L&T Finance Holdings will sell its mutual fund business L&T Investment Management Ltd to HSBC Asset Management (India) Ltd for $425 million (around RS 3,200 crore), the company said in a stock exchange filing on Thursday.
“L&T Finance Holdings (LTFH) and HSBC Asset Management today entered into a definitive agreement whereby HSBC AMC shall acquire 100% equity shares of L&T Investment Management Ltd, a wholly owned subsidiary of LTFH..,” the company said.
LTFH, the investment manager of L&T Mutual Fund, will also be entitled to excess cash in L&T Investment Management until the completion of the acquisition. The transaction is subject to the requisite regulatory approvals, it further said.
“The transaction with HSBC is in line with our strategic objective of unlocking value from our subsidiaries which will help us to strengthen our balance sheet for our lending business. When seen alongside the recent capital raise it provides us with enough ammunition to increase the pace of retailisation in our lending portfolio, which is one of our long-term goals,” said Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings.
Further, the acquisition of L&T Investment Management is in line with the strategic growth plans of HSBC in India. HSBC stands to gain from an experienced team, diversified assets, strong retail customer base and the vast geographical reach that L&T Mutual Fund has built over the years, the statement added.
Both L&T Investment Management and HSBC AMC will work to ensure that there will be continuity of services to their investors and counter-parties in the interim.
JP Morgan and Citi were the financial advisors to L&T Finance Holdings. Cyril Amarchand Mangaldas acted as the legal advisors and PwC acted as due diligence and tax advisors to L&T Finance Holdings.
With assets under management (AUM) of Rs 80,300 crore ($10.8 billion) and over 2.4 million active folios as of September 2021, L&T Investment Management is the 12th largest Asset Management Company (AMC) in India. It offers a basket of equity, fixed income and hybrid schemes to both retail and institutional investors.
Meanwhile, HSBC intends to merge the operations of LTIM with that of its existing asset management business in India, which had AUM of Rs 11,700 crore ($1.6 billion) as of September 2021.
In February 2020, HSBC combined its retail banking and wealth management, asset management, insurance and private banking businesses to create Wealth and Personal Banking which serves over 39 million customers globally.
Till last year, reports suggested that global private equity giant Blackstone and IIFL Wealth, which is backed by PE firm General Atlantic, were also in the fray to acquire a majority stake in engineering-to-finance conglomerate Larsen & Toubro Ltd’s mutual fund business.
L&T had entered the mutual fund industry a decade ago by acquiring DBS Chola MF. It expanded the vertical in 2016 when it acquired the India mutual fund business of Fidelity. The company had average assets under management of Rs 71,000 crore as of December 31, 2019.
