A consortium led by Bandhan Financial Holdings Ltd (BFHL), which won the bid to buy IDFC Asset Management Company for a proposed consideration of ₹4,500 crore, is seeking to strengthen AMC’s product portfolio and improve its distribution network by partnering with banks and small financial banks (SFB). The consortium hopes to receive the necessary approvals and expects the acquisition process to be completed within the next nine to twelve months.
BFHL will use part of the ₹10,600 crore it received upon diluting its stake in Bandhan Bank to pay for the acquisition.
Focus on equity funds
According to Karni S Arha, managing director of Bandhan Financial Holdings, IDFC AMC has a strong portfolio of debt-based funds. The aim would be to add more equity funds aimed at retail investors.
“Our immediate focus (after the acquisition) will be to grow the business. IDFC has more debt-based funds; we will consider adding more equity funds aimed at retail investors. retail footprint by partnering with banks and SFBs,” Arha said. Activity area.
Sale of the entire AMC
The Boards of Directors of IDFC and IDFC Financial Holding Company (IDFC FHCL) had on Wednesday approved the sale of all of the shares of IDFC AMC and IDFC AMC Trustee held by IDFC FHCL to a consortium consisting of Bandhan Financial Holdings, Lathe Investment (subsidiary of GIC), Tangerine Investments and Infinity Partners (subsidiaries of ChrysCapital).
BFHL will hold 60% while GIC and ChrysCapital will hold 20% each in AMC.
JM Financial acted as financial advisor to the consortium led by Bandhan. The proposed transaction is expected to close upon receipt of regulatory and other approvals, if any, and the closing of related actions mutually agreed to by the parties.
IDFC AMC has assets under management worth ₹1.25 crore. The financier would focus more on clients in semi-urban and rural areas as a majority of people in these areas do not have access to multiple savings instruments. Bandhan, who began his journey lending at the bottom of the pyramid and building his microcredit loan portfolio, understands the market well and would be able to capitalize on the strength, sources said.
The mutual fund industry, which has grown around 16-17% on an annual basis over the past ten years, has seen some activity and consolidation, Arha said, pointing to the opportunities offered by the sector.
Inorganic Growth Opportunities
Karni S Arha, MD of Bandhan Financial Holdings
According to Arha, the acquisition aligns with what the Bandhan Group strives to do – to be a holistic financial services group. BFHL also plans to review other financial services, as permitted by the guidelines, such as asset management businesses and insurance businesses, including life and general insurance, among others.
“We could be looking to enter the insurance business in the next couple of years. We will look at both organic and inorganic routes, but the inorganic route would be relatively easier to venture into the insurance business,” he said.
BFHL is also one of the resolution seekers for Reliance Nippon Life Insurance. As per Reserve Bank of India regulations, a bank is not allowed to venture into other businesses and hence the holding company structure is used.
07 April 2022