Fortis, Sundaram BNP Paribas may merge funds

Experts are valuing the AMC at 3-4 per cent of its assets under management.

Fortis Mutual Fund and Sundaram BNP Paribas Mutual Fund are likely to merge following BNP Paribas’ global acquisition of Belgium-based Fortis for €4.5 billion.

Sources familiar with the developments said discussions between senior executives from both the mutual funds had started and the global teams were expected to visit Indian shortly to finalise the deal.

Sources said a sell-off was ruled out as BNP wanted to retain the assets.

Experts are valuing the AMC at 3-4 per cent of its assets under management. Sundaram Finance, which holds 49.9 per cent stake in Sundaram BNP Paribas AMC, will have to pay 50 per cent of this amount if a merger were to happen.

Almost 90 per cent schemes of Fortis Mutual Fund are fixed income ones, a fact that may skew its valuation, say experts. It also has a large number of fixed maturity plans.

BNP Paribas has acquired all the operations of Fortis which include asset management, private banking, merchant banking and consumer finance outside the Netherlands. This, in effect, means that Fortis Mutual Fund will be a part of Sundaram BNP Paribas Mutual Fund. However, under Indian regulations, a mutual fund cannot have two licences. This makes the merger mandatory.

TP Raman, CEO of Sundaram BNP Paribas Mutual Fund, said, “We have no news or information that we can share at this point in time”. An emailed query to Fortis remained unanswered. BNP Paribas’ Country Head Frederic, Amoudrou, refused to comment.

ABN Amro Mutual Fund was changed to Fortis Mutual Fund in November 2008 after Fortis acquired the investment management business of ABN Amro in a global deal. Sundaram BNP Paribas had assets under management of Rs 5,336.36 crore at the end of March 3, 2009, while Fortis is comparatively smaller in size with assets of Rs 357.75 crore.

Mutual fund industry has been going through a wave of consolidation post October 2008, when mutual funds faced a severe liquidity crisis and the Reserve Bank of India had to step in to provide them a line of credit. The problem did not stop there as several mutual funds’ investments in real estate and NBFCs’ (non-banking finance companies’) papers went wrong.

Religare acquired Lotus Mutual Fund in November 2008 after the latter went into trouble due to its huge exposure to fixed maturity plans (FMPs). Goldman Sachs has already pulled out from its announced asset management venture in India while Bharti is planning to exit its mutual fund venture with Axa.