Bandhan Financial Consortium wins bid for IDFC Mutual Fund

Bandhan Financial Holding headed a consortium of GIC Singapore and ChrysCapital to win the bid to buy IDFC AMC and IDFC AMC Trustee for Rs.4,500 crore. While this deal is still subject to regulatory approvals, once the deal is consummated, it will be the largest acquisition deal in the Indian mutual funds space.

Bandhan Financial Holding is the holding company that owns major stake in private sector micro lender Bandhan Bank.

One of the reasons for the consortium is that SEBI has been averse to venture capital firms directly picking a controlling stake in Indian mutual funds. Hence, ChrysCapital and Government Investment Corporation of Singapore jointed the consortium.

The equity pattern of IDFC AMC post the merger will be such that Bandhan Financial Holdings will own 60% in the AMC while GIC of Singapore and ChrysCapital will own 20% stake each.

Bandhan Financial Holdings is also the holding company of Bandhan Bank, one of the recent names to get a banking license from the RBI. This deal is a logical extension to the financial inclusion goals of Bandhan group.

The deal will permit the Bandhan group to enter India’s growing mutual fund business, with overall AUM in excess of Rs.38 trillion. Bandhan Bank already distributes products of about 10 Indian mutual funds via the bancassurance route.

In the case of Bandhan Financial Holdings, it will need the approval of SEBI as well as RBI since it is also the holding company of a bank and the seller also has a large bank in its group.
 

For IDFC, this deal allows them to unlock value as the IDFC AMC had already been identified as a non-core business and there was tremendous pressure on the directors of the company in the last AGM to exit the mutual funds business at the earliest.

IDFC, incidentally, happens to be among the top 10 Indian funds in terms of assets under management. As of the Mar-22 quarter, IDFC Mutual Fund had AAUM (Average AUM) in the vicinity of Rs.1.21 trillion and is the ninth largest fund India in terms of AUM.

The top-10 funds in India are dominated by banking groups with the largest bank owned mutual funds being SBI MF, ICICI Prudential MF, HDFC MF, Kotak MF and Axis MF in that order.

What is in it for the IDFC AMC business. They get a much wider micro distribution channel for the fund and that can help them develop their micro equity fund business more effectively.

Bandhan consortium with its strong brand and resources can help IDFC MF boost its distribution strengths and also improve overall investor, distributor and customer experience for IDFC AMC. It is a logical step forward towards greater inclusion.

For Bandhan, this is a capital market extension to leverage their strong distribution franchise. This is in sync with the Bandhan view that the asset management business will grow rapidly within the Indian financial services sector.

Bandhan had already identified this space as the ideal growth trigger for their business. IDFC AMC offers a scaled‐up asset management platform, top class management team and an all-India distribution network.