HSBC Asset Management, an indirect wholly owned subsidiary of HSBC Holdings plc, has acquired L&T Investment Management (LTIM) for $425 million (about ₹3,187 crore) from L&T Finance Holdings.
LTIM is the investment manager of the L&T Mutual Fund.
HSBC has proposed to fund the acquisition through internal accruals. It expects the acquisition to become earning-accretive on completion of the deal and will achieve a return on investment of over 10 per cent in the medium term.
The acquisition, which is subject to regulatory approval, will help HSBC’s asset management business in India and serve the wealth needs of the growing non-resident Indian customer base.
Merger plan
Following the completion of the acquisition, HSBC intends to merge the operations of LTIM with its existing asset management business in India. HSBC AMC has asset under management of ₹ 11,700 crore as of September.
LTIM is currently ranked as the 12th largest mutual fund management company with assets under management of ₹80,300 crore and over 2.4 million active folios.
LTIM reported a pre-tax profit of ₹ 185 crore on an income of ₹ 348 crore for the financial year ended March. Its cost in same period was ₹163 crore.
LTIM offers a distribution platform, encompassing leading banks, regional distributors, over 50,000 independent financial advisers, established digital platforms and a footprint across 65 locations across India.
Noel Quinn, HSBC’s Group CEO, said combining both the businesses gives the scale, reach and capabilities to capture the 15-20 per cent annual growth expected in the asset management business in India over the next five years.
The deal will also boost HSBC’s ability to serve India’s growing wealth needs, along with those of the 18 million non-resident Indians around the world, he said.
High-growth market
Surendra Rosha, HSBC’s Co-Chief Executive Asia Pacific, said LTIM customer base and wide footprint in India will provide HSBC with much deeper access to a high-growth wealth management market.
India’s rising income levels and higher life expectancy are driving expansion in the under-penetrated sector, he added.