India’s mutual fund industry is abuzz with high-valuation deals, despite several short-term headwinds. Religare Asset Management Company (AMC) is the latest entrant in the high-valuation deal club by agreeing to sell a 49 per cent stake to the US-based money manager, Invesco, at a valuation of 6.5 per cent, or Rs 1,000 crore.
This marks the fourth straight transaction in the current year valued at between six and seven per cent of assets under management (AUM). Prior to this, Nippon-Reliance, Schroders-Axis and L&T-Fidelity were among the transactions which had raised many eyebrows on account of valuations not seen over the past few years.
Though officials at Religare remained mum on the valuation, Shachindra Nath, group chief executive officer (CEO), Religare Enterprises, said the deal value was not less than the recent ones in the fund management space. As on August 31, Religare's AUM stood at Rs 14,600 crore and it is among the top 15 fund houses in a 44-player industry.
Invesco is one of the leading independent global investment management firms with operations, spread over 20 countries.
The Religare-Invesco deal has come at a time when the country’s fund industry is witnessing an action-packed period, with several positive regulatory changes to lift sentiments.
Interestingly, the whole process of due-diligence till deal signing took both parties around six months as Business Standard learnt that discussions had started soon after L&T Mutual Fund declared acquisition of Fidelity’s India business.
More From This Section
Invesco has a presence in India through its affiliate WL Ross and Co and also operates an enterprise centre in Hyderabad with a headcount of 600.
Martin L Flanagan, president and CEO of Invesco, said in a statement: “Our agreement with Religare will expand the comprehensive range of investment capabilities Invesco provides to our retail and institutional clients around the world, and further position both firms for long-term success.”
J P Morgan acted as the financial advisor to Religare Enterprises for the transaction. According to Rohit Chatterji, who heads J P Morgan’s investment banking in India: “Despite a high proportion of fixed income assets, Religare AMC has reached break-even point and is also making marginal profits. This helped the fund house grab high valuation.”
| MUTUAL FUND DEALS | ||||
| Acquirer | Target | Stake (%) | Valuation (% of AUM) | Year |
| Invesco* | Religare AMC | 49 | 6.50 | 2012 |
| Nippon Life | Reliance AMC | 26 | 6.64 | 2012 |
| Schroders* | Axis AMC | 25 | 6.50-7.00 | 2012 |
| L&T Finance* | Fidelity (India) | Buyout** | 6.20 | 2012 |
| Bank of India* | Bharti Axa | 51 | 4.00 | 2011 |
| Goldman Sachs* | Benchmark | Buyout** | 4.10 | 2011 |
| * Valuation estimates by industry sources ** Complete buyout Source : Asset Management Company | ||||
Sources said on Thuesday’s deal was likely to get the overall regulatory approvals within three months. Thereafter, the new entity will be re-branded as Religare Invesco AMC and so will the existing schemes.
Saurabh Nanavati, CEO of Religare Mutual Fund, will continue to head the joint venture entity along with the existing management team. Currently, net assets under management of India’s fund industry are Rs 7.52 lakh crore, of which equity assets comprise Rs 1.76 lakh crore.