The financial markets meltdown has opened up opportunities for buyouts for new investors. US-based Principal Financial Group is looking to acquire an asset management firm in India to scale up its exposure in the country, according to this report.
Apparently the firm has also appointed merchant bankers to look out for targets. Principal's India country head Rajan Ghotgalkar has indicated that the firm is eyeing a big firm with large equity assets. Principal already has a venture with Punjab National Bank and Vijaya Bank that manages around Rs 7,000 crore ($1.4 billion) in assets.
Principal's statement comes soon after Religare Enterprises struck a deal to buy Lotus Mutual Fund, a venture of Fullerton (which is funded by one of Singapore's sovereign wealth funds Temasek) and London-based Sabre Capital Worldwide. Early this year IDFC had acquired Standard Chartered's mutual fund arm in India.
However valuations have crashed in line with stock markets meltdown. In December'07, Reliance Capital had announced a deal with Eton Park (5% for mutual fund business for Rs 500 crore valuing India's largest mutual fund firm at 13% of its total assets). The IDFC-StanChart deal was at 6-7% of assets and Religare struck a bargain deal where the Lotus acquisition was estimated to be valued at just 1-2% of assets.
The market crash this year has also affected investors appetite for mutual fund investments. New fund offers which had been propping high growth for the industry has now fallen out of fashion. Between April-October'08 inflows into new funds dropped more than 85% as per the industry data. Principal's India head has stated that if organic growth is going to be limited the firm will go for inorganic growth.