HSBC AMC will acquire 100 percent equity shares of L&T Investment Management Limited, which is a wholly-owned subsidiary of L&T Fin Holdings.
L&T Housing Finance on Thursday announce selling L&T Investment Management (LTIM) to HSBC Asset Management (India) at $425 million. LTIM is the investment manager of the mutual fund business of L&T.
It must be noted that L&T MF is currently the 13th largest fund house in India.
L&T Investment Management (LTIM) is the 12th largest asset management company (AMC) in India and offers a basket of equity, fixed-income, and hybrid schemes to retail and institutional investors.
Apart from an aggregate purchase consideration of $425 million, LTFH will be entitled to excess cash in LTIM until the completion of the acquisition. In the meantime, both LTIM and HSBC AMC will ensure that there is continuity of services to their investors and counterparties.
L&T said in a regulatory filing on December 23: “the board of directors of L&T Finance Holdings Limited at its meeting held today considered the sale of 100 percent of the paid-up share capital of L&T Investment Management Ltd, a wholly-owned subsidiary of the company and the asset manager of L&T Mutual Fund, to HSBC Asset Management (India) Private Limited (HSBC AMC), which sale will be subject to receipt of requisite regulatory approvals (‘proposed transaction’).”
“The transaction with HSBC is in line with our strategic objective of unlocking value from our subsidiaries which will help us to strengthen our balance sheet for our lending business. When seen alongside the recent capital raise it provides us with enough ammunition to increase the pace of realization in our lending portfolio, which is one of our long-term goals," said, Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings Ltd.
With the sale of LTIM, the schemes it manages will be managed by HSBC AMC in the future. A board of trustees of HSBC Mutual Fund will be appointed as the trustee of the schemes of L&T Mutual Fund and some of its schemes will be merged with those of HSBC’s.
HSBC intends to merge the operations of LTIM with that of its existing asset management business in India, which had assets under management (AUM) of Rs 117 billion as of September 2021.
The divestment of the mutual fund business is in line with the strategic objective of L&T Finance Holdings of unlocking value from its subsidiaries to strengthen its balance sheet, it stated in a press release.
The data from the Association of Mutual Funds in India (Amfi) shows L&T Mutual Fund (MF) has average assets under management (AAUM) worth Rs 78,273.80 crore, while HSBC MF has AAUM of Rs 11,314.32 crore as in the July-September quarter.
If the conversion rate of Rs 75 is taken, the deal will be worth approximately Rs 3,188 crore.
Dinanath Dubhashi, managing director and chief executive officer, L&T Finance Holdings, said: “When seen alongside the recent capital raise, it provides us with enough ammunition to increase the pace of realization in our lending portfolio, which is one of our long-term goals.”
This will be a third merger and acquisition in the Indian asset management space in 2021. Earlier in this year, Sundaram AMC had bought the assets of Principal Asset Management.
According to the industry participants, the deal was at Rs 338 crore.
HSBC intends to merge the operations of LTIM with those of its existing asset management business in India. JP Morgan and Citi were the financial advisors to L&T Finance Housing. Cyril Amarchand Mangaldas acted as the legal advisors and PwC acted as due diligence and tax advisors.
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