L&T Finance Holdings, the financial services arm of capital goods major Larsen and Toubro, will buy out Fidelity Asset Management Company, the 15th largest mutual fund in India.

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Financial details of the transaction were not disclosed in the announcement made on Tuesday though market sources peg the deal at over Rs500 crore. The acquisition, which is subject to regulatory approvals, is routed through the subsidiary, L&T Finance. This is the second acquisition by the company in the mutual fund space. It had earlier acquired DBS Chola to enter the mutual fund arena in 2010.

With this acquisition, Larsen & Toubro is set to become the 13th largest mutual fund in India. It would have a combined average AUM of around Rs13,412 crore for the quarter ended December 2011, with a market share of roughly 2%. L&T had average assets under management of Rs4,616 crore for the quarter ended December 2011.

M Deosthalee, chairman and managing director of L&T Finance Holdings, stated that the buyout is part of the growth plan for the mutual fund.

“This acquisition provides L&T Mutual Fund the necessary scale, products and access to retail customers to grow profitably,” he said.

Fidelity set up base in India in 2004 and manages $212 billion — over Rs10 lakh crore —  worth of assets under management (AUM) globally. Mounting losses and an inability to garner larger market share in the sector may have caused the fund to exit, according to market sources.

Fidelity had run up losses of Rs306.84 crore, according to its annual report for the financial year ended March 2011. It had an average AUM of Rs8,796 crore for the quarter ended December 2011, according to data from the Association of Mutual Funds in India.