In its first ever acquisition, Reliance Capital Asset Management (RCAM) on Wednesday announced takeover of global giant Goldman Sachs’ mutual fund business in India for Rs 243 crore in an all-cash deal as yet another foreign player exits the Rs 13 lakh crore Indian MF market.
The deal, under which RCAM will acquire all 12 onshore mutual fund schemes of Goldman Sachs Asset Management India with total asset under management of Rs 7132 crore, would also make Reliance MF the exclusive fund manager for the government’s ambitious Central Public Sector Enterprises (CPSE) Exchange Traded Fund.
The transaction has been approved by the boards of the two companies and is expected to be completed in the current fiscal, RCAM’s parent firm Reliance Capital said in a statement.
Reliance Capital is the financial services arm of Anil Ambani-led business conglomerate Reliance Group and is also present in insurance, brokerage and wealth management among other areas.
Goldman Sachs was given the mandate last year to manage CPSE ETF through which the government has so far raised Rs 4,000 crore by selling part of its stake in ten central PSUs as part of its disinvestment programme.
Besides further consolidating the position of RCAM, which runs Reliance Mutual Fund and is the largest asset manager in India with total AUM of over Rs 2.5 lakh crore across mutual funds, pension funds, managed accounts and offshore funds, the deal also marks yet another exit by a foreign player from the Rs 13 lakh crore Indian mutual fund industry.
Goldman Sachs had entered the Indian mutual fund industry in 2011 with acquisition of Benchmark Mutual Fund for Rs 120 crore. In last few years, a number of global players have exited the Indian mutual fund business.
Standard Chartered sold its mutual fund business in India to IDFC in 2008, Fidelity sold its mutual fund to L&T Finance in 2012, while last year HDFC MF acquired Morgan Stanley’s fund business here.
Besides, Birla Sunlife has acquired ING Mutual Fund, Kotak MF has bought PineBridge Mutual Fund and Pramerica has taken over Deutsche Bank’s mutual fund business in India.
Still, there are more than 40 fund houses in the country with total AUM of over Rs 133 lakh crore, which has been growing for eight consecutive quarters now. In terms of mutual fund AUM, HDFC MF is the largest (Rs 1.71 lakh crore), followed by ICICI Prudential (Rs 1.65 lakh crore) and Reliance MF (Rs 1.53 lakh crore) at the second and third places respectively.
HDFC MF was also in the race to acquire Goldman Sachs’ India mutual fund assets, but lost out and the deal will help Reliance MF close the gap on its two bigger rivals.
Globally, Goldman Sachs Asset Management is one of the biggest fund managers with AUM of over $1.19 trillion across countries and asset classes.
“Reliance Capital Asset Management will pay a total sum of Rs 243 crore ($37.5 million) in cash to acquire all onshore mutual fund schemes, including exchange traded funds, of GSAM India.
“The transaction is expected to be completed by the end of this fiscal year, subject to necessary regulatory approvals,” the two firms said in a joint statement.
“This acquisition by RCAM is an important first step in our overall strategy to strengthen our businesses through selective inorganic growth. GSAM India has a strong bouquet of schemes and a talented team. We are confident that together they will complement and enhance RCAM?s overall offerings to our investors,” said Sam Ghosh, Executive Director, Reliance Capital.
Goldman Sachs India Chairman Sonjoy Chatterjee said, “GSAM will continue to deliver global asset management services to Indian clients and will remain a significant investor in Indian securities through regional and global managed GSAM funds.
“In the meantime, we remain committed to growing our investment banking and securities franchise in India and we continue to feel extremely positive about India as an important and growing market for Goldman Sachs overall.”
RCAM CEO Sundeep Sikka said the deal will add over half a percent to its market share.
“We will ensure that we maintain seamless continuity for all GSAM India fund investors across all schemes. Going forward we would be willing to consider more such acquisitions that add to our strength and complement our portfolio,” Sikka added.
“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 deeply 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 the largest ETF provider in India. It has a total 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 CPSE ETF for which GSAM India is currently the exclusive fund manager.
As part of the transaction, RCAM will extend offers of employment to substantially all of GSAM India?s employees dedicated to supporting the ETF business.