Diversified financial services firm Religare Enterprises Ltd has sold 49 per cent of its stake in Religare Asset Management Company Ltd (RAMC) to NYSE-listed investment management firm Invesco Ltd for an undisclosed amount, REL said on Thursday.
As on August 31, 2012, the company’s asset under management (AUM) was pegged at around Rs 14,600 crore and according to sources, the deal is valued at around 6-7 per cent of the AUM, which translates into a transaction worth around Rs 465 crore ($87 million). The company extends its expertise across equity, fixed income and alternatives, and caters to individual investors, corporate and institutions through mutual fund and sub-advised portfolios.
The deal involves stake sale by Religare Securities, a wholly owned subsidiary of the public listed Religare Enterprises, according to the company.
Religare had acquired Lotus India Asset Management Company for an undisclosed sum in November 2008 and renamed it as Religare AMC. Although the deal size was not made public, it was rumoured to be 1-2 per cent of the AUM of Lotus at that time (pegged at around Rs 5,500 crore).
Back-of-the-envelope calculations suggest Religare AMC’s valuation has rocketed around 10 times in less than four years.
Religare has made major overseas acquisitions in areas like asset management (Landmark and Northgate Capital) and securities (Noah Financial, Hichens Harrison). It has also bought relatively smaller Indian players to enter new businesses like mutual funds (Lotus AMC) and housing finance (Maharishi Housing Development Finance Corporation).
Both Religare and Invesco have a large exposure towards debt funds and less on equity side, said Saurabh Nanavati, the chief executive officer at Religare Asset Management Company, who will continue to lead the firm, now a joint venture.
“Religare’s asset management business has consistently focused on developing its investment capabilities through a well-defined, proprietary investment process – both in equity and fixed income. Since we already broke even in our third year, we believe that both our retail and offshore businesses would be propelled to the next level of their growth journey,” said Shachindra Nath, group CEO at Religare Enterprises.
With asset under management of about $646.6 billion, half of Invesco’s portfolio comes from retail investors. Invesco currently has a presence in India through its affiliate WL Ross & Co, which is known for distressed assets investments.
It also operates an enterprise centre in Hyderabad, first opened in 2006, employing more than 600 staff members across a range of global support functions including IT, investment operations, finance, compliance and human resources.
“This addition will enhance Invesco’s presence in an important and growing market while providing Religare’s clients access to our broad range of investment solutions,” said Martin L. Flanagan, president & CEO of Invesco Ltd. “Our agreement with Religare will expand the comprehensive range of investment capabilities that Invesco provides to our retail and institutional clients around the world, and will further position both firms for long-term success,” he added.
J.P. Morgan acted as the exclusive financial advisor to Religare Enterprises on this transaction.
Earlier this year, Japan’s largest life insurance firm Nippon Life Insurance Company struck a deal with Reliance Capital Ltd to buy 26 per cent stake in Reliance Capital Asset Management Ltd (RCAM) for Rs 1,450 crore ($290 million). RCAM is part of the public-listed Reliance Capital, the flagship financial services company under Anil Ambani-led Reliance ADA Group. The deal valued India’s second largest asset management firm at Rs 5,600 crore ($1.1 billion) or 6 per cent of assets under management (AUM) worth Rs 93,148 crore ($19 billion) as of September 30, 2011, across mutual funds, managed accounts and hedge funds.
(Edited by Sanghamitra Mandal)