IDBI Bank Ltd. said it's selling its mutual fund arm to Kochi-based gold loan financier Muthoot Finance Ltd. to comply with regulatory requirements, not to raise capital.
“The amount is just Rs 215 crore, which is not big at all. Hence, it was not done for shoring up capital but rather for compliance,” Samuel Joseph Jebaraj, deputy managing director at IDBI Bank, said in an interview with BloombergQuint.
The Securities and Exchange Board of India has given the lender till January 2020 to exit its asset management business.
After IDBI Bank became a 51 percent subsidiary of Life Insurance Corporation of India, which already has an asset management company, the unit had to be divested since there was no reason for two AMCs to exist, Jebaraj said.
The transaction is expected to be completed by the end of February 2020, subject to necessary regulatory approvals, according to an exchange filing by Muthoot Finance. “Upon closing, both IDBI AMC and IDBI MF Trustee Company will become wholly owned subsidiary companies of MFIN.”
Like other debt-laden lenders, IDBI Bank is also looking to sell non-core assets, including equity stakes. “It's already in the public domain that we are looking at divesting our stake in IDBI Federal Life Insurance,” Jebaraj said.
IDBI Bank owns 48 percent in the insurer, with The Federal Bank Ltd. and Ageas Insurance International N.V being the other shareholders.
“This is a little more complicated than the divestment of our mutual fund in which we along with IDBI Capital Markets held 100 percent,” Jebaraj said.
WATCH | IDBI Bank's Deputy MD Samuel Joseph Jebaraj on the rationale behind selling the mutual fund business to Muthoot Finance
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