L&T Finance among suitors for DBS Cholamandalam AMC

The DBS venture has been under financial stress of late.

Financial services companies, including L&T Finance, are in the race to acquire DBS Cholamandalam Asset Management Company (AMC), which is a joint venture between Singapore’s DBS Bank and the Chennai-based Murugappa group.

Bankers told Business Standard that the asset management company had appointed Edelweiss as the investment banker.

When contacted, a DBS Cholamandalam spokesperson said, “Since there are no definitive plans on this subject at this point in time, we request you to treat this as a rumour.” L&T Finance’s spokesperson declined to comment.

Though L&T Finance does not have an AMC licence, it has expressed intention to set up one. Several other players such as Indiabulls and Axis Bank have in recent months received approval from the Securities & Exchange Board of India (Sebi) to set up AMCs. These companies, however, said that they were looking to build their own businesses.

DBS Cholamandalam AMC had reported a loss of Rs 38 crore for the year ended March 2009. The AMC, formed in 1996, has been managing assets worth Rs 3,000 crore with over 200,000 customer accounts at the end of August 2009. The company is present at over 20 locations in the country and also has a strong distribution network.

In recent months, the financial services joint venture between DBS and Cholamandalam has been under pressure and had to resort to using the Reserve Bank of India’s special line of credit for non-banking finance companies to raise Rs 750 crore to meet the asset-liability mismatch. Its shareholders have also pumped in equity to strengthen the financial position of the NBFC.

The Chennai-based business house is also into engineering, fertilisers and sugar, and has been into the mutual fund business for over a decade. The finance company started operation in 1978 as an equipment financing company.

At present, there are 36 players in the mutual fund industry. The industry, which was reeling under pressure of low volumes during the second half of the last year when the economic crisis hit the country in October, has been recording growth in assets in the first five months of the financial year.