DBS Chola eyes suitors for loss-making AMC

MUMBAI: Non-banking finance company DBS Cholamandalam Finance is learnt to be scouting for a buyer for its loss-making mutual fund arm, DBS Cholamandalam Asset Management. Feelers have been sent to select mutual funds and private equity funds, three people familiar with the matter told ET.

Religare Enterprises, promoted by the Singh brothers who formerly owned Ranbaxy, and South Korean fund house Mirae Asset are among the players who have been sounded out.

A top executive of a mutual fund house confirmed that his firm had been approached informally. People familiar with the development said the promoters of DBS Chola Finance���Chennai-based Murugappa group and Singapore���s DBS Bank���are weighing various options, including an outright sale of the mutual fund business or induction of a strategic or financial partner. DBS Cholamandalam Asset Management made a loss of Rs 38 crore for the year ended March��� 09.

The fund���s assets under management have shrunk in the last couple of years from over Rs 3,800 crore in September 2007, when it first initiated the stake sale process, to around Rs 2,700 crore as in July ���09.

At that time, the parent Cholamandalam DBS Finance (the mutual business is housed in this company) had raised around Rs 200 crore through a rights issue in late 2007, and so decided against the sale of the mutual fund business.

Outside of its core lending business, the NBFC distributes financial products and provides investment advisory and brokerage services.

When contacted by ET, a Cholamandalam DBS Finance spokesperson said, it doesn���t comment on market rumours that arise from time to time. Religare Enterprises and Mirae Asset officials also declined to comment.

This time around, sources said the promoters changed mindset is because it wants to focus on other businesses considering that the mutual fund business has not met their expectations.

The Murugappa Group, one of the Chennai���s best-known business houses with diverse interests from engineering to fertilisers and sugar, has been into the mutual fund business for over a decade. Founded in 1978 as an equipment financing company, both the Murugappa Group and DBS hold 37.5% each in the non-banking finance company.



In 2005, post the joint venture partnership between the Murugappa Group and DBS Bank, Singapore, the company was renamed as Cholamandalam DBS Finance Limited (CDFL).

The Murugappas earlier had an association with Cazenove Capital Management of the UK. Later, they bought out their partner���s stake in the joint venture.

DBS Cholamandalam���s portfolio is heavily skewed towards debt, with the equity component being barely Rs 200 crore. Since mid-2007, the company has seen an exodus of its senior management team.