Larsen & Toubro has decided to shelve its proposed foray into the mutual funds business. The company, which was planning to expand its financial services business, had earlier said it would float an asset management company and had already acquired necessary approvals from Securities and Exchange Board of India (Sebi).
Y M Deosthalee, L&T's chief financial officer, said: "We have decided against going ahead with the AMC foray keeping in mind the current business scenario. The mutual funds industry does not look attractive to us any more."
"We have been constantly evaluating the proposal and several presentations have been made at the board level. We were finally not convinced with the idea of floating the AMC," L&T executives said.
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Interestingly, the Aditya Birla group, which now holds 12.89 per cent in L&T, is one of the leading players in the mutual funds business. It has a joint venture with Canadian multinational Sun Life, and has floated several schemes.
As per L&T's proposed foray into the business envisaged last year, it had planned to rope in a joint venture partner which was to be offered a 20 per cent strategic stake in the AMC, while L&T, along with L&T Capital, was to hold around 80 per cent equity.
L&T officials did not say whether the change in strategy is an outcome of the recent change in its shareholding pattern.
The diversified company now has two separate finance subsidiaries in L&T Finance and L&T Capital Co. It has decided that Rs 97 crore L&T Finance would primarily help the parent in arranging finance for the core engineering business, and other in-house operations.
L&T Capital was earlier the merchant banking division of L&T Finance, which was later demerged into a separate company as per the Sebi regulations to separate fee-based and fund-based services.