Schroders, the UK-based asset management giant that manages close to $291 billion in assets, is set to acquire nearly 30 per cent stake in Axis Asset Management Company, sources familiar with the deal have told Business Standard.
The transaction will help Schroders revive its India presence and end Axis Asset Management Company’s search for a strategic partner in the mutual fund business.
While two other companies had evinced interest in buying a stake in the asset management company promoted by Axis Bank, sources say Schroders is set to seal the deal. A senior management team from the firm’s London headquarters is scheduled to visit Mumbai next week to finalise the transaction.
In the mutual fund industry, deals are valued on the basis of the asset mix of the fund house, network strength, long-term earning prospects and profitability. The deal value increases if the assets are more in equity schemes. This is because these schemes earn better commissions compared to debt and other hybrid funds of the same tenure.
| MUTUAL FUND M&As | ||
| Year | Deal | Value |
| 2012 | Nippon Life buys 26% in Reliance Capital Asset Management | Rs 1,450 crore or 6.64% of total assets |
| 2011 | Goldman Sachs buys Benchmark Mutual Fund | Rs 130 crore 4.1% of total assets |
| 2009 | L&T Finance buys DBS Chola Mutual Fund | Rs 45 crore 1.1% of total assets |
| 2008 | IDFC buys Standard Chartered Mutual Fund | Rs 831 crore 5.7% of total assets |
| Source: Industry | ||
Axis Mutual Fund, owned by Axis Asset Management Company, closed the last calendar year with Rs 8,598 crore in assets.
According to sources, the domestic fund house is likely to get six-eight per cent of the value of its equity assets and another two-four per cent of the value of its debt funds. On average, they say, the valuation of the AMC could be four-six per cent of the total assets or in the range Rs 350-500 crore.
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The valuation is broadly in line with the recent transactions in the domestic mutual fund industry.
Nippon Life Insurance Company had acquired 26 per cent stake in Reliance Capital Asset Management for Rs 1,450 crore in January 2012. The Japanese life insurer valued the Indian asset management firm at 6.64 per cent of its total assets.
Earlier, Goldman Sachs had bought Benchmark Mutual Fund at a reported value of Rs 130.5 crore, thereby giving it a valuation of 4.1 per cent of assets. In September 2009, L&T Finance had acquired DBS Chola Mutual Fund for Rs 45 crore or 1.5 per cent of total assets. IDFC's purchase of Standard Chartered Mutual Fund in 2008 for Rs 831 crore was valued at 5.7 per cent of the assets managed by the fund house.
Sources say the deal will aid Schroders revive its India operations, which have been at a crossroads since they started in 2007. The firm had applied for a mutual fund licence from the Securities and Exchange Board of India in April 2008 but has not started the business so far.
Schroders declined to comment for this story. "We have a policy of not commenting on market speculation or rumour, so there is no further comment," a spokesperson of Schroders said in an emailed response.
Axis Bank said it was evaluating partnership opportunities in the mutual fund space but did not detail further.
"Axis Bank regularly evaluates partnership opportunities for Axis Asset Management Company that will add value to its business either in investment management or distribution, both local and global. When we are able to identify the right partner we will assess the appropriate partnership arrangement," the bank's spokesperson said.