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Fidelity Worldwide Investments is looking at a strategic review of its Indian operations, said a spokesperson from FIL Fund Management. Earlier in the day, there were reports that the company may hive off its Indian mutual fund arm for a valuation of Rs 1,000 crore.
But the spokesperson for the company said it is too preliminary to discuss any outcome: “Fidelity Worldwide Investment is conducting a strategic review of its onshore asset management business in India; as with strategic reviews all options are being covered,” he said in an emailed statement.
“We remain fully engaged in and committed to the process of successfully managing money for clients using all the resources of the company as required. In addition, the outcome of this review will take full account of our fiduciary duty to, and the interests of, our clients,” it said.
M&As on the rise
According to data on the AMFI Web site, as at the end December 2011, the assets under management of Fidelity Mutual Fund stood at Rs. 8,796 crore. Ms Ashu Suyash is the CEO of the fund house. M&A activity in the mutual fund industry has picked up in the last one-year period. Last week, Reliance Capital Asset Management announced the sale of a 26 per cent stake to Japan's Nippon Life in what was termed as the largest such deal in the Indian mutual fund industry.
The month of December last year saw two AMCs selling their stakes. Bharti of Bharti AXA Mutual Fund sold 51 per cent of its stake to Bank of India, while IDFC Mutual Fund sold 25 per cent of its stake to French firm Natixis Global.
In the early part of 2011, Benchmark Mutual Fund which specialised only in exchange-traded funds, sold-out to Goldman Sachs Asset Management. Goldman Sachs which entered the Indian mutual fund industry in 2008 had not launched any fund of its own.
Tough times
The mutual fund industry, which manages assets worth Rs 6.1 lakh crore, has been going through tough times owing to the poor equity market performance and stringent regulatory measures. In the last two-year period, the AUM of the industry declined by eight per cent forcing fund houses to re-think business strategies.
The entry-load ban in 2009 led to decline in distributor interest in selling mutual fund products. With declining sales and reduced investor interest, the fund houses' profit margins have also fallen. That most fund houses operate on wafer-thin margins is an acknowledged fact in the industry.
With the industry still grappling with redemptions and reducing inflows and businesses being down, the only way forward for the industry seems to be consolidation, say industry experts.
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