JM Financial Mutual Fund, promoted by Nimesh Kampani, is on the radar of the asset management arm of Goldman Sachs group, which managed $840 billion at the end of December 2010.
Goldman Sachs Asset Management is likely to be looking to buy an actively managed onshore mutual fund business in India, nearly four months after it bought Benchmark AMC, a provider of exchange traded funds. It is said that Goldman Sachs may have conducted due diligence on JM Financial MF, but it is not known if both parties have agreed on valuation.
“We have no comment to make to your query,” Goldman Sachs spokeswoman Anisha Patel said, replying to a query whether the US fund house was conducting due diligence on JM Financial MF.
Prashant Khemka, MD & CEO of Goldman Sachs Asset Management (India), did not respond to an email seeking confirmation. Nimesh Kampani, chairman, JM Financial group, did not respond to a text message. However, a JM Financial spokesperson denied any selloff plan. “There is absolutely no truth in this. JM Financial remains committed to all its businesses,” the spokesperson said.
Himanshu Srivastava, research analyst at Morningstar, said somebody with deep pockets like Goldman Sachs might prefer acquisition of an existing mutual fund company as it would take time and resources to build the business.
Also, the acquisition of Benchmark has given the US fund only an entry in ETFs. Benchmark had Rs 4,115 crore in AUM at the end of June. Besides, JM Financial MF has not been doing well lately and may prefer to exit at a good valuation. Its AUM has been slipping from Rs 8,853.15 crore in December 2009 to Rs 6,083 crore in March 2011 to Rs 5,849.76 crore in June. Its average AUM under equity schemes is just over Rs 800 crore and rest is under debt schemes.
It is not known how much Goldman Sachs would be willing to pay for JM Financial MF. It paid around 4.33-5 per cent of AUM, or around Rs 130 crore, when it bought Benchmark, according to officials. Given that JM Financial MF is mostly into debt schemes, the value may be much lower than what it paid for Benchmark. L&T Finance paid only 1.56 per cent of AUM when it bought Cholamandalam DBS Finance MF.
In the past 2-3 years several firms have entered the Indian MF space, most of them via acquisitions. The list includes Religare, which acquired Lotus MF; Daiwa, which bought Shinsei MF; L&T Finance, which purchased Cholamandalam DBS Finance; T Rowe Price, which picked 26 per cent stake in UTI MF and Japan’s Nomura, which bought 35 per cent in LIC MF.
Goldman Sachs Asset Management received the Sebi’s nod to set up its own mutual fund business in 2008. It has a team of eight people, headed by Khemka, in Mumbai. The team provides research for offshore funds, including on Indian equities and Bric equities.
At the time of Benchmark acquisition, Oliver Bolitho, head of Goldman Sachs Asset Management Asia, had said that India was a strategic priority for the firm. He had said Goldman Sachs would bring onshore funds to India “building on the strong expertise that Prashant Khemka's team has established”.
Srivastava of Morningstar pointed out that most overseas players when they entered Indian mutual fund business did it through either a joint venture with a local company or through an acquisition.
He said Indian mutual funds hold much promise. For the quarter ended June, the industry’s average AUM rose by six per cent to Rs 7,43,000 crore from Rs 7,00,000 crore in the previous quarter.
JM Financial’s Kampani was embroiled in a controversy over defaults in payments by Nagarjuna Finance, an NBFC, where he was an independent director. He fled to Dubai after his plea was rejected by the Supreme Court in April 2009. Kampani maintained that he quit from the board of Nagarjuna Finance in 1999, well before the Hyderabad-based company defaulted.
Kampani returned to Mumbai after the Andhra Pradesh high court stayed all further proceedings against him along with the lookout notice issued by Interpol in October 2009.
Source: http://www.mydigitalfc.com/mutual-funds/goldman-sachs-radar-tracks-jm-financial-mf-502
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