Muthoot Finance (MFIN), the Kerala-based gold loan non-banking financial company, said on Friday it had entered into a definitive agreement with IDBI Bank to buy its mutual fund (MF) arm for around Rs 215 crore.
The acquisition will mark MFIN’s foray into the Rs 26-trillion MF space. George Alexander Muthoot, managing director, MFIN, said, "IDBI MF is a trusted player with a steady loyal customer base. The business objectives and customer-centric approach that we follow is well aligned with the business objectives of the MF industry.”
MFIN will buy 100 per cent equity shares of IDBI Asset Management Company (AMC) and IDBI MF Trustee Company. The transaction is expected to be completed by the end of February, subject to regulatory approvals. IDBI AMC and IDBI MF Trustee Company will become wholly-owned subsidiary companies of MFIN.
The IDBI Bank has been trying to sell its non-core assets to ease pressure on the balance sheet. The current sale is part of the plan. Net loss of the bank stood at Rs 3,459 crore in the September quarter. The gross NPA ratio stood at 29.43, marginally better than 31.78 it had reported in the year-ago period, while the net NPA ratio came down to third at 5.97 from a high 17.30.
In January, LIC purchased 51 per cent in IDBI Bank. According to Securities and Exchange Board of India (Sebi) norms, an entity cannot hold more than 10 per cent in more than one MF. The MFIN deal will help LIC avoid legal issues with Sebi.
IDBI MF is one of the profit-making AMCs in the MF space, with an asset under management (AUM) of over Rs 5,300 crore. As of March 31, IDBI Bank owned 66.67 per cent stake in IDBI Asset Management with IDBI Capital Markets and Securities holding a 33.33 per cent.