HDFC Asset Management Company Ltd, India's biggest fund manager in terms of assets, said it will acquire Morgan Stanley Investment Management's eight mutual funds, with a combined Rs. 3,290 crore under management, for an undisclosed sum. The sale of the fund assets marks the latest exit from India by a foreign player. Japan's Daiwa Asset Management offloaded its mutual fund schemes this year and Fidelity Worldwide exited last year. (Read: Morgan Stanley to sell India mutual funds assets to HDFC)
NDTV spoke to Milind Barve, managing director of HDFC MF on the contours of the deal. Here's an edited transcript.
Have you decided what are you going to do with these eight acquired schemes? Will they be merged with the current schemes you have at HDFC MF or are they going to operate standalone?
We just announced the deal. We will now work internally and with regulators and see how and if we can create a differentiated scheme. So, if we are able to come up with that, which is our objective, then that is what we will do. If we are not able to do that then we have the option to consolidate them into our existing funds. But basically whatever we do we have to keep unit holders interest in mind. We don't want to repeat and give him similar product which we already have.
These mutual fund schemes are well performing and mostly equity assets or some of them are tilted towards fixed income or perhaps hybrid schemes?
I think the attraction of the deal for us was that out of the Rs 3,200 crore, almost Rs 1,400 crore is equity AUM, which is all retail ownership... The debt funds are about Rs 1,100 crore. And the good thing is that funds have very high quality performance, very consistent performance. And I think we are inheriting the good quality of products they are buying so I think that is an attraction that we are buying good quality fund products.
With this new acquisition how many new customers are you acquiring? And how much does that take your total customer base to?
I think they have a little under 5 million customers and this is going to add about 4 lakh more, so I think that's kind of useful. But this is not really just about acquiring AUM or customers; it's really about being able to add something meaningful to our product range.
As of now you are the largest fund house. So I wanted to know post these new schemes after they are brought in, what will roughly be your asset size?
Very soon we will be announcing the average assets for the quarter in December. I think on 1st of January we will be publishing those numbers. I am not exactly aware of the average assets of Morgan Stanley for December quarter but we will know that soon. But as I said this is not so much about adding AUM it's about adding some good products.
This sale marks the latest exit from India by a foreign player. Earlier we had seen Daiwa, and then we had seen Fidelity Worldwide. Is their very little for foreign funds to grow in India?
No. I don't think one can use a board brush and really get judgmental that it's about all foreign funds wanting to get out. I think each seller has its own rationale and each one could be unique and different in their own way. If you look at some of these exits there are also examples of foreign fund houses buying stakes into India... I think there are equal numbers of people who are looking to get a foothold into India mutual fund space as well.
But it would be fair to assume that consolidation is going to be the way ahead for the mutual fund space and particularly what with such high amount of redemption that we have seen for last couple of years. Do you expect that to change?
You know if you look at the way assets in the industry are owned in terms of management across about 44 fund houses one would have thought that even years back consolidation would have happen. But if you see the history in last 4-5 years, there has been hardly one deal in two years. So, I don't think going forward it will happen, whether it should or not is for people who are buyers and sellers to decide. I do not see a consolidation really gaining in terms of number of deal going forward.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
