Morgan Stanley mutual fund rejigs capital structure

Gives up the joint venture model to become a ‘foreign fund house’.

Morgan Stanley Investment Management, one of the earliest foreign fund houses to set shop in India, has reworked its capital structure. The company, which launched its first fund 17 years ago, has bought back shares held by Alanoushka Finlease and Investments, the Indian arm of Morgan Stanley Mauritius company, making it a fully foreign-owned enterprise.

Following the exercise, it asked the Association of Mutual Funds of India (Amfi) to reclassify it as a foreign fund house. “(There has been a) change in the shareholding pattern of Morgan Stanley Investment Management Pvt Ltd and, accordingly, a change in status from a joint venture (predominantly foreign) to a foreign AMC,” Amfi said in its latest monthly report.
 

NEW SHAREHOLDING PATTERN
Shareholder’s name	No of shares
Morgan Stanley Mauritius Company	15,668,602
Alanoushka Finlease and Investments Private	1
Vinod Sethi	1
Dara Pherozshah Mehta	1
Total	15,668,605
Source: Company

Anthony Heredia, CEO, Morgan Stanley IM, said: “We have completed the transaction sometime back. We requested Amfi to change the status as we were no longer a joint venture.”

According to Heredia, since the company’s capital was over $50 million, the change of structure will not have any impact on its business. In the early days, fund houses preferred the joint venture structure to take advantage of the minimum capital requirement norms. While foreign fund houses were required to bring higher capital, joint ventures with Indian companies reduced the capital requirements to a fraction.

Under the original structure, the shares of the AMC were held in the ratio of 74.99:25 by Morgan Stanley Mauritius Company Limited (a company incorporated in Mauritius and Alanoushka Finlease) and Investments Private Limited (a company incorporated in India), respectively. The remaining shares were held by two individual shareholders.

As part of this capital restructuring exercise, the AMC bought back all but a single share held by Alanoushka.

Under Sebi rules, such transactions, that involve transfer of 10 per cent or more shares are viewed as a change in the controlling interest of an AMC. The company had informed regulator of the proposed transaction towards the end of last year.

In 1994, Morgan Stanley had launched its first domestic fund, Morgan Stanley Growth Fund (MSGF). The MSGF was such a hit among investors that a mile-long queue stretched all the way from Dalal Street to VT Station to get an application form, said senior investors.

However, its next New Fund Offer, of the ACE fund, took fourteen years to hit the market. By then, the fund house had been pushed to the bottom of the Assets Under Management (AUM) table. At the end of September 2011, it managed five schemes with an average AUM of Rs 1,971 crore.

Morgan’s US rival Goldman Sachs entered the Rs 7.13-lakh-crore Indian Asset Management industry earlier this year, buying out Benchmark Mutal Fund. The merger process was officially completed last month with schemes of the Benchmark fund officially rechristened under the Goldman Sachs brand. Goldman Sachs AMC had an average AUM of Rs 4,357 crore as of September.