L&T Finance (LTF), on Tuesday, executed definitive agreements to acquire the mutual fund business of Fidelity in India.
LTF, which is a subsidiary of L&T Finance Holdings, said the transaction would be completed in two months. However, it declined to give any transaction details. LTF will, accordingly, acquire FIL Fund Management Private Ltd. (Fidelity AMC) and FIL Trustee Company Private Ltd., which are carrying on the Fidelity's mutual fund business in India. The transactions are subject to regulatory approvals.
Y. M. Deosthalee, Chairman and Managing Director, L&T Finance Holdings, said, “In 2010, we entered the asset management business by buying DBS Chola and we have seen a 33 per cent growth in assets under management (AUM) to Rs.4,616 crore for the quarter ended December 2011. We felt it was important to go to the next level. With this acquisition, we are a step closer to achieving our vision of being among the top players in the Indian mutual fund industry.”
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Fidelity Asset Management Company (AMC), incorporated in 2004, manages the 15 largest mutual fund in India with a market share of 1.3 per cent and an average AUM of Rs.8,881 crore for the quarter ended December 2011. Its team includes 120 people but a large part of the Fidelity Equity Fund management team will not be available to LTF after the integration process is over.
Fidelity reported Rs.306-crore accumulated loss in the last financial year but LTF would not be taking over any losses, said Mr. Deosthalee. “Our portfolio is significantly institutional debt while they have equity and retail presence. They also have a high quality team built over eight years and we have a geographical reach all over the country.” About 68 per cent of Fidelity assets are equity-oriented and it has built an equity-oriented franchise with access to large high net worth individuals (HNI) customers and a strong systematic investment plan (SIP) portfolio.
He said that mutual funds being an under-penetrated industry, there was tremendous potential in the medium-term, the important factors being AUM and fee income.
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“We are working on a detailed integration plan which will ensure a decent fee income for the financial business. We are not going to look at any more acquisitions.”
N. Sivaraman, President & whole-time director, L&T Finance Holdings, said, “We see tremendous complementary strengths between the two funds. The strong equity focus of
“Fidelity's Indian mutual fund when combined with L&T Mutual Fund, results in a combined entity with an average AUM of Rs.13,497 crore and a market share of around 2 per cent.”