It has done this by acquiring 60% in the country’s 17th largest asset management company, Invesco Asset Management India Ltd, which was a 100% subsidiary of Invesco Ltd.
According to a statement by Invesco Mutual Fund, Invesco Ltd will retain 40% stake in the mutual fund JV, while the rest will be held by IIHL, which is a promoter of the country’s fifth largest private sector lender IndusInd Bank Ltd.
Globally, Invesco Mutual Fund has over $1.6 trillion in AUM.
On Tuesday, while signing the JV with Invesco Mutual Fund, Ashok Hinduja, chairman, IIHL, said, “It was our vision to transform IIHL into a BFSI powerhouse."
Invesco’s mutual fund business may benefit from IIHL’s distribution network of at least 11,000 pan-India touch points and the Hinduja-led group’s 45 million customer base.
MUMBAI : To capitalize on the country’s rising equity investment trend, especially through mutual funds, IndusInd International Holdings Ltd. (IIHL), a Mauritius-based investment firm led by the Hinduja brothers, said on Tuesday it has entered into an asset management joint venture with Atlanta-based fund management group Invesco Ltd.
It has done this by acquiring 60% in the country’s 17th largest asset management company, Invesco Asset Management India Ltd, which was a 100% subsidiary of Invesco Ltd.
According to a statement by Invesco Mutual Fund, Invesco Ltd will retain 40% stake in the mutual fund JV, while the rest will be held by IIHL, which is a promoter of the country’s fifth largest private sector lender IndusInd Bank Ltd.
The deal is subject to regulatory approval from Sebi.
In a statement, Invesco MF said that it owns at least ₹85,393 crore in assets under management in India. Globally, Invesco Mutual Fund has over $1.6 trillion in AUM.
IIHL’s investment portfolio currently includes IndusInd Bank, Sterling Bank & Trust Ltd.- Bahamas, capital market assets (Afrinex Exchange Ltd-Mauritius with a cumulative listing of $13.5 billion of underlying securities) and wealth management services (Beryllus Capital-UK, Switzerland & Singapore).
IIHL and Invesco have not disclosed the valuation of Invesco MF at which the latest JV deal has been signed up, but typically, AMCs are valued on their asset mix, with equity-heavy ones getting higher valuation due to their ability to earn more commissions from selling equity-linked MF schemes than from selling fixed-income schemes.
The valuation of an AMC also depends on its profitability, distribution strength, brand equity of the sponsors, and the performance and popularity of some of their schemes.
Earlier, in February 2024, IIHL concluded a deal to acquire Reliance Capital Ltd. and its subsidiaries via a resolution plan approved by the National Company Law Tribunal (NCLT).
On Tuesday, while signing the JV with Invesco Mutual Fund, Ashok Hinduja, chairman, IIHL, said, “It was our vision to transform IIHL into a BFSI powerhouse."
“A strong domestic partner will significantly increase the JV’s ability to expand into more Indian cities and towns, which are driving industry growth," said Saurabh Nanavati, CEO of Invesco Asset Management India Limited, who will continue to lead the new JV along with the existing management team. “The Indian mutual fund industry is at an inflexion point with favourable demographics and a rising middle class, which will prefer transparent investment products like mutual funds and ETFs."
Invesco’s mutual fund business may benefit from IIHL’s distribution network of at least 11,000 pan-India touch points and the Hinduja-led group’s 45 million customer base.
Invesco Mutual Fund started operations in India in late 2008 with the acquisition of MF assets from Lotus India Asset Management Co.
Invesco operates an enterprise centre in Hyderabad employing more than 1,700 staff across a range of global support functions, including information technology, investment operations, finance, compliance, and human resources.
While announcing the deal, Andrew Lo, senior managing director and CEO, Invesco Asia Pacific, said, “We are committed to serving our clients’ needs across India and maintaining our significant presence in Hyderabad as well."
The rising trend among domestic investors to put money into MFs to earn from the ongoing equity market bull run has begun encouraging businesses houses in India to venture into the asset management business.
Domestic MFs injected a record ₹45,120 crore into domestic shares in March, marking their highest buying in any month, according to data from MF industry Amfi. This inflow is expected to remain high in the coming months.
Axis Capital, in a 23 February report, said the Indian MF industry’s assets are expected to double to ₹100 trillion by 2030, implying a compound annual growth rate of 14% over this period.
With 42 million investors, MF penetration in India is less than 5% of the working-age population. Plus, the fact that the average value of monthly systematic investment plans (SIPs) is just ₹2,300 indicates there is ample room for growth, according to the report.
Fund managers are upbeat about the prospects of India’s MF industry, given the increasing appetite for MF investments among retail investors, a large part of Indian market still being underpenetrated.
The ratio of mutual fund assets (AUM)-to-GDP still low at around 15%, countries, according to Securities and Exchange Board of India's (SEBI's) whole-time member Amarjeet Singh, who spoke at the Global Fintech Fest 2023 in September.
With hopes of unprecedented growth, even foreign fund managers, who had once exited India, have started contemplating a re-entry.
Recently, Mukesh Ambani-led RIL’s financial services arm Jio Financial Services Ltd and American investment giant BlackRock announced an agreement to form a 50:50 JV with a $150-million investment each to enter the asset management business in India. BlackRock was earlier present in India in a JV with DSP Mutual Fund.
While Jio-BlackRock is still awaiting Sebi’s MF licence, the Ambani-led JV has promised to deliver affordable, innovative investment solutions to millions of investors in India in a statement in July 2023.
Most fund managers see an emerging trend in which conservative, risk-averse investors, especially in the non-metro locations, who have traditionally relied on fixed return investment schemes, have now started slowly shelling out money for equity-oriented MF schemes.
This, according to market experts, may not only encourage Indian business houses to venture into asset management business but also compel foreign fund managers to enter India again.
“The MF industry is ramping up well and the participation is widening and deepening across the country. This is great news for those who are looking at attractive opportunities in high growth markets and may prompt Indian and foreign businesses to enter this promising area," said Suresh Sadagopan, founder, Ladder 7 Financial Advisories, a registered investment advisor.
Kaustubh Belapurkar, Head of Research Morningstar, said, “Mutual funds are still under-penetrated in investor portfolios. While the industry assets have seen good growth, it’s still early days, as penetration beyond metro cities is still limited. The advent of increasing investor awareness and technology-enabled reach will result in multi decade runway for growth for the industry."
Some of the world’s largest AMCs have tried earlier to gain a grip in India’s MF space but finally exited. These include marquee names such as Fidelity (exited in 2012), Morgan Stanley (2013), Blackrock (2018), Goldman Sachs (2015), JP Morgan (2018), and Deutsche (2015), among others.
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