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Principal buys IDBI stake in mutual fund for Rs 94 cr

Mumbai, March 29: The Industrial Development Bank of India (IDBI) will divest its entire equity stake in IDBI-Principal Asset Management Company to joint venture partner Principal Financial Group for Rs 94 crore.

The divestment, subject to statutory and regulatory approvals, is under a ‘sale and purchase agreement’ with Principal Financial Group Mauritius, IDBI informed the Bombay Stock Exchange today.

IDBI would divest its 50 per cent stake in IDBI-Principal Trustee Company and all trust corpus rights of IDBI Mutual Fund to Principal or nominees.

IDBI and Principal Financial Group had entered into a tie-up in April 2000, with a 50:50 equity stake. The AMC currently manages 17 schemes with a total corpus of Rs 1,754 crore as on February 28, 2003.

The company operates around 16 debt schemes, four short-term debt schemes, four equity and debt schemes and five gilt fund schemes. IDBI-Principal AMC’s largest corpus is under the income fund with around Rs 610.76 crore, followed by cash management at Rs 396.81 crore and equity at Rs 62.5 crore.

IDBI’s exit from the mutual fund division, though expected, has given rise to fresh speculations about the leading financial institution’s plan vis-a-vis IDBI Bank.

The institution, which is now looking at universal banking, has been contemplating selling a significant stake in IDBI Bank over the past couple of years. Bankers believe IDBI’s exit from the mutual fund business could signify a similar move in IDBI Bank.

The Principal Financial Group is a leader in the retirement savings business in North America. Established in 1879, it is also a leading provider of a wide range of financial products and services to businesses and individuals, including asset management, retirement services, life and health insurance and mortgage banking. It is a Fortune 500 company with over Rs 12,000 crore funds under management. Through wholly-owned firms and joint venture partnerships, the company provides a broad range of financial services and expertise to more than 13 million customers in 14 countries around the world.

IDBI-Principal was set up in October 2000 and launched its series of mutual funds under the umbrella brand ‘Future Goals’ — India’s first Life Stage Investment Plan. The Future Goals Series offered unique features such as asset allocation and automatic rebalancing based on the objectives in the different life stages of an individual.

The joint venture was also the first private sector company to tie up with the department of posts to sell mutual funds through the postal network.

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