BlackRock eyes bigger India play

The world's biggest asset manager with assets of $4.7 trillion eyeing bigger share in DSP BlackRock MF

Laurence Fink, chairman and chief executive officer (CEO) of US-based BlackRock Inc, world’s largest asset manager with assets of $4.7 trillion, was in India this February to meet Prime Minister Narendra Modi along with other senior ministers including the Finance Minister Arun Jaitley.

The ‘secret’ meeting, as industry insiders told Business Standard, was to take stock of the current situation in India and the future prospects.

A media report, on Thursday, said BlackRock Inc has offered to buy out its JV partner Hemendra Kothari's stake in DSP BlackRock Mutual Fund.

Larry, as the BlackRock’s chief is often referred to, was said to be quite impressed and gained confidence about expanding business in India. It was here that he first thought of increasing their holdings DSP BlackRock Mutual Fund, domestic joint venture (JV) between BlackRock and Hemendra Kothari’s DSP Group.

Kothari, a renowned investment banker, owns 60 per cent in the JV while rest is owned by BlackRock. With assets under management (AUM) of nearly Rs 38,000 crore, DSP BlackRock Mutual Fund is India's tenth-largest fund house.

“The top management of BlackRock had been contemplating of taking a more active role in the management. There can't be a better time to do that than now when things are looking up after a long time,” said a source. He added a majority stake in the fund house will be very beneficial for the company as BlackRock’s professionalism and expertise is too high.

According to Dhirendra Kumar, CEO of fund tracking firm Value Research, “Right now, the fund house is not BlackRock's company. It is just an investment. If they are interested in Indian market, they should have at least 51 per cent holding in the company. Hemendra Kothari is well known for his ability to time his sale. BlackRock is not just big, it’s very big; and buying Kothari’s stake wouldn’t be a challenge.”

“It’s a long-term strategy and BlackRock is quite interested in India as one of the most growing emerging economies in the world,” said a person familiar with the development. According to him, even 51-75 per cent stake in the JV will matter a lot.

Sources said that BlackRock, upon having majority stake, wants to continue its focus on high quality products and performances. “In recent years there have been some issues with performances, mainly in the equity schemes. Rectifying that will be priority. In the fixed income space, the fund house is quite small and that will be probably a focus area,” they said.

“The equity schemes have struggled. Further, the fundamental problem with the fund house is their weak distribution. It has to be strong. It is to be seen how intervening will BlackRock be in India,” said Kumar.

However, question remains will or why would Kothari, who is a non-executive chairman of DSP BlackRock, sell his stake? Sector insiders say that there is no active involvement of chairman in the fund house' day-to-day business, as was the case earlier. Some say that Kothari may now want to fully concentrate on his initiatives of saving India's forests and wildlife.

His daughter, Aditi Kothari - an executive vice president, is the member or the executive committee of the fund house. She is the head of marketing, retail sales relationships and strategy.

She is also involved in social initiatives and is a trustee of the Hemendra Kothari Foundation and Wildlife Conservation Trust.