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Exclusive | L&T revives plans to sell MF business; ropes in JP Morgan as advisor

The move is part of L&T's drive for the past few years to monetise its non-core segments and businesses and become a leaner and meaner conglomerate

January 31, 2020 / 12:22 PM IST
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Engineering-to-software conglomerate Larsen & Toubro (L&T) has decided to put its mutual fund business, housed under listed arm L&T Finance, on the block yet again, sources told Moneycontrol.

"The move is part of L&T's drive for the past few years to monetise its non-core segments and businesses and become a leaner and meaner conglomerate. Investment bank JP Morgan has been mandated to find a buyer and a controlling stake will be made available. A similar attempt had been made two years back, but those plans didn't fructify," a source said.

"The domestic MF business is dominated by the big boys. L&T Mutual Fund is a comparatively smaller player and does not have the scale or market share like its peers and hence the move. L&T Mutual Fund had average assets under management (AUM) of around Rs 70,000 crore as of March 2019. A realistic valuation for the MF arm would be around 5-6 percent of the AUM, which translates to around Rs 3,500 crore to Rs 4,200 crore, though this may change depending upon the exact deal contours," a second source added.

"The deal is likely to attract interest from rival MF houses who want to beef up their asset base and even private equity suitors," shared a third source.

MF industry: The pecking order and trendsL&T Mutual Fund is ranked 12th in the sector in terms of AUM and has a market share of around 2.7 percent as per data available with ICRA as of September 2019. The top five players have cornered 58.5 percent of the market.

In Q2 FY20, the QAAUM (quarterly average AUM) of the MF industry increased by Rs 0.18 lakh crore as against the previous quarter to touch Rs 25.7 lakh crore. SIP contribution in the quarter under review stood at Rs 24,818 crore compared with Rs. 24,543 crore in Q1. Net inflows surged to Rs 37,836 crore in Q2 as compared to Rs 17,635 crore in Q1 FY20.

L&T Mutual Fund: The journey so farTwo years after entering the mutual fund business in 2010, L&T Finance edged out rivals and announced the acquisition of Fidelity's mutual fund business in India in May 2012 in an aggressive move to boost growth in a highly competitive market. The deal value was said to be pegged between Rs 550-Rs 600 crore.

L&T Mutual Fund competes with the likes of UTI Mutual Fund, SBI Mutual Fund, HDFC Mutual Fund, Franklin Templeton Mutual Fund, ICICI Prudential Mutual Fund, Nippon India Mutual Fund, Kotak Mahindra Mutual Fund, Axis Mutual Fund and others.

HDFC Asset Management Company and Nippon Life India Asset Management are the two key listed players in the domestic mutual fund market.

In response to an official query from Moneycontrol, L&T Finance said, “As a matter of policy, the company does not comment on speculation.” JP Morgan declined to comment on this story.

Ashwin Mohan
first published: Jan 31, 2020 11:01 am