Birlas take control of mutual fund venture with Sun Life

Buys 1 per cent stake in 50:50 JV to take its stake to 51 per cent

The Aditya Vikram Birla group, led by Kumar Mangalam Birla, has taken charge of its mutual fund joint venture with Sun Life Financial of Canada by buying one per cent stake from the latter. The Birlas will now own 51 per cent stake in Birla Sun Life Asset Management Co Ltd and Sun Life will be left with 49 per cent.

When contacted, Sushil Agarwal, wholetime director and CFO of Aditya Birla Nuvo, said: “The Aditya Birla group has acquired an additional one per cent stake in Birla Sun Life AMC. The AMC now becomes a subsidiary of Aditya Birla Nuvo.  Our partnership with Sun Life remains very strong and both Aditya Birla Group and Sun Life are committed to grow the asset management business in India.”

An email sent to Sun Life did not elicit any response.

The equity structure of the Birla group’s second joint venture with Sun Life Financial in the insurance sector will continue as usual at 74 per cent with the Indian promoter. The Canadian company will raise its stake as and when the government permits higher stake for foreign companies in the insurance sector, sources familiar with the developments said. Sun Life had the option of increasing stake in the insurance company since the JV was set up 12 years ago.

The Birlas and Sun Life had set up the mutual fund venture in 1994. ince then, it has grown into one of India’s leading mutual fund companies with assets under management of Rs 72,900 crore as on September this year,  growing at an annual rate of 8.5 per cent. The valuation of the stake in an AMC is usually based on 2 to 4 per cent of the total corpus of the AMC. But a source said there was difference in opinion on how to run the business.

For fiscal 2012, Birla Sun Life AMC had made a profit of Rs 59 crore on revenue of Rs 315 crore.  The financials were down when compared to the previous financial year in 2011 when the AMC made a profit of Rs 85 crore on revenues of Rs 366 crore.

A source in the group said the Birlas decided to take charge of the joint venture after it realised that the group can manage the AMC on its own and it should be on the driver’s seat. Besides the group’s own brand image was very good in India and, if need be, the source said, it could go alone in the mutual fund business. BSE-listed Aditya Birla Nuvo holds stake in the mutual fund company.  The Aditya Birla group has made significant progress in the financial services business and is planning to apply for a bank, as and when the Reserve Bank of India issues licenses to new companies.

The Indian mutual fund industry has witnessed a lot of churn in recent months.  Anil Ambani’s Reliance Mutual Fund sold 26% stake to Nippon of Japan while L&T Finance took over Fidelity’s mutual fund business in India in March this year.