The US-based Principal Financial Group is keen to buy half of Industrial Development Bank of India's (IDBI) 50 per cent holding in the asset management company. Principal intends to increase its stake in IDBI Principal Asset Management Company (currently a 50:50 joint venture) in order to consolidate its accounts.
Sources familiar with developments said that as the mutual fund business is not a core business for IDBI, the institution too wants to sell part of its stake. It is looking at selling a 20 per cent stake to its JV partner.
IDBI does not wish to exit totally from the AMC and intends to keep at least 26 per cent which will enable it to vote decisively on special resolutions. The day-to-day management of the AMC now lies with Principal, with the IDBI chairman as the non-executive chairman on the board.
Principal requires to buy just one per cent and bring its holding to 51 per cent for meeting the accounting norms under US GAAP. However, as Principal's interest in India is increasing with the opening up of the pension industry to private players, the US company is keen to increase its holding in the AMC. It thus wishes to enhance its stake and hold 75 per cent in the mutual fund.
IDBI Principal AMC managing director and CEO Sanjay Sachdev declined to comment. IDBI has been looking to exit from IDBI Bank over a period of time, as it proposes to convert itself into a bank. Its plans to reduce its shareholding in the AMC also is it wants to focus only on its core business. In February 2000, Principal bought a 50 per cent stake in the mutual fund at a premium of Rs 80 on a Rs 10 share. As Principal proposes to acquire a strategic holding, it will have to shell out a higher premium for the 25 per cent additional stake, analysts said.
IDBI Principal AMC wants assets to increase to Rs 2,500 crore by fiscal 2003. With a net inflow of Rs 100 crore every month, the company expects to meet its targets.
A number of mutual funds are up for sale in the Indian market, and many foreign banks and other entities have indicated interest in buying the promoter's stake.
