HDFC MF buys Morgan Stanley's India schemes

Gets Rs 3,290 crore of assets and 400,000 new customer accounts

HDFC Mutual Fund, the country’s largest asset management company, has acquired the schemes of Morgan Stanley Mutual Fund India.

The acquisition — HDFC Mutual’s first in over a decade — will add Rs 3,290 crore to its assets under management (AUM) of Rs 1.03 lakh crore. The MF sector has assets of about Rs 8 lakh crore.

HDFC did not disclose what it was paying. Sector officials guessed the deal could be two to three per cent of Morgan Stanley’s AUM.  At three per cent, HDFC would have paid close to Rs 100 crore.

HDFC MF’s chief executive officer, Milind Barve, in a chat with Business Standard, declined to disclose the size of the acquisition but said it would bring in about 400,000 retail accounts. “We have got a good quality business. Around Rs 1,400 crore of assets is equity, which is extremely valuable. The equity schemes of Morgan Stanley were good performing funds,” he said.

Barve clarified the deal wasn’t to acquire an asset management company (AMC). Asked if HDFC would absorb the employees at Morgan Stanley, he said, “We will evaluate and take a call on it with an open mind.”

Barve agreed there could be duplication of schemes. “We will integrate the acquired schemes and maintain a difference. We are going to get a loyal customer base and look forward to welcome the investors in the eight schemes into the HDFC family.”

Morgan Stanley launched its Indian MF business in 1994, the first foreign fund to set up operations here. Its equity scheme, Morgan Stanley Growth Fund (MSGF), was a hit among investors, who expected the foreign fund house to manage the product differently from the dominant UTI. MSGF was a closed-ended fund with a 15-year lock-in but was listed on the stock exchange.

Investors who lapped up the new fund offer were dismayed that the stock exchange price was at a significant discount to the net asset value. Many had bought the units like a stock, thinking these would trade at a premium to the issue price. This resulted in the fund house being at the receiving end of investors.

Morgan Stanley is the second foreign AMC, after Fidelity, in many years to shut its Indian MF business. Fidelity sold its India’s business to L&T MF in March last year. Earlier, in June 2003, HDFC had acquired the assets of Zurich Mutual.