Reliance MF buys Goldman AMC

Rs 243-crore deal values the acquired entity at 3.4% of its assets' business

Anil Ambani-owned Reliance Mutual Fund (MF) has agreed to acquire US-based Goldman Sachs' domestic asset management business for Rs 243 crore. The deal is valued at 3.4 per cent of the latter's assets’ business.

Goldman Sachs is an exchange-traded fund (ETF)-focused asset manager, with assets’ business of Rs 7,132 crore for the quarter ended September. It has equity assets of Rs 4,500 crore, including Rs 2,000 crore from the Central Public Sector Enterprises (CPSE) ETF. It has Rs 2,500 crore of debt assets, which includes a gold ETF of about Rs 1,700 crore.

The boards of Reliance Capital Asset Management and Goldman Sachs Asset Management India have approved the transaction, expected to be completed by the end of this financial year, subject to regulatory approvals.

“The ETF segment is small at present, but is expected to become big with more wealthy investors and institutional money coming in,” said Sundeep Sikka, chief executive officer (CEO) of Reliance MF, adding that the MF is hoping to attract pension money from institutions like the Employees Provident Fund Organisation and would retain key talent from Goldman Sachs.

Reliance MF, which has a net worth of around Rs 1,400 crore, will pay Goldman Sachs in cash from its balance sheet.

Sanjiv Shah, co-chief executive officer, Goldman Sachs AMC India, said, “We feel this business is best positioned to achieve long-term success under the direction of an asset manager, with an established onshore franchise. We are deeply encouraged by the growing investor demand and government support for the burgeoning Indian ETF sector.”

According to Manoj Nagpal, CEO at Outlook Asia Capital, Reliance MF is not simply buying the assets but rather the capability to run the ETF business. “They seem to have global aspirations and might introduce more global ETFs, since the segment is attracting big money in Asia,” he said.

Reliance MF is currently the third-biggest asset management company (AMC) in the country in terms of asset size, behind HDFC MF and ICICI Prudential AMC. The Goldman Sachs deal will help Reliance MF reach within striking distance of ICICI Prudential. Reliance MF lags HDFC MF by about Rs 19,600 crore and ICICI Prudential AMC by Rs 12,700 crore, according to data sourced from Value Research.

Sikka said, “The transaction will add over half a per cent in our market share...We would be willing to consider more such acquisitions that add to our strength and complement our portfolio.”

Goldman had bought Benchmark MF in early 2011 reportedly for Rs 130 crore. In the past four-and-a-half years, the AMC has managed to more than double its assets’ business from Rs 3,200 crore to about Rs 7,100 crore.

Goldman Sachs is the seventh foreign AMC to exit India since 2012. Last year, HDFC MF acquired Morgan Stanley’s fund business in India. Other recent deals include Birla Sun Life MF acquiring the assets of ING Mutual Fund and Pramerica taking over Deutsche Bank’s mutual fund business in India.

Japan’s Nippon Life-backed Reliance Capital Asset Management (RCAM) is a subsidiary of Reliance Capital, a listed firm. On Wednesday, shares of Reliance Capital rose 3.67 per cent to close at Rs 413.6 on the National Stock Exchange. RCAM managed assets of Rs 2.54 lakh crore as on September 30, according to a company release.