Bank of India rethinks 51% stake in Bharti AXA Investment

Bank of India (BoI) is “revisiting” its plan to buy 51% stake in Bharti AXA Investment Managers, a source with the public sector bank said.

“Considering the current market conditions, we will revisit this plan and the board will take a final call on the deal,” the source said on condition of anonymity.

An email query sent to Bharti AXA Investment Managers on Tuesday remained unanswered at the time of going to press.

Bank of India, which had exited the mutual fund business in 2004, has confirmed that it is committed to re-entering the asset management business now.

“If in our assessment we find that the deal is not favourable to us, then we may even back out and look at other fund houses,” said the source, pointing out that the bank will consider a fund house’s expertise in the business, its ability to fund and its ability to offer tailor made products in India.

News reports earlier this year suggested BoI was looking to acquire controlling stake in the asset management venture.
Bharti AXA, too, had confirmed that it was in discussion with a leading public sector bank for the stake sale. “Subject to regulatory and other approvals, and various formalities, the bank proposes to hold 51% stake in the Trustee Company and in the AMC and Bharti will thus exit from the Venture. The said proposal is currently under advanced stages of discussion between the two prospective partners, and is likely to be concluded in a short time,” the AMC said in its annual report.

Neither of the players confirmed the size of the deal, though reports suggested it would be 2-3% of the AMC’s assets under management (AUM).

Bharti AXA’s average AUM during the July-September quarter was around Rs176 crore, down from Rs216 crore in the previous quarter.

The average AUM of mutual funds has declined from a high of Rs8,07,546 crore in November 2009 to Rs7,12,742 crore during the July-September quarter, as per the latest figures from the Association of Mutual Funds in India.

In recent stake sales by asset management companies, valuations have been in low single-digit as a percentage of AUM.

According to reports, DBS Cholamandalam was acquired by L&T Finance for Rs45 crore in September 2009 at 1.5% of its nearly Rs3,000 crore in assets under management at the time, while, LIC Mutual Fund entered into an agreement to sell 35% of its stake to Nomura Asset Management Co of Japan in July 2009, valuing the mutual fund at Rs880 crore, or 2.7%, of its assets under management at the time.