Franklin Templeton AMC may acquire Deutsche AMC

If deal goes through, latter will be 4th foreign fund to exit India in about a year, though this will be a first sale to Indian arm of a foreign parent in this sector

Franklin Templeton Mutual Fund, India's seventh largest fund house in terms of assets, might acquire the Indian operations under Deutsche MF. If the deal goes through, it will be the fourth exit of a foreign fund house in about a year.

Sources told Business Standard both parties are in an advanced stage of the due-diligence process. The valuation could not be ascertained but experts said it could be between three and five, as was the case in recent deals.

“We do not comment on market speculation,” said spokespersons at Franklin Templeton and Deutsche MF to our query.

Deutsche Asset Management (India), the MF division of Deutsche Asset & Wealth Management in India, was established in 2002. As on December 31, it had an average of assets under management (AUM) of Rs 22,670 crore and is the 13th largest fund house in the country.

The US-based Franklin Templeton AMC set up its India office in 1996 and flagged off the fund business with the launch of Templeton India Growth Fund in September of that year. Currently, the fund house has an average AUM of Rs 63,643 crore.

Upon merger of the assets of these two fund houses, Franklin will dethrone SBI Asset Management from the sixth slot and be neck and neck with UTI AMC, the fifth largest fund. UTI AMC has an average AUM of Rs 87,390 crore.

At a time when India's MF sector has made a strong comeback in 2014, after five years of a lull, the sector is again abuzz with merger & acquisition deals.

At the end of 2013, HDFC MF acquired Morgan Stanley's India fund business. It was followed by Birla SunLife MF going for Dutch asset manager ING MF in May of 2014. In September, Kotak MF took over PineBridge MF.

All these deals had an Indian entity acquiring a foreign name. What differentiates the likely Franklin-Deutsche deal is that it will be between two foreign entities having Indian operations in the MF space.

Prior to this, the sector saw a complete buyout of Fidelity MF by L&T Finance, in March 2012. IDFC had bought out Standard Chartered MF in 2008. In between, there were several partial stake acquisition deals — such as Nippon Life & Reliance AMC, Nomura & LIC MF and Bank of India & Bharti Axa.

There are 43 MF houses in India, managing assets of Rs 11.06 lakh crore. The top 10 control nearly 80 per cent of the total AUM. HDFC MF leads with an asset size of Rs 1.5 lakh crore, followed by

ICICI Pru AMC at Rs 1.36 lakh crore and Reliance MF at Rs 1.26 lakh crore.