Private sector lender Bandhan Bank Ltd.'s parent Bandhan Financial Holdings Ltd. - led consortium of private equity firm ChrysCapital and Singapore's sovereign fund GIC, has been shortlisted to be the new owner of IDFC Asset Management Co. Ltd, which manages mutual fund assets worth about Rs1.3 trillion
Two people with direct knowledge of the matter confirmed this on the condition of anonymity since the announcement is yet to be formally made by the board of IDFC, which net on Wednesday to shortlist the buyer for the group's mutual fund business from a list of three close contenders including a consortium led by American fund manager Invesco, the one led by Bandhan Bank, and private sector lender IndusInd Bank Ltd.
ChrysCapital will be spearheading the consortium for leadership management and the business structure post the buyout by the Bandhan Financial- led consortium.
"The deal has been finalized at around Rs. 4,500 crore, which is 2.2% of IDFC AMC's assets under management," said the first person.
"IDFC AMC has more debt-oriented MF schemes than equity funds. That's why the deal has been done at somewhat the lower end of the average valuation given for acquiring mutual fund businesses," said the first person.
While Bandhan Bank will bring in 60% of the investment to acquire IDFC AMC, ChrysCapital and GIC will invest 20% each to acquire the mutual fund business entirely from the shareholders of IDFC Ltd., according to the two persons.
"Bandhan became a bit aggressive towards the end and increased its offer from Rs. 4,000 crore to Rs.4,500 crore as the assets were good and the opportunity is abundant,"said the second person.
IDFC AMC's investment banker Citigroup Global Markets had submitted its proposal with names and bids of the potential acquirers last week.
IDFC AMC's acquisition will get Bandhan Financial a readymade licence to be a new entrant in the Rs38 trillion mutual fund industry.
The proposed sale of IDFC AMC is in line with IDFC group's objective to reverse-merge with IDFC First Bank Ltd and focus on banking operations after selling off profitable non-core assets, including IDFC AMC.
On 24 February, Mint reported that the Hinduja family-led IndusInd Bank Ltd was one of the top three contenders to buy IDFC AMC which is one of the top 10 AMCs in the country.
“The formal bidding process was supposed to be completed by 31 March but global events delayed the process,” the second person said.
The number of retail folios is steadily growing in the MF space as small investors are increasingly preferring to earn income from monthly equity investments through the MF route.
That’s why both Bandhan Financial and IndusInd Bank have been actively scouting for a well-established fund house from which they could potentially earn a regular additional income through fees, apart from the interest income that the banks earn from their credit business.
