Mahindra looking for foreign partner to grow mutual fund business

Mahindra MF, which began operations in July 2016, is currently a bit-player and placed 31 among 42 fund houses, with assets under management of about Rs 40 bn

Mahindra Mutual Fund has begun scouting for a foreign partner to ramp up operations and improve fund management capabilities, said people in the know. 

Mahindra MF, which began operations in July 2016, is currently a bit-player and placed 31 among 42 fund houses, with assets under management of about Rs 40 billion. 

It has three equity schemes with assets of Rs 10.5 billion and aims to make inroads in regions where Mahindra Finance and its subsidiaries are active in. 

“They have begun scouting for a foreign partner,” said a person familiar with the matter. 

“We have not selected or chosen any specific inorganic route yet. Any partnership will be for reasons such as expertise or value addition to the core business of asset management, and a shared vision to grow the business beyond the top few cities,” said Ashutosh Bishnoi, Managing Director and Chief Executive Officer of Mahindra Mutual Fund.

Historically, deals in Indian asset management have happened at 5-6 per cent of the assets under management (AUM). As of June, there were 13 foreign players in a joint venture with Indian asset management companies. 

The most recent company to tie up with a foreign player was Union Bank of India, which announced an investment by Dai-ichi Life Holdings in Union Asset Management Company in May. As part of this new partnership, Dai-ichi Life holds 39.62 per cent of the share capital of Union AMC through investment in compulsorily convertible preference shares, making it a co-sponsor in the AMC.

DSP MF, which recently parted ways with its foreign partner BlackRock, is also understood to be exploring a possible tie-up with a foreign partner. 

The MF sector’s assets have grown at a compound annual growth rate of 25-30 per cent in the past three years, with an average monthly inflow of Rs 40-70 billion through systematic investment plans. The industry has doubled its assets in the past three years, with overall AUM totalling over Rs 21 trillion as of March 31, 2018.

The profits of large-sized fund houses are expected to grow at a fast clip as assets swell and fixed costs remain the same.