L&T Finance is in advanced stages of negotiations to buy Morgan Stanley’s wealth management business in India. The proposed acquisition will help L&T Finance strengthen its foothold in the country’s nascent wealth management industry, almost a year after the financial services firm roped in Manoj Shenoy and 12 executives from Swiss private bank EFG, which shut shop in India in early 2012.
The deal could be finalised in a month, said a person familiar with the matter.
An L&T Finance spokesman said the company does not comment on market speculation. An email query sent to Morgan Stanley did not elicit a response till the time of going to press.
L&T Finance has taken the acquisition route for growth, making three buyouts last year in the mutual fund, housing finance and auto finance segments.
Ved Prakash Chaturvedi, who joined L&T Finance from Tata Mutual Fund last year, is said to be in charge of the company’s venture into the wealth management business. Manoj Shenoy, who reports to Chaturvedi, and executives are said to have brought in about $200-250 million in assets of rich investors into L&T Capital, a unit of L&T Finance that will run the wealth management business.
The extent of assets managed by Morgan Stanley’s Indian wealth management arm could not be ascertained, but three industry officials said its assets could be in the range of Rs 2,000 to Rs 3,000 crore. Foreign investments including Morgan Stanley run the biggest private banking or wealth management businesses in India, they said.
Morgan Stanley, which employs about 400 people across businesses including capital markets, equity and fixed-income sales and trading, research, asset management and private-wealth management, had set up the wealth management unit about five years ago.
It is not clear how much would L&T Finance pay to buy the business and whether the firm would absorb Morgan Stanley’s executives once the acquisition is complete. But, wealth management industry officials said it would be imperative for L&T to retain the staff as relationship managers will be important for bringing in a major chunk of the assets of Morgan Stanley’s wealth management division.
“During acquisitions of private banking firms, the aim of the acquirer is to ensure atleast 60 to 70% of the assets of the target are brought in," said a senior official with a private bank. “For that retaining executives is crucial even if they are highly-paid,” he said.
Many firms, including foreign investment banks, have been pruning or selling out their wealth management business in India and Asia in recent months as the business has been unviable. Private banks, which came to India on the expectations that they would grow 20% every year by servicing the nation’s growing rich, have been disappointed at the pace of growth.
In October last year, Swiss private bank Julius Baer Group announced the acquisition of Bank of America’s wealth management businesses outside America.
