Stepping stone

Mumbai, Sept. 25: L&T Finance Ltd (LTF) today entered the asset management space when it signed a memorandum of understanding to buy 100 per cent of DBS Cholamandalam Asset Management Ltd (DCAM) for Rs 45 crore.

DCAM is a subsidiary of Cholamandalam DBS Finance Ltd, a joint venture between the Chennai-based Murugappa Group and DBS Bank Ltd of Singapore. The two partners held 37.5 per cent each with the rest being held by the public.

Founded in 1996, DCAM has assets under management (AUM) of close to Rs 2,900 crore in 24 schemes. However, debt accounts for a large portion of these assets. The equity assets in DCAM’s portfolio amount to just over Rs 250 crore.

The rebound in the equity markets has sparked buyouts in the domestic mutual fund industry.

Last year, Infrastructure Development Finance Company Ltd acquired Standard Chartered Bank’s asset management business in India for $205 million. Later in the same year, Religare bought Lotus India AMC — a joint venture between Fullerton Fund Management Group and London-based Sabre Capital Worldwide — for over Rs 100 crore.

According to recent data released by the Association of Mutual Funds in India, the aggregate AUM of 29 fund houses stood at Rs 7,49,915.52 crore, a rise of 8.7 per cent over the July figure of Rs 6,89,946 crore. Mutual fund circles said the surge in the equity markets had led to this improvement.

Reports had indicated that besides L&T Finance, newly formed Axis Asset Management Company Ltd and Indiabulls Financial Services were in the race to bag DCAM.

In a statement, L&T Finance said the acquisition would help to synergise with its existing financial services business by deepening and widening the services.

“L&T believes that its brand and reach will enable building a robust and valuable asset management business,” it said.

The transaction is subject to regulatory approvals.

Engineering, procurement and construction firm-L&T has presence in the financial services sector through its two wholly owned subsidiaries. They are LTF and L&T Infrastructure Finance Ltd.

On a consolidated basis, these entities have an asset size of over Rs 9,000 crore. They have a nation-wide distribution network, with presence in over 230 locations, especially in the rural and semi-urban areas.