Who will buy Goldman’s MF business in India? Reliance Mutual Fund or HDFC

In the race to acquire the fund management business of Goldman Sachs Group Inc in India, Reliance Mutual Fund and HDFC Mutual Fund are trying hard.

According to a person familiar with the development, both the suitors are in the final round of negotiations and hope to clinch the deal. “However, it depends on who is more aggressive," said one of them. The deal is likely to be announced shortly,” he said.

The Goldman’s MF business has assets of about Rs 7,132 crore.

Let’s take a look at the profile of both the suitors!

Reliance Mutual Fund, which had assets under management of Rs 1.53 lakh crore on September 30, is likely to bid aggressively as it looks to bridge the gap with number two ICICI Mutual Fund that manages about Rs 1.65 lakh crore.

On the other hand, HDFC Mutual Fund is looking at consolidating its number one position with assets of Rs 1.71 lakh crore.

"The deal is expected to be valued at about 3-4% of AUM (assets under management). With an AUM of Rs 7,132 crore, the transaction value should be around Rs 250 crore," said another person who is aware about the development.

Besides adding Rs 7,132 crore of AUM, a deal would also help the acquirer gain a foothold in the exchange-traded fund (ETF) business that is growing in popularity with local investors, mirroring global trends.

ETFs have been witnessing sustained growth in markets such as the US in the past decade.

But for India, the ETF market is relatively new. Goldman Sachs Mutual Fund, which has 13 schemes, is primarily focused on the ETF segment. It has seven equity-oriented ETFs, one liquid ETF, one gold ETF, one international ETF, two equity schemes and an open-ended debt scheme. About 95% of its assets are in ETFs.

Goldman Sachs Mutual Fund was awarded a central government mandate last year to sell the Central Public Sector Enterprise ETF. The government sold a part of its stake in state-run companies through an ETF for the first time, raising Rs 4,000 crore by disposing of shares in 10 state-controlled companies.

Goldman Sachs entered the Indian mutual fund industry in 2011 by acquiring Benchmark Mutual Fund for Rs 120 crore.

"The (likely) exit of Goldman Sachs from the asset management business conclusively proves that the foreign fund managers are finding it difficult to make inroads into the Indian investors' mind space," said a fund manager with a leading foreign fund.

He said: "In the last few years, we have witnessed the exit of Fidelity, PineBridge, Morgan Stanley, ING among others."

Foreign firms are finding it difficult to compete against local companies such as HDFC, ICICI, Reliance, Birla and UTI, except for outfits such as Blackrock and Franklin Templeton.

Dhirendra Kumar, founder and CEO of Value Research, is of the view that foreign fund managers find it difficult to navigate India's investment landscape. Value Research is an independent mutual fund research house.

In 2014, PineBridge Mutual Fund sold its domestic mutual fund schemes to Kotak Mahindra AMC, Morgan Stanley sold its domestic MF business to HDFC AMC and ING MF was acquired by Birla Sun Life AMC. In 2012, L&T Finance acquired Fidelity's mutual fund business in India.

(Image: Indiatimes)