08/05/2018

DSP to buyout BlackRock's 40% stake in mutual fund venture

Money Control

The DSP Group Monday announced that they will buy out BlackRock’s 40 percent stake in DSP BlackRock Investment Managers. The firm will be called DSP Investment Managers and DSP Mutual Fund, subject to regulatory approvals.

Moneycontrol had exclusively reported ahead of the formal announcement that BlackRock, the US-based investment management firm is in the final stage of talks with DSP to exit the mutual fund joint venture--DSP BlackRock Investment Managers--and the announcement is likely to be made shortly.

"As of today, the DSP Group holds a controlling stake in DSP BlackRock Investment Managers and owns 60%. I am very proud to announce that after all necessary regulatory approvals, DSP group will increase its stake to 100%. Thereafter, we will be renamed as "DSP Investment Managers," said Hemendra Kothari, Chairman, DSP BlackRock Investment Managers in a note sent to investors.

 DSP BlackRock Investment Managers is a 40:60 joint venture between BlackRock and DSP Group. As of March 31, 2018, DSP BlackRock Investment Managers managed assets worth Rs 86,325 crore, with a 50:50 mix of equity and debt.

The fund house did not disclose any valuations but generally, most acquisitions in the mutual fund industry happen at 5-7 percent of equity assets under management of the asset management company being taken over.
 

The DSP Group is headed by veteran investment banker Hemendra Kothari who started his career with family firm D.S. Purbhoodas & Co before founding financial services firm DSP Financial Consultants in 1975.

DSP partnered with Merrill Lynch in 1995, and subsequently sold his entire 57 percent stake in tranches between 2005 and 2009. After parting ways with Merrill Lynch, he partnered with BlackRock US for a mutual fund venture.

In the last 10 years, several foreign players have exited the Indian mutual fund industry. In the last few years, Daiwa, Deutsche, Morgan Stanley, ING, PineBridge, Nomura, Fidelity, AIG, Zurich, Morgan Stanley, JP Morgan, Goldman Sachs, and KBC have exit Indian asset management industry.

There are 43 mutual fund houses in India, which manage AUM of Rs 22 lakh crore, but the top ten control more than 80 percent of the assets. The smaller players, including global majors, have been sustaining losses in recent years, forcing many of them to exit the industry.

According to industry experts, stringent guidelines by Indian regulator, the Securities and Exchange Board of India is also making it tougher for asset managers to charge high fees. A few years ago it banned entry loads, preventing funds from charging a fee to investors buying into schemes.