SBI MF acquires Daiwa funds

First inorganic expansion by bank-sponsored fund house

In a first-of-its-kind move, SBI Mutual Fund, a joint venture between State Bank of India and French asset management company AMUNDI, has taken the inorganic route to growth by agreeing to acquire all India-domiciled funds of Daiwa Mutual Fund.

Due-diligence for acquiring Daiwa’s India assets has been underway for seven to eight months. Sources told Business Standard despite the fact that there were more than two contenders, the Japan-based Daiwa wanted to sell its India business to SBI Mutual Fund. They added the deal was signed today.

Though SBI Mutual Fund did not disclose the valuations of the deal, industry insiders estimate it could be worth 1-1.5 per cent of Daiwa’s asset size. As on March 31, Daiwa Mutual Fund’s assets under management stood at0266 crore. If the estimated valuation holds, the deal size would be02.6-4 crore. This is far lower than the valuations of recent deals in the Indian asset management business, which were in the range of five to seven per cent, in terms of asset size.

“We cannot disclose the valuation of the deal,” said Deepak Chatterjee, managing director and chief executive of SBI Mutual Fund. He added the transaction couldn’t be compared to other deals, as this was a takeover of existing schemes, not buying out the asset management company.

The deal’s low valuation is also because Daiwa has a high proportion of debt assets. Currently, it has eight schemes---six in debt and two in equities. One of its equity schemes, Daiwa Industry Leaders, gave 24 per cent returns through the past year

When asked whether there would be more inorganic expansion, Chatterjee said, “Inorganic growth is not a priority route for us to grow. The market has huge potential to grow (organically).” As on March 31, SBI MF’s average assets under management stood at about055,000 crore.

The deal is subject to regulatory approvals. After the transaction is completed, all existing schemes of Daiwa Mutual Fund would become SBI MF schemes; all existing unit holders Daiwa MF schemes would become SBI Mutual Fund unit holders.

The acquisition would help SBI MF acquire a client base that would increase its penetration in the retail and high net worth individual spaces, the company said in a statement. The parties concerned would implement a detailed plan to facilitate a smooth integration of the schemes of Daiwa Mutual Fund into SBI Mutual Fund, the statement added.