Leading foreign financial powerhouses like Deutsche Bank, Morgan Stanley and JP Morgan are in the race to buy Standard Chartered’s mutual fund business, which could be up for grabs. India’s own Reliance Capital is also in the fray, investment banking sources told Hindustan Times.
Authoritative sources in the industry said on condition of anonymity that the deal size would be around Rs 500 crore, and added that Deutsche Bank appeared to be the frontrunner.
Both Deutsche Bank and Morgan Stanley officials refused to comment on the deal, which would see Stanchart exiting from a business which industry officials say has grown smartly but has been weighed down by a volatile environment in which corporate clients parking their funds in easily encashable debt funds are no longer hot because fixed income securities went out of fashion after interest rates began stabilising.
In the last one year, liquid funds run by Stanchart’s asset management company yielded returns of no more than six percent though the size of its assets make it attractive as a balancing element for mutual funds that have a heavy portfolio bias towards equities. Foreign funds seeking entry into India’s promising market are also eyeing Stanchart’s AMC as a foothold.
Standard Chartered bank officials said they were keeping all options open.
“We have not yet reached to any conclusion. Currently we are in the process of evaluating all options including roping in a joint venture partner or selling it outright or even growing organically,” Bala Swaminathan, managing director of Standard Chartered’s Indian unit in the wholesale division, told Hindustan Times.
A late entrant into the Indian mutual fund industry, Standard Chartered had total assets under management of Rs 15,554 crore at the end of August, spread across 47 different schemes. Of this, Rs. 12,2284 crore or 79 per cent were under liquid funds, a favourite parking slot for corporate clients nursing cash piles.
Under these schemes, the fund has given annualised returns ranging between, 3.6 per cent and 6 per cent. The fund started equity schemes last year in which it built an asset base of Rs 2,609 crore. Its asset size under bond schemes is Rs 548 crore.
According to a financial industry source, Reliance Capital, which has one of the country’s largest mutual funds has also shown an interest in Standard Chartered Mutual Fund, but it could not be confirmed from the company.
One bidder, on condition of anonymity, said that since 80 per cent of the assets of the mutual fund are primarily invested by corporate clients, they were highly volatile and therefore, the valuation would not be very high. As against the industry norm under which valuation is in the range of 6-7 per cent of the assets under management, this would be valued around 3 per cent, he added.