The Hindu Business Line : Mergers & Acquisitions in mutual fund space

Last week, a little, innocuous-sounding report had the entire mutual funds industry in its grip. It concerned a proposal apparently formed by Temasek, an investment arm of the Singapore government, to acquire a mid-sized fund house in India.

Some sections claimed to have identified it as Standard Chartered MF, a contention that was refuted by people close to the bank. It was another matter, though, that Temasek has already drafted plans to foray into the country's asset management sector.

The idea behind this column is not to wax eloquent about an attempt that may be totally non-existent. But we can use this opportunity to view some of the takeovers that have happened before and the positions of the outfits that did the acquisitions.

Let's take, for starters, Franklin Templeton, HDFC and Birla Sun Life, three players that had at various points of times gobbled up such giants as Kothari Pioneer, Zurich and, more recently, Alliance Capital.

Where are the three now? Well, if you did not know it already, these are among the top funds of the day. HDFC MF, in fact, is one of the leaders, not too far away from the current No. 1. Franklin Templeton - Kothari Pioneer, remember, was the country's first private-sector fund - is also a major player, although its position has lately come off a bit. Birla Sun Life too has seen its asset size go up ever since it did the deal with Alliance Capital.

Shift your thought to the other end of the spectrum, especially to newcomer Sahara MF, which took over the Dr A C Muthiah-promoted First India MF.

Where is the Sahara venture now? If you consider its asset size, it is still quite near the bottom of the pile. Not that First India had huge assets in the first place, but you perhaps had expected the acquiring organisation to have done better than this.

Small takeovers

In between the mega deals, the market did see a number of smaller takeovers. Principal MF bought out Sun F&C MF's schemes, while Canbank MF took care of GIC MF. And Indbank MF sold out to the Tatas. The point is, these were relatively minor in comparison.

Unless you are a very diligent observer, you would have by now probably forgotten all about them.

Some of the schemes offered earlier by the acquired players have been merged with those managed by their more dominant counterparts. This has happened mainly to debt products.

What is, after all, the point in running two very similar money market schemes?

In a few cases, there have been re-namings. Tata MF, for instance, took one of Indbank MF's schemes and totally overhauled its style in the early days of the bull run.

Now, to turn to our original point, will any of the existing fund houses sell its business in future?

Will another large-sized entity at some point of time really think of getting out as an emergency measure? Will the merger & acquisition route be seriously considered as a means of growth?

There are no immediate answers. However, if you are still curious, allow us to tell you M&As among funds keep on happening all over the world. The big fish simply eats the small fish.

In India, this has happened on several occasions, and there is no reason why history will not be repeated.

Feedback may be sent to nilanjan@thehindu.co.in

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