Subhash Chandra-promoted diversified business group Essel is closing a full acquisition of the mutual fund and trust management business of Kolkata-based Peerless General Finance and Investment Company Ltd (PGFI), it said in a statement.
After the acquisition, Essel Finance would get to manage an asset base of over Rs 970 crore acquired from Peerless Fund Management Company Ltd (PFMCL) and another legal entity Peerless Trust Management Company Ltd (PTMCL), the trustee of the mutual fund. PFMCL is a subsidiary of PGFI, and the investment manager to Peerless Mutual Fund, the first mutual fund in the eastern region, headquartered in Kolkata.
The deal value is not disclosed.
SK Roy, managing director of Peerless General Finance and Investment Co Ltd, said Essel Group intends to build on the efforts taken by the Peerless Group over the last few years. “We are confident that the interests of our unit-holders will remain foremost in their approach to this service, as it was in ours,” he added.
Amitabh Chaturvedi, managing director, Essel Finance Management, said, "The acquisition is part of our strategy to become a financial services conglomerate. The addition of the mutual fund business will fortify our position and take us closer to our goals''.
At present, Essel Finance offers financial services such as SME business loans through its non-banking financial company (NBFC), housing finance, forex, private equity and investment banking.
Chaturvedi said with Peerless’ team, products and its performance, the company would be able to create a large asset management business.
Essel group has presence in various sectors, including media, entertainment, packaging, infrastructure, education and technology, among others. The group's listed entities have a combined market capitalisation of over $6 billion.
Essel Finance is the umbrella brand for the financial businesses of the $10 billion Essel Group, which is founded by Chairman Subhash Chandra. It has more than 10,000 employees.
PGFI is a financial service provider in the private sector with over 83 years of experience. Incorporated in 1932 as Peerless Insurance Co. Ltd, it is now known as Peerless General Finance & Investment Co Ltd.
PFMCL manages equity, hybrid, debt and liquid funds. At present, it manages a liquid scheme, a hybrid scheme, four fixed income schemes and three equity schemes, including an equity-linked savings scheme.
In February 2016, Essel Finance was reported to be in talks to acquire Bangalore-based BSS Microfinance Pvt. Ltd for Rs 90 crore (approximately $13 million). However, Kotak Mahindra Bank Ltd (Kotak) acquired BSS Microfinance for Rs 139.2 crore ($21 million) in cash.
M&As in mutual funds
The interest for the mutual fund assets is due to the growth prospects it offers. According to the association of mutual funds in India, the average assets under management (AUM) of Indian mutual fund industry for October 2016 crossed Rs 16.8 lakh crore. The AUM of the Indian MF industry grew from Rs 3.26 trillion as on 31 March 2007 to Rs 16.30 trillion as on 31 October 2016.
In March 2016, Edelweiss Asset Management Ltd acquired JP Morgan’s Indian mutual fund business in a deal that marked the exit of yet another foreign firm in an intensely competitive sector. The deal included the acquisition of onshore fund schemes managed by JP Morgan Asset Management India Pvt. Ltd and the international fund of funds.
JP Morgan joined Japan’s Nomura, Germany’s Deutsche Bank and US financial services giants Goldman Sachs and Morgan Stanley in exiting a sector that still has 43 players, according to the industry group Association of Mutual Funds in India.
In December 2015, Nomura Asset Management Co. Ltd agreed to sell more than half its stake in its mutual fund joint venture with Life Insurance Corporation and the state-run firm's mortgage lending arm. In October, Reliance Capital Ltd announced plans to buy Goldman Sachs's mutual fund business in India.
A month before that, Religare Enterprises Ltd agreed to sell its majority stake in its Indian asset management joint venture to its foreign partner Invesco Ltd, as part its strategy to scale back diversified operations.
Belgium's KBC Asset Management had sold its stake in Union KBC Mutual Fund, where it held a 49%, in October. In August, Deutsche Bank said it is exiting its India MF business, selling it to Pramerica.
In 2014, Morgan Stanley, ING and PineBridge had exited India's MF industry. Earlier, Standard Chartered divested its mutual fund business in India to IDFC in 2008 while Fidelity sold its mutual fund arm to L&T Finance in 2012.
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