Axis MF to buy ING Investment schemes

Deal, valued at Rs 20-30 cr, will add Rs 1,000 cr to Axis's AUM

Axis Mutual Fund is set to acquire the assets of ING Investment Management, a joint venture between Dutch financial services group ING, realtor Rajan Raheja and Kirti Equities. A source familiar with the matter said Axis had offered to buy ING Investment Management’s schemes for Rs 20-30 crore.

Once formalised, the deal will add about Rs 1,000 crore to Axis’s assets under management (AUM) of about Rs 14,700 crore, as on December 31.

The proposed deal values the ING schemes at two-three per cent of the total assets under management (AUM). Sources said Axis wouldn’t absorb ING’s staff as part of the acquisition.

“There has been a handshake,” said a person familiar with the talks, without specifying whether all the three owners had signed. While ING owns 47.25 per cent in ING Investment Management, Raheja’s Hathway Investments holds 39.75 per cent and Kirti Equities owns 13 per cent.

An ING Investment spokesperson said the group was in the process of divesting its insurance and investment management businesses, including the stake in ING Investment Management India. “Beyond that, we do not comment on the process. Under the amendments on the divestment programme, the divestment of more than half the Asian insurance/investment management operations were to be completed by 2013-end, with the remaining interest divested by the end of 2016,” the spokesperson said.

The Rajan Raheja Group and Kirti Equities could not be reached for comment. An Axis Mutual spokesperson said, “We do not comment on market speculation.”

Mutual fund officials said the deal valuation was somewhat lower than many other transactions in recent times, partly because ING’s assets under the domestic mutual fund business were fixed-income.

As of December 2013, ING managed assets worth Rs 672 crore under its domestic mutual fund business. Under the portfolio management services business, its AUM is about Rs 400 crore.

Other than Axis, L&T Mutual Fund, BNP Paribas Mutual and Pramerica Mutual, among others, were said to be in the race to buy ING’s assets.

If the deal is finalised, it will be the second in the mutual fund industry in three months. In late December, Morgan Stanley had announced the sale of the schemes of its Indian asset management company to HDFC Mutual Fund. Several foreign financial services firms are scrambling to exit the Indian mutual fund sector, as most of them are reeling under losses and have been unable to scale-up the domestic business in the way they expected.

In August 2009, the Securities and Exchange Board of India (Sebi) banned entry load—an upfront fee asset management companies charge unit holders to pay distributors. This, coupled with investor apathy for mutual fund products weak market conditions have hit the 44-member strong local sector.

Officials said Sebi’s recent step to increase the net worth requirement from Rs 10 crore to Rs 50 crore could force some fund houses to wind up operations. Currently, overall assets managed by the mutual fund sector are about Rs 9,00,000 crore.