Anil Ambani-controlled Reliance Capital Ltd's asset management arm is acquiring Goldman Sachs Asset Management’s (GSAM) onshore business in India for Rs 243 crore ($37.5 million).
The deal will see RCAM take over all onshore mutual fund schemes, including exchange traded funds, of GSAM India, as per a statement on Wednesday.
The transaction is expected to be completed by the end of this fiscal year, subject to necessary regulatory approvals.
“We feel this business is best positioned to achieve long-term success under the direction of an asset manager with an established onshore franchise. We are encouraged by the growing investor demand and government support for the burgeoning Indian ETF industry,” said Sanjiv Shah, co-chief executive officer, GSAM India.
GSAM India currently manages 12 mutual fund schemes, including 10 ETF schemes, and is known to be the largest ETF manager in India. It has total assets under management (AUM) of Rs 7,132 crore ($1.1 billion) as of September 30, 2015 which includes Rs 2,172 crore ($ 334 million) of AUM in the Central Public Sector Enterprises (CPSE) ETF for which GSAM India is currently the exclusive fund manager.
The deal values the firm at 3.4 per cent of its AUM.
The firm is a part of Investment Management Division of The Goldman Sachs Group, Inc, which oversees $1.19 trillion in assets as of September 30, 2015.
“This acquisition by RCAM is an important first step in our strategy to strengthen our businesses through selective inorganic growth. We are confident that together they will complement and enhance RCAM’s overall offerings to our investors,” said Sam Ghosh, executive director, Reliance Capital. It was in talks for the deal for almost a year now.
As part of the transaction, all of GSAM India’s employees dedicated to supporting the ETF business will join RCAM.
RCAM runs the country's third-largest mutual fund house behind HDFC and ICICI Prudential, as per data compiled by industry body AMFI.
Recently, Nippon Life Insurance Company, Japan’s largest life insurer, said it will raise its stake in RCAM to 49 per cent from 35 per cent for Rs 1,196 crore ($184 million).
As part of the deal, Nippon Life would become the co-sponsor in RCAM, valued at Rs 8,542 crore ($1.3 billion) and the firm would be renamed Reliance Nippon Life Asset Management.
There have been several deals in the asset management space in the country. In August, Deutsche Bank Group entered into an agreement to divest its India asset management business to Pramerica Asset Managers Pvt Ltd (Pramerica AMC), for an undisclosed amount.
Pramerica AMC, in which Dewan Housing Finance Corporation Ltd (DHFL) picked 50 per cent stake, will get a big boost in terms of AUM with this transaction.
Last year, Dutch financial services group ING had sold its stake in ING Investment Management to Birla Sun-Life Mutual Fund. Prior to that, HDFC Mutual Fund acquired the assets of Morgan Stanley Asset Management while Fidelity exited by selling its assets to L&T Finance.