UK-based Standard Chartered Plc announced, Friday, it has sold its Indian asset management business to one of India's oldest lending institutions, Infrastructure Development Finance Co. (IDFC), in an all-cash $205 million deal (before deductions for local taxes and deal expenses).
According to the deal, IDFC will take control over Standard Chartered Asset Management Co. Pvt Ltd and Standard Chartered Trustee Co. Pvt Ltd, which represent Standard Chartered's mutual fund manufacturing business in India, but not its mutual fund distribution business.
Standard Chartered will remain a distributor of asset- management products in India, Jaspal Bindra, CEO (Asia), Standard Chartered, said in the statement. India is a key market.
IDFC is a well respected financial services company and we are delighted to have reached an agreement with them for the sale of this business, Bindra said.
We are pleased to acquire a quality asset management platform. This is in line with our wider strategy of broadening our footprint in the asset management business and diversifying our fee-based revenue streams, Dr. Rajiv Lall, CEO and managing director, IDFC, said.
The deal is expected to complete in the second quarter, subject to regulatory approval.
According to sources close to the deal, besides IDFC, others in the fray were Indiabulls, Goldman Sachs, Japanese group Shinsei, French bank Credit Agricole and Korean fund house Mirae Asset Management. However, most players dropped out when Standard Chartered fixed the bid price at $175 million as against a base price of $137 million.
The recent sale follows a breakdown in talks to sell the Indian business unit to UBS AG, Europe's biggest bank by market value. UBS agreed to buy the unit for $120 million but it failed to get regulatory approval in December.
Standard Chartered entered the mutual fund business about 2 and 1/2 years ago and and has around eight equity funds - the StanChart Classic (a multi-cap fund), StanChart Premier Fund (a mid- & small-cap fund), StanChart Imperial (a large-cap fund), StanChart Enterprise Fund (that largely invests in IPOs), the ELSS fund (a close-ended fund), the StanChart SME fund and two arbitrage funds (one open-ended and the other close-ended).
The asset management business was a legacy that came to it as part of its acquisition of ANZ Grindlays in 2000.
Following the sale, Standard Chartered plans to focus on consumer and commercial banking.
IDFC, which finances roads, ports and utilities in India, will move into large-scale wealth management business following the acquisition and is expected to compete with Reliance Capital Asset Management Ltd., the biggest fund manager in India, and overseas managers including Franklin Resources Inc. and Fidelity International Ltd.
Earlier, it picked a 33 percent stake in the Mumbai-based brokerage firm SSKI.
According to market analysts, IDFC will immediately become the third largest asset management business player in India with over Rs.14,000 crore ($3.5 billion) in assets under management. More than Rs.10, 000 crore ($2.5 billion) of these assets are in debt with the remaining Rs.4000 crore ($1 billion) in equity.
The acquisition of this business will also help IDFC to shore up its fee income base. It will also reduce its dependence on lending, which is a relatively lower margin business, the analysts said.