Edelweiss Asset Management announced on Tuesday it had agreed to acquire the onshore fund schemes managed by JPMorgan Asset Management India (JPMAM), including its India-based onshore mutual fund business and the international fund of funds. The buyout is subject to regulatory approvals.
JPMorgan is the seventh global financial services firm to exit the Indian mutual fund (MF) sector in the past three years. Last year, Goldman Sachs sold its MF business to Reliance Capital for Rs 243 crore in a deal valued at 3.4 per cent of the former's Indian assets under management (AUM). Deutsche MF sold its business to DHFL Pramerica reportedly for Rs 400 crore (or two per cent of the German entity's Indian fund management arm's assets).
The AUM of JPMAM is Rs 7,081 crore, while that of combined entities amounts to Rs 8,757 crore as on December 31. Edelweiss Asset Management, which has long been among the bottom 10 fund houses in terms of assets managed, now stands to enter the top 20 club.
Edelweiss did not reveal the deal price but said the deal size "was in line with the recent transactions in the MF space."
"We will reach a critical size with this acquisition. We had domestic assets of about Rs 3,000 crore, including the PMS (Portfolio Management Services) assets. With this buyout the asset size will balloon to about Rs 10,000 crore. This will be a big confidence booster to our distributors as well," said Nitin Jain, chief executive officer (CEO), global asset and wealth management, Edelweiss Group.
According to experts, Edelweiss will get about Rs 1,500-2,000 crore of equity assets of JPMorgan, which is a good thing. "It can leverage the foreign bank network of JPMorgan," said Manoj Nagpal, CEO, Outlook Asia Capital.
JPMAM had been scouting for buyers for many months. However, the plan had taken a backseat after the crisis caused by the Amtek Auto default. The fund house had an exposure of nearly Rs 200 crore to Amtek Auto debt paper through two of its debt schemes.
Earlier this month, Tata Mutual Fund was reportedly in the race for buying the fund's assets at one per cent of JPMAM's AUM. In March last year, Reliance Capital Asset Management and at least two other large and two mid-sized asset management companies were reportedly keen on buying JPMAM's assets.
"Given the complementary business advantages and the significant business that JPMAM has built, this acquisition is a natural win for both Edelweiss and JPMorgan. There will be planned investments in the business in terms of products, technology, distribution, and a clear strategy to compound growth," said Rashesh Shah, chairman and CEO, Edelweiss Group.