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The DSP Group has decided to buy out its joint-venture partner BlackRock for an undisclosed amount, marking the exit of yet another foreign fund house from India. BlackRock Inc held 40 per cent stake in the JV.
Post the deal, DSP BlackRock Mutual Fund will be renamed DSP Mutual Fund, while the holding company will be known as DSP Investment Managers.
In the last 10 years, several foreign players have quit India as growth in the mutual fund industry has been lopsided, with the top 10 fund houses commanding 81 per cent of the ₹23-lakh crore assets under management (AUM).
DSP BlackRock, which registered a growth of 32 per cent, had an AUM of ₹86,326 crore, accounting for 4 per cent market share as of March-end. An analyst said most acquisitions in the mutual fund industry generally happen at 5-7 per cent of equity AUM of the asset being taken over.
One of several big guns
In the last few years, over a dozen foreign fund houses have moved out of India due to stagnant growth in their market share.
Some of the top overseas players in this list include Daiwa, Deutsche, Morgan Stanley, ING, PineBridge, Nomura, Fidelity, AIG, Zurich, Morgan Stanley, JP Morgan, Goldman Sachs and KBC. The 150-year-old DSP Group had tied up with Merrill Lynch Investment Managers in 1996 to establish its retail asset management business in India as DSP Merrill Lynch Asset Management.
However, BlackRock Investment Managers stepped in 2008 as a partner after BlackRock took over Merrill Lynch’s global asset management business in 2006.
DSP said no to buyout
Hemendra Kothari, Chairman, DSP BlackRock Investment Managers, told BusinessLine that BlackRock had seen a tremendous growth in India and wanted to have a majority stake in the joint venture. However, Kothari, being the fourth-generation promoter, did not want to give up the business. In China, he said, BlackRock had a JV in which it owned an initial 19 per cent which it subsequently raised to 51 per cent.
“Similarly, they were trying to consolidate stake in India by buying us out. But my family was against it. Finally, we decided to part ways amicably,” he said ruling out any more JV partners in near future.
The Group has equity capital of ₹800 crore and has not declared any dividend. BlackRock, which employs 1,400 people, intends to continue its global financial services business from Gurgaon, Mumbai and Bengaluru offices.
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