Canadian insurance multinational Manulife is entering the Indian mutual fund industry through a strategic stake buy in Mahindra Asset Management Company, a source in the financial industry told Moneycontrol.
An announcement is expected in the next few hours.
Manulife, which was founded in 1887 as the 'The Manufacturers' Life Insurance Company' and is headquartered in Toronto, may pick up a stake in Mahindra AMC through its Indonesian arm, Manulife Indonesia, the source said.
Anand Mahindra-promoted M&M Financial is the parent of Mahindra AMC, which is amongst the smaller asset management companies in the country, having assets under management of a little under Rs 5,000 crore.
While the quantum of stake buy is not immediately known, if Manulife takes up to 39 percent, it will be qualified a stakeholder. But if it takes 40 percent it will be qualified as promoter.
SEBI MF regulations define anyone with over 10 percent stake, but less than 40 percent, as a stakeholder.
Since the early 2000s, many joint ventures have been undertaken in the mutual fund industry, formed by new asset players with one sponsor more than 40 percent and another stakeholder between 10 percent but less than 40 percent.
In case of two players holding 40 percent each, both will be treated as co-sponsors and the same level of regulatory responsibility will apply to both, as per SEBI Mutual Funds Regulations 1996.
As per regulations, a foreign entity can buy up to 100 percent in an Indian AMC.
SEBI due diligence
In 2010, SEBI, during Chairmanship of CB Bhave and KN Vaidyanathan as ED of MF Department, altered the policy stance to add the same level of due diligence for all MF players, the stakeholders, sponsors and co-sponsors.
This, it was felt, would close the bypass entry for players through stakeholder route without a due diligence exercise and make them go through thorough diligence examination, said a former SEBI DGM who worked in its mutual fund department during that tenure.
There was the addition of retail investor handling and investor servicing experience for a new player in mutual funds, both in joint venture and new entrant category, making MF players relevant and adept for MF Industry, added the former SEBI Official.
In the event of Manulife Insurance picking up a stakeholder or co-sponsor stake in Mahindra Mutual Fund, it would get a go-ahead from SEBI, post a due diligence examination on Manulife.
Mutual funds in India offer corporate, retail, high networth investment products and retirement solutions.
This calls for background expertise in investor handling and servicing which Mahindra Mutual Fund expects to leverage from global standards of Manulife Insurance.