The bid has been won by the consortium led by Bandhan Financial Holdings Limited (BFHL) and includes GIC and ChrysCapital.
Key factual points on the acquisition –
- BFHL is the non-operative financial holding company of the Bandhan group. It is the promoter of Bandhan bank and currently owns ~40% stake in the Bank.
- IDFC mutual fund (IDFCMF) with total AUM of approx Rs 1.15 lakh crore is currently 9th largest in Indian mutual fund industry.
- The winning bid from Bandhan consortium is of Rs 4,500 crore implying a valuation of 3.9% of the AUM.
- In FY 21, IDFCMF business reported revenues of Rs 371 crore and net profit of Rs 143 crore.
- The acquisition agreement entails continuity of existing employees and investment process at the IDFC mutual fund.
Important points for consideration
- Dec 21 qtr press release – Rs 1.25 lakh crore as on December 31, 2022
- Acquisition press release – Rs 1.15 lakh crore as at March 31, 2022
That’s a decline of approx 8%.
Industry during this period is estimated to have a positive growth of about 1-2%. (As on Dec 31, 2021, industry AUM was Rs 37.72 lakh crore and during March average of Rs 38.37 lakh crore. Exact industry AUM is not available as on March 31, 2022. However, given the average AUM, I will be surprised if it’s so much of decline as IDFCMF).
I personally found 3.9% of AUM to be on the lower side – though L&T’s transaction with HSBC had also happened at 4%.
IDFCMF is comparatively a larger and more established franchise and given the expected continued strong growth of mutual funds in India, I would have expected it to be atleast north of 5%.
Maybe the muted performance of AUM growth is the reason.
View on the future from Bandhan’s perspective
The business will be housed in a non-operative “private” holding company i.e., BFHL.
There is no direct impact on Bandhan bank of the acquisition. Yes theoretically, it can get higher commissions by focusing more on distributing IDFCMF funds but that has it’s own associated pros and cons. Industry is much larger in size and comprises of many more mutual funds with significantly larger business to offer.