has a licence that can be transferred in IndusInd’s name if the deal talks fructify.

Citigroup Global Markets has been appointed by IDFC Ltd to find a potential buyer and the proposed deal could be concluded in three-four months, according to the first person.

ABOUT THE AUTHOR

Anirudh Laskar

Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
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