Muthoot Finance to acquire IDBI Mutual Fund
Photo Credit: VCCircle

Muthoot Finance Ltd said on Friday it has agreed to acquire IDBI Asset Management Ltd and IDBI MF Trustee Company Ltd, paving the way for its entry into the mutual fund segment.

Muthoot will shell-out Rs 215 crore as part of the deal, whereby  IDBI AMC and IDBI MF Trustee Company will become Muthoot’s wholly-owned units after the deal closes, the country’s biggest gold-loan financier said in a stock-exchange filing.

The transaction is likely to be completed by the end of February 2020, subject to receipt of necessary regulatory approvals.

ICICI Securities acted as the advisors to IDBI Bank.

In May this year, the lender invited expression of interest for its mutual fund business, joining a bunch of lenders that are selling their asset management arms to ease the burden of high bad loans.
IDBI Bank has the worst asset quality among Indian lenders.

In 2017, VCCircle reported that IDBI Bank had sought representations from investment banks to sell most of its businesses, subsidiaries, associates, joint ventures, or investments that were not central to its main business with an aim to increase its capital base eroded by mounting bad loans and losses.

It has sold stakes in the National Stock Exchange, CARE Ratings, Clearing Corporation of India Ltd, a clearing and settlement platform for transactions in the fixed-income market, including those related to foreign exchange.

In July 2018, insurance behemoth Life Insurance Corporation of India's board approved raising its stake in IDBI Bank to 51%, thereby acquiring the government’s stake in the lender besides injecting funds into the bank.

In July this year, the bank decided to sell its stakes in 19 companies as part of a strategy to sell non-core assets and revive its fortunes. The 19 companies include Neelachal Ispat Nigam, Haldia Petrochemicals, Gujarat NRE Coke and Konaseema Gas Power.

IDBI Bank had chalked-out a turnaround plan in March this year to also sell IDBI Federal Life Insurance Co. Ltd.

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