Kotak Mahindra Looks Homewards: Acquires Domestic Schemes From PineBridge MF
Kotak Mahindra Looks Homewards: Acquires Domestic Schemes From PineBridge MF
Kotak Mahindra has just announced that it will be acquiring the domestic schemes of PineBridge Mututal Fund. Regulatory approval for the deal is yet to be given. The schemes which are to be acquired are equity oriented. Kotak Mahindra will be looking at such purchases in the future as well. Reports indicate its latest acquisition may be around INR 6,500 million adding to the existing AUM of INR 370 billion, according to figures quoted by Deal Curry.
Kotak Mahindra AMC commenced functioning in the year 1998 and it has an investor base of around 8 lakhs presently. The MAC operated through 79 branches in 76 cities. PineBridge Investments had stepped into India through American International Group's Indian MF unit. PineBridge is an investment group with a host of interests including property and infrastructure in the Asia Pacific countries.
The MF industry had undergone a sea change in 2008 following tough times. A change is on the cards now with many foreign countries exiting India after leaving the business in domestic hands. The AUM of the MF industry is up 6% to INR 2600 billion in recent times because of equity inflows. Kotak Mahindra is the ninth largest fund house in the nation when judged in terms of assets.
PineBridge MF has assets under management amounting to Rs. 660 crore. This is yet another exit of a foreign fund house from Indian shores. This is a challenging time for MF houses. With tax on MF higher now, customers are expecting returns which can offset losses. Investors only opt for MF if they can get healthy returns, whether the fund house in question is foreign or domestic.
This has proved to be a deterrent for many in the last few months. Morgan Stanley sold its domestic MF business to HDFC AMC. ING MF too went to Indian hands namely Birla Sun Life AMC. The deal made bty Kotak Mahindra is the third in the list of high profile acquisitions in the past few months in India's MF industry.
“We have an appetite for further acquisitions which can create value for us and we would be keen to consider such opportunities,” Gaurang Shah, President-asset management, life insurance and international business, Kotak Mahindra Bank, parent company of Kotak AMC has been quoted by Business Standard as saying.
Considering that Pinebridge MF's assets are lower than 2% of the Kotak MAC's AUM of Rs. 37,000 crore as on August 2014, there is little doubt that the Indian MF house will have to optimise the value PineBridge has for them. The acquired MF house has 7 domestic schemes- 3 in equity and debt and 1 in the gold segment. D. Kumar, CEO of Value Research has been quoted by Business Standard as saying AMCs are exiting because they cannot keep up with big peers. Larger fund houses are more trusted because their brand value and reputation are immense. What's more, they live up to their reputation. With more acquisitions on the way, the Indian MF industry is now all about the clash between the Titans.
