Exclusive | IDFC MF Sale: 3 binding bids likely; Sundaram-Carlyle Combine may drop out

Representative image.

Three sets of bidders, namely a consortium of Bandhan Group, GIC and ChrysCapital, a consortium of Invesco MF, Warburg Pincus and Kedaara Capital and a promoter group entity of IndusInd Bank are likely to submit binding bids for IDFC MF, multiple industry sources in the know told Moneycontrol.

This is expected to be the biggest mutual fund transaction in recent times and follows the recent sale of L&T MF to HSBC MF in December for around Rs 3,188 crore.

The deadline for submission of binding bids for the mutual fund business of IDFC Ltd and IDFC Financial Holding Company ends on March 21 and was extended following an initial deadline of March 15.

On February 3, Moneycontrol was the first to report that a bevy of asset management firms, fin-tech players and private equity firms had submitted expressions of interest for IDFC MF.

Later on February 9, Moneycontrol was also the first to report that the sale process had resulted in a shortlist of four strategic suitors (Bandhan Group, Invesco MF, Sundaram MF, IndusInd Bank along with the promoter group) which would explore consortiums with a clutch of private equity funds.

To be sure, market regulator SEBI isn’t comfortable with a pure-play private equity fund acquiring a majority stake in a domestic mutual fund. That was one of the key reasons why the Blackstone-L&T MF transaction fell through earlier.

“Post due diligence, it now appears to be a three-way tussle between Bandhan Group, Invesco MF and their respective PE partners and the promoter group entity of IndusInd Bank which is going solo. These parties are likely to submit binding bids,” one of the persons above told Moneycontrol.

According to a second person, Sundaram MF, which had earlier expressed interest in the transaction and had tied up with Carlyle, may have dropped out of the race.

A third person added that Citi was the sell side investment banker and that the expected valuation of the binding bids may be upwards of Rs 3,800 crores.

“IDFC MF has a strong management team and there are not many MF assets of this size and scale in the market and therefore, this deal will attract a scale premium,” this person said.

“GIC had invested earlier in the Bandhan Group and capital deployment had to happen. Beyond its core business, the group needs a value addition platform like this and that’s a strategic imperative,” said a fourth person.

A fifth person said Invesco is a well performing equity MF and since the target IDFC MF is largely debt oriented, the deal makes good sense for the Mumbai based player. Moreover, its PE partner Warburg Pincus has an indirect understanding of the MF industry since it backs CAMS (Computer Age Management Services) which made its market debut in October, 2020.

There was buzz that over and above Warburg Pincus and Kedaara Capital, a third party may have also joined Invesco MF, but this could not be independently confirmed by Moneycontrol.

All the five persons above spoke to Moneycontrol on the condition of anonymity.

Email queries sent to IDFC MF, Bandhan Group, GIC, ChrysCapital, Warburg Pincus, Invesco MF, Sundaram MF and Hinduja Group were left unanswered despite reminders. This article will be updated as soon as we hear from the firms. Carlyle and Citi declined to comment. Kedaara Capital could not be reached for an immediate comment.

On November 18, Moneycontrol had reported that Prateek Indwar, EVP and Group Head (Investment Banking) at SBI Capital Markets had quit and was headed to IndusInd Bank to lead the i-banking vertical. The report had added that the private sector lender was eyeing potential initiatives or forays into non - core banking areas and ancillary activities like mutual fund, insurance and other segments.

MORE ABOUT IDFC MF & M&A TRIGGERS

According to the Moneycontrol report dated February 3, IDFC MF has around Rs 1.2 lakh crore of AUM, is profitable (PAT of around Rs 80 crore in the first half of 2022) with 64 percent of its AUM in fixed income and 26 percent in equity. For FY 20-21, the firm had reported a net profit of Rs 144 crore, a sharp rise of 81 percent over Rs 79.4 crore, registered in FY20, reports said.

There are not many MF assets of the size and scale in the market like IDFC MF.

In December, IDFC First Bank set the ball rolling for the process of merging IDFC Ltd and IDFC Financial Holding Company with itself. Both entities are part of the bank’s promoter group.

Over the past few years, the domestic mutual fund segment has seen a lot of M&A activity. Other than the HSBC-L&T MF and the Sundaram MF-Principal MF transactions, the sector has also seen deals like Zerodha-backed Groww–IndiaBulls MF, White Oak-Yes Mutual Fund and Navi–Essel MF.