In a sign of further consolidation in the overcrowded mutual fund industry, Kotak Mahindra Asset Management Company, a wholly owned subsidy of Kotak Mahindra Bank, has signed a definitive agreement to acquire 10 schemes of PineBridge Mutual Fund for an undisclosed amount.
Analysts peg the deal size at ₹50 crore given the industry valuation of similar deals at 5-7 per cent of AUM.
As of August 31, the assets under management of Kotak Mahindra Mutual Fund were around ₹37,000 crore and the AUM of PineBridge India was about ₹660 crore. PineBridge has two equity-focused funds, six debt funds and two fund-of-funds.
In terms of assets under management, Kotak is the ninth largest while PineBridge is ranked 36.
Gaurang Shah, President – Asset Management, Life Insurance and International Business, KMBL, said the assets acquired include equity-oriented funds which provide a further enrichment to Kotak’s equity base.
“We have an appetite for further acquisitions which can create value and would be keen to consider such opportunities,” he added.
The foreign asset management companies which entered the Indian mutual fund space with high hopes are throwing in the towel as fresh fund flows into the industry are hard to come by.
Last December, the country’s largest fund house HDFC Mutual Fund acquired Morgan Stanley’s assets worth ₹3,290 crore. Morgan Stanley was the first global fund to launch in India in 1994 after liberalisation, but its asset size was small by international and Indian standards.
Despite the bullish sentiment in equity markets, the mutual fund industry had witnessed an outflow of ₹13,035 crore in August. The fresh fund flow into equity funds halved in August to ₹5,217 crore against ₹10,815 crore logged in July.
The change in tax treatment on non-equity funds in this year’s Budget resulted in huge outflow of ₹12,696 crore income funds, which account for 46 per cent of the assets under management while liquid funds saw an outflow of ₹5,684 crore in August.
However, the industry AUM has increased by ₹6,300 crore in August to ₹1,012,824 crore against ₹1,006,452 crore in July, largely due to the recent stock market rally.