MUMBAI: Swiss financial services giant UBS is all set to enter the Indian mutual fund industry by acquiring Standard Chartered Mutual Fund for about Rs 580-600 crore.
The deal values StanChart MF at close to 4.6-4.7% of its total assets under management (AUM) of Rs 12,625 crore, as on December 31, 2006, though the final figure would be based on the AUMs on the date of the agreement. UBS, as part of the deal, would also acquire StanChart MF’s liabilities to the tune of Rs 55 crore.
Though Aviva, the UK-based insurance major, was one of the highest bidders for the mutual fund among the initial 19 bidders, it is learnt that senior officials of StanChart were more comfortable with UBS. With Aviva opting out of the race last month, UBS was left as the sole contender.
In its edition dated December 7, ET had first reported that Aviva had walked out of the race and UBS would takeover the AMC.
While, on the face of it, the deal appears expensive, given that roughly 80% of StanChart’s AUM is debt, it will enable UBS gain direct entry into the domestic mutual fund industry.
“The acquirer (UBS) will directly get hold of a good brand with an existing network of clients and a competent management team. The challenge would be to retain the assets and the current team,” said an official at a rival fund house.
Sources said, UBS, in order to retain staff, is likely to offer retention bonuses to some of the senior staff of the AMC. There would also be some lock-in period.
In the past few months, unlike other mutual funds, StanChart Mutual Fund did not see any major churns. The MF has a staff strength of around 60-65. The next few months is likely to see a major churn with around 17 new funds looking at starting operations in the country.
StanChart had put its AMC business on the block around five months ago, as India is the only country where the banking giant has an AMC, thanks to its acquisition of Grindlays four years ago.
In the past, the domestic mutual fund industry has seen such big-ticket acquisitions, including Franklin Templeton of
Kothari Pioneer, Birla Sun Life Mutual Fund of Alliance Capital AMC and HDFC Mutual Fund of Zurich India Mutual Fund.
Most of these deals, which were sealed at approximately 4.5-5.5% of their AUMs, were considered expensive, despite the target funds’ assets having equity or a fair mix of equity and debt.
UBS is betting big on India and had applied for a banking licence with the Reserve Bank of India. Other than fixed income and forex business it is also keen to enter wealth management. The takeover of StanChart’s mutual fund would help the Swiss bank as it would get a large base to start with.