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In an announcement that surprised industry watchers on Tuesday, publicly listed Edelweiss Financial Services Ltd disclosed that its mutual fund arm, Edelweiss Asset Management Ltd, will acquire the onshore fund schemes of its much larger competitor, JP Morgan Asset Management India Pvt Ltd, subject to regulatory approvals.
As on December 31, 2015, assets under the management of JP Morgan stood at ₹7,081 crore, while Edelweiss reported AUM of ₹1,676 crore Neither party confirmed the size of the deal, but market experts put it in the ₹160-180-crore range.
An Edelweiss statement said the acquisition would strengthen the Group’s ₹31,000-crore global asset management portfolio.
Nitin Jain, CEO, Global Asset and Wealth Management, Edelweiss Group, told BusinessLine that the acquisition will give Edelweiss “critical mass” in the domestic mutual fund business. He said he expects the acquisition to be completed in four to six months.
JP Morgan AMC has been on the block for almost a year. Reliance, Tata and DHFL Pramerica were believed to be in the race; the sale to Edelweiss was precipitated after two of JP Morgan’s debt schemes took a partial write-down in value because of investments of ₹200 crore in debt papers of Amtek Auto, an auto ancillary manufacturer that missed bond payments last August.
JP Morgan is only the most recent in a line of foreign asset managers to exit the country, and the third to sell its local business in less than 12 months. Last August, Pramerica bought Deutsche Bank’s domestic mutual fund business while Anil Ambani’s Reliance AMC agreed to buy out Goldman Sachs’s local fund arm in October 2015.
In a market dominated by giant-sized fund houses with legacies in the banking or insurance business, foreign AMCs have found it hard to get a foothold. Add to this the costs of building a presence in the market, a competitive distribution network and the inability to grow beyond a certain size, foreign AMCs have found that the costs of doing business outdo the benefits.
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