Deutsche Bank to sell Indian asset management business to Pramerica Mutual Fund

MUMBAI: Deutsche Bank is selling its Indian asset management business to Pramerica Mutual Fund. The acquisition will add Rs 20,720 crore to Pramerica’s existing assets under management (AUM) of Rs 2,125 crore, catapulting it to the 13th largest asset management company in the country’s 43-member strong mutual fund industry that manages money to the tune of Rs 13 lakh crore. Pramerica is jointly owned by Dewan Housing Finance Corporation (DHFL) and US-based Prudential Financial.

Deutsche is the sixth global financial services company to exit the domestic mutual fund industry in the last three years. Fidelity, Morgan Stanley, Daiwa, ING and PineBridge Investments are the others which have sold their local assets management businesses. Pramerica and Deutsche did not disclose the value of the deal. However, industry officials said Pramerica could have paid about Rs 350-400 crore to Deutsche Asset Management India. This values the business at about 1.6-1.9% of Deutsche’s AUM. An email query to both Deutsche and Pramerica specifically on the deal valuation went unanswered till the time of going to press.




Mutual fund industry officials said if the business was sold at 2 per cent of the AUM, the deal value is lower than that of many of the transactions in the past. This could be because equity assets account for just 3 per cent of Deutsche Asset Management’s or Rs 600 crore. Buyers usually give steeper value to mutual funds with higher equity assets because of better margins. Also, an equity AUM, which usually belongs to retail investors, stay with the mutual fund for a longer period.

"The divestment of our asset management business is in line with our strategy of focusing on our core businesses where we can achieve a leadership position," says Ravneet Gill, CEO, Deutsche Bank Group India.

The Indian mutual fund industry has seen a slew of mergers and acquisitions (M&As) in the last couple of years. Last year, Kotak Mahindra Capital Management acquired the domestic schemes of PineBridge Mutual Fund and Dutch financial services group ING sold its stake in ING Investment Management to Birla SunLife Mutual Fund. In 2013, HDFC Mutual Fund bought the assets of Morgan Stanley Asset Management.

Among others, Goldman Sachs is also looking to sell their Indian asset management businesses. Mutual fund industry officials said many firms are looking to sell their mutual fund businesses as they are reeling under losses and they have been unable to scale-up the domestic business in the way they expected.