Pramerica set to acquire Deutsche AMC; YES Bank out of the race

YES Bank out of the race; deal size at Rs 400 crore, 1.8% of Deutsche's AUM

 

Pramerica Mutual Fund is likely to acquire India’s assets of Deutsche Asset Management Company (AMC) for Rs 400 crore. According to sources, YES Bank, which was in the race to acquire the German financial firm's Indian arm, could not ink the deal, as it had offered less.

Pramerica MF is nearly one-tenth the size of Deutsche MF in terms of quantum of assets managed in India. However, post this transaction, Pramerica will jump from one of the smallest fund houses to 13th largest fund house.

This will be the fifth exit of a foreign fund house over the last two years. All these exits happened at a time when fortune of the mutual fund industry significantly improved with equity assets nearly doubling to Rs 3.7 lakh crore and overall size of the sector surpassed Rs 12 lakh crore-mark. Prior to this, SBI Mutual Fund bought Daiwa, HDFC MF acquired Morgan Stanley, Birla Sun Life MF went for ING MF and Kotak Mutual Fund took over PineBridge Investments.

Deutsche AMC, which manages about Rs 22,400 crore as on March 31, was on the block for quite some time now. With this deal, the fund house is valued at little less than 2 per cent of its overall assets under management. The fund house, the MF division of Deutshe Asset & Wealth Management in India, was established in 2002.

Market sources said the quality of assets (which is mainly in liquid and income funds) was a deterrent for several potential buyers, as the asked price was far higher than what it should actually have been.

Pramerica's spokesperson told Business Standard: "We do not comment on market speculation." The spokesperson at Deutsche offered no comments. YES Bank did not respond to the Business Standard query.

Pramerica, a US-based investment manager sponsored by Prudential Financial, Inc (PFI), entered India's mutual fund business in 2010. However, due to tough regulatory framework and unfavourable market conditions, the fund house could not scale up the business at the desired rate. As on March this year, the average AUM of the fund house stood at Rs 2,309 crore.

Sources added that after Vijai Mantri, former CEO of Pramerica, left the organisation early this year, the fund house has turned aggressive to expand and increase its size. Ravi Kumar, a graduate from Harvard University, replaced Mantri as CEO. Earlier, he was the chief operating officer of the AMC. He worked with PFI for over eight years and managed all stages of acquisitions, divestitures and joint ventures in financial institution.

Currently, there are 43 players in the sector with 42.4 million folios. The top 10 fund houses control nearly 80 per cent of the overall assets.