ET BureauL&T Finance has finalised plans to sell its mutual fund business. The financial services firm of engineering-to-software conglomerate Larsen & Toubro, which had initially planned to sell a minority stake in L&T Mutual Fund, is now scouting for buyers to take over the asset management company, said two people familiar with the development.
L&T Mutual Fund had Rs 39,300 crore of assets under management as of March 31. The mutual fund industry managed assets worth Rs 18.3 lakh crore.
L&T Finance is said to be seeking a valuation of close to Rs 2,000 crore for the mutual fund arm, valuing the business at roughly 5% of assets under management. While a banker is yet to be appointed for the transaction, it has asked a US bank to search for buyers.
In response to an ET query, an L&T Finance spokesperson said, “We would not like to comment on rumours or speculation.”
L&T Finance had earlier planned to sell 26 per cent or 49 per cent in the mutual fund as part of its restructuring plans but was unable to find buyers because they were not interested in a minority stake, forcing L&T to consider selling the entire business. “The thinking at L&T is that if it has to sell a majority stake in L&T Mutual Fund, it might as well sell it entirely,” said an official familiar with the plans.
Steep Valuation: Rival Funds
A lot has changed for L&T Mutual from the time its parent decided to sell a minority stake in early 2016. Its assets under management have risen almost 60 per cent from roughly Rs 25,000 crore in the March quarter of 2016.
Industry officials said it has paid higher fees to distributors to garner more assets. The fund house has also cut costs mainly by reducing employee strength.
Top officials at some rival mutual funds, which are believed to be among those interested in buying the business, said the valuation that L&T has asked for is steep even though the industry is in the pink of health, led by record inflows. One official said a deal could be struck at between Rs 1,200 crore and Rs 1,500 crore.
This is partly because a chunk of L&T Mutual Fund’s assets is said to be inflows from the parent. Also, margins in the business are relatively low, making it imperative for the buyer to ensure that the acquired assets under management remain intact.
L&T Mutual surprised the markets in 2012 when it announced the acquisition of Fidelity Mutual Fund, which was almost double its size then, for about Rs 550 crore.
While L&T has been able to expand its assets since then, industry officials said the fund house has struggled to recover the acquisition costs.
They said L&T Mutual will be a good fit for a smaller sized mutual fund looking to boost assets, especially equity.
The fund house manages Rs 12,000-13,000 crore in equity schemes, which is about 30 per cent of its total assets under management, according to industry estimates.
L&T Mutual Fund had Rs 39,300 crore of assets under management as of March 31. The mutual fund industry managed assets worth Rs 18.3 lakh crore.
L&T Finance is said to be seeking a valuation of close to Rs 2,000 crore for the mutual fund arm, valuing the business at roughly 5% of assets under management. While a banker is yet to be appointed for the transaction, it has asked a US bank to search for buyers.
 |
In response to an ET query, an L&T Finance spokesperson said, “We would not like to comment on rumours or speculation.”
L&T Finance had earlier planned to sell 26 per cent or 49 per cent in the mutual fund as part of its restructuring plans but was unable to find buyers because they were not interested in a minority stake, forcing L&T to consider selling the entire business. “The thinking at L&T is that if it has to sell a majority stake in L&T Mutual Fund, it might as well sell it entirely,” said an official familiar with the plans.
Steep Valuation: Rival Funds
A lot has changed for L&T Mutual from the time its parent decided to sell a minority stake in early 2016. Its assets under management have risen almost 60 per cent from roughly Rs 25,000 crore in the March quarter of 2016.
Industry officials said it has paid higher fees to distributors to garner more assets. The fund house has also cut costs mainly by reducing employee strength.
Top officials at some rival mutual funds, which are believed to be among those interested in buying the business, said the valuation that L&T has asked for is steep even though the industry is in the pink of health, led by record inflows. One official said a deal could be struck at between Rs 1,200 crore and Rs 1,500 crore.
This is partly because a chunk of L&T Mutual Fund’s assets is said to be inflows from the parent. Also, margins in the business are relatively low, making it imperative for the buyer to ensure that the acquired assets under management remain intact.
L&T Mutual surprised the markets in 2012 when it announced the acquisition of Fidelity Mutual Fund, which was almost double its size then, for about Rs 550 crore.
While L&T has been able to expand its assets since then, industry officials said the fund house has struggled to recover the acquisition costs.
They said L&T Mutual will be a good fit for a smaller sized mutual fund looking to boost assets, especially equity.
The fund house manages Rs 12,000-13,000 crore in equity schemes, which is about 30 per cent of its total assets under management, according to industry estimates.
Get Unlimited Access to The Economic Times
