IDFC Ltd on Wednesday announced the sale of its mutual fund business to a consortium led by Bandhan Financial Holdings, for a consideration of Rs 4,500 crore. The deal is subject to the necessary regulatory approvals.
“IDFC Limited and a consortium comprising Bandhan Financial Holdings Ltd, (Singapore’s sovereign wealth fund) GIC and (private equity firm) ChrysCapital have entered into a definitive agreement to acquire IDFC Asset Management Company Limited and IDFC AMC Trustee Company Limited from IDFC Limited,” IDFC Ltd said in a statement.
The deal is “for a consideration of Rs 4,500 crore, subject to the receipt of necessary regulatory approvals and customary closing conditions”, the statement said.
Bandhan Financial is the holding company of Kolkata-based Bandhan Bank. In September 2021, IDFC Limited and IDFC Financial Holding Company Limited in its board meeting had approved the divestment of its mutual fund business.
“The Bandhan consortium was selected through a highly competitive divestment process which witnessed strong participation from strategic players and financial investors. This is a highly tracked acquisition and will be the largest such deal in the Indian asset management industry to date,” IDFC said in the statement.
The deal will allow the Bandhan group to enter India’s growing mutual fund (MF) industry, which manages Rs 38 lakh crore of assets. Established in 2000, IDFC AMC manages over Rs 1.15 lakh crore of assets under management (AUM) at the end of March 31, 2022, for over 1.5 million investor folios representing leading institutions, corporates, family offices and individual clients. It is among the top-10 MF companies in India.
In the financial year 2020-21, the fund house saw its profit after tax at Rs 144 crore compared to Rs 79.4 crore in FY20. Typically, deals in MFs take place between 5-7 per cent of the AUM.
IDFC Chairman Anil Singhvi said, “This transaction is a significant milestone in our plan of unlocking value, and the consideration demonstrates the strong position of IDFC AMC in the Indian Mutual Fund space. We have achieved signing within six months of the Board’s decision to divest, which further demonstrates IDFC board’s commitment to consummate the merger of IDFC Limited and IDFC Financial Holding Company with IDFC First Bank.”
He added that the Bandhan consortium with its strong brand and resources will further strengthen the distribution of products improving the overall experience for IDFC AMC’s investors and distributors.
Bandhan Financial Holdings Managing Director Karni S Arha said, “The acquisition of IDFC AMC provides us with a scaled-up asset management platform, with a stellar management team and a pan India distribution network. IDFC AMC could benefit significantly from the Bandhan brand and continue strengthening its position in the asset management industry.”
He added that he is happy to partner with marquee investors such as GIC and ChrysCapital and is confident that this venture will enhance value for all the stakeholders of Bandhan and IDFC AMC.
Choo Yong Cheen, chief investment officer (private equity) of GIC, said: “GIC is pleased to continue our partnership with the Bandhan group and ChrysCapital through this new investment in IDFC AMC. We believe IDFC AMC is in a favourable position to capture the strong secular growth in the currently underpenetrated Indian asset management industry.”
ChrysCapital Managing Director Ashish Agarwal said, “ChrysCapital is excited to partner with BFHL and GIC to buy out IDFC AMC, a quality platform with a seasoned management team. The company is well poised for the future with strong industry tailwinds including increasing financialisation of savings and a growing equity culture amongst the younger generation.”