Chennai-based Sundaram Finance Group is set to buy French bank BNP Paribas’ 49.90% stake in their domestic mutual fund joint venture, Sundaram BNP Paribas Asset Management.
The decision comes after the Securities and Exchange Board of India (Sebi) earlier this year asked BNP, which also owns Fortis Mutual Fund here, to limit its exposure to the Indian mutual fund industry through a single entity.
BNP Paribas had bought a stake in Sundaram Finance’s mutual fund in 2005. But, last year, Fortis Mutual Fund came under the French bank’s umbrella after it acquired Belgium-based Fortis Bank’s various international operations, including the domestic mutual fund business.
As rules do not allow one firm to own stakes in more than one Indian asset management companies, market regulator Sebi set a deadline of March 31 for BNP to decide on how it wanted to operate in India’s 36 member-strong mutual fund industry.
While conveying to Sebi the decision to sell its stake in Sundaram BNP Paribas Asset Management, BNP has sought approval to conclude the deal by June, said a person close to the matter. ET could not ascertain how much Sundaram will shell out to buy the stake.
In a response to ET’s email questionnaire, a BNP spokesperson said, “We do not comment on this story. BNP Paribas studies (sic) the various strategic options on the Indian market.” Sundaram Finance officials could not be reached for comment. BNP had the option of selling its stake in Sundaram BNP Paribas Asset Management or push for the merger of Fortis Mutual Fund with the mutual fund joint venture, said another person in the know.
Sundaram BNP Paribas’ merger with Fortis Mutual Fund would have resulted in Sundaram Finance owning a lower stake in the new entity, unless it wanted to pump in more money.
“The thinking in the Sundaram Finance camp has been to buy BNP’s stake (in Sundaram BNP Paribas Asset Management) and own the entire company rather than pump money into an entity where they have a lesser say,” the person in the know said. “Also, there is discomfort at Fortis’s assets being mostly debt,” he added.
Fortis Mutual Fund managed assets worth Rs 7,889 crore, as on March 31. Sundaram BNP Paribas Asset Management managed assets worth Rs 13,877 crore as on March 31. The mutual fund industry had assets under management worth about Rs 7.5 lakh crore in the period. Industry officials said Sundaram Finance will probably look to grow its equity assets under management and look for a partner later at higher valuations.
“Roping in a bank with a wider reach as partner would be a good strategy at a later stage to grow this business (mutual fund),” said a senior official with a private mutual fund.
Source: http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/Sundaram-Fin-to-buy-out-BNP-in-JV/articleshow/5841925.cms
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