Dutch Rabo Bank is likely to acquire management control of one of the nation’s oldest mutual funds, Canbank Mutual Fund. Rabo Bank, through its Indian subsidiary – Rabo India Finance Ltd, is in an advanced stage of discussions with the senior management of Canara Bank, highly placed sources told Hindustan Times.
Canara Bank is looking at divesting a minority stake of up to 49 per cent in Canbank Asset Management Company, which was started in 1987 and was the country’s second largest mutual fund in 1992 under the leadership of B Ratnakar with assets under management of more than Rs 4,500 crore.
However, it came under severe scrutiny on charges of misuse of funds in the infamous securities scam of 1992 and has never been the same again.
In fact, after the Unit Trust of India (UTI), in its original avatar, State Bank of India and Canara Bank are two public sector banks that started mutual funds in this country.
According to sources in the financial services industry, the bank has in principle agreed to give complete management control to strategic partners while retaining a majority stake. Other sources, however, said that Rabo Bank is asking for a majority stake in Canbank Mutual.
The deal would be similar to what the State Bank of India did for its mutual funds subsidiary. SBI has divested around 40 per cent stake of its asset management company to Societe Generale of France.
A senior official of Rabo India Finance told Hindustan Times on condition of anonymity that they were in discussions for quite some time with Canara Bank with the intent of forging a strategic alliance. "Canara Bank is looking for some strategic partners," he said.
Sources close to the transaction said the deal is expected to be valued around Rs 150 crore. The valuation is expected to be more than 7 per cent of the total assets under management of the company. Canbank Mutual had assets under management of Rs 2,305 crore as on November 30, 2006. In fact, its assets, which had dwindled after the 1992 scam, have appreciated significantly in the last one year. In 2006, the assets under management increased by around Rs 800 crore.
The fund is currently managing 19 schemes. It has nine equity funds which manage around Rs 380 crore in all.
"Since Canbank Mutual Fund has more than three lakh retail unit holders, it will command a better premium," said the chief executive of a rival mutual fund.
"The induction of private or foreign partners gives the ability to sharpen the focus of its fund managers and increases the confidence of investors," said Dhirendra Kumar of fund researcher Value Research.