Four fund houses in talks for mergers in Rs 15 lakh cr mutual fund industry, say experts

New Delhi: Indicating further consolidation in the Rs 15-lakh crore mutual fund industry, at least four fund houses are said to be in discussions for possible takeover by rival players, including for reasons of cashing out at good valuation.

 Four fund houses in talks for mergers in Rs 15 lakh cr mutual fund industry, say experts

Representational image. Reuters

Some smaller ones are also looking to exit the market due to regulatory requirements such as higher net worth and difficult business conditions in a market full of too many small fund houses and only a few large players.

The names doing the rounds for possible merger and acquisition (M&A) deals include L&T Mutual Fund, which has built a significant asset base including through acquisitions.

Industry sources said L&T Finance, a part of the diversified group Larsen & Toubro, is believed to be mulling over sale of its mutual fund business, which manages assets worth Rs 28,000 crore.

Sources said L&T Finance has begun discussions for a possible sale of its Indian mutual fund arm, although the firm officially declined to comment on the same.

When contacted, an L&T Finance spokesperson said, "We do not comment on rumors and market speculations."

Sources said Peerless MF is also looking at potential M&A opportunities, but officials at the fund house maintained there was no truth in such speculations.

L&T had entered in mutual fund space in January 2010 by acquiring DBS Chola Mutual Fund. Later in March 2012, L&T had acquired Fidelity's mutual fund business in India.

Total asset base of the Indian mutual fund business crossed Rs 15 lakh crore last month, although the industry is highly scattered with 42 active players with most of them having small businesses.

In last few years, mutual fund houses faced a challenging time due to regulatory changes coupled with high redemption pressure from investors mainly on account of weakness in the equity markets. The conditions saw several players exiting the mutual fund space.

JP Morgan sold its mutual fund business to Edelweiss Asset Management, Goldman Sachs sold its MF business to Reliance MF and Morgan Stanley offloaded its MF operations to HDFC MF. Besides, ING MF operation was acquired by Birla Sunlife. Kotak MF has bought PineBridge MF and Pramerica MF has taken over Deutsche Bank's mutual fund business.

Moreover, experts believe that in the coming months, the industry will see further consolidation as the Securities and Exchange Board of India's deadline for mandatory Rs 50 crore minimum net worth for asset management companies is approaching.

The capital market regulator had in February 2014 given three years to asset management companies to meet the minimum net worth norm. The move was aimed at weeding out non-serious players and ensure stability of the financial system.

"We will see further consolidation in mutual fund space as many small fund houses are not able to meet the Sebi's net worth threshold," Quantum chief executive Jimmy Patel said.

Updated Date: Sep 05, 2016 13:32:40 IST