Mumbai: US asset manager Invesco, which oversees investments of about Rs 86,000 crore in India, has signed an option deal to sell its remaining 40% stake in the local mutual fund business to Hinduja Group-owned IndusInd International Holdings (IIHL) as part of a broader plan to exit an increasingly competitive geography for foreign players, two people familiar with the deal said.
On Tuesday, it announced the sale of a 60% stake in Invesco Asset Management India to IIHL.
Invesco AMC Valuation at Rs 2,500 cr
IIHL – the Mauritius-based investment company of the mobility-to-chemicals conglomerate that owns IndusInd Bank and Anil Ambani-promoted Reliance Capital, which it bought recently in a bankruptcy resolution – has valued Invesco Asset Management India at Rs 2,100-2,500 crore.
Invesco can exercise the put option to sell all of its 40% in the India mutual fund unit over the next three years, the people said. However, the sale cannot be made in the next 18 months due to a lock-in clause.
As and when Invesco exercises the sale option, the US major, which manages assets worth $1.6 trillion worldwide, will join its Wall Street peers, such as Goldman Sachs, Morgan Stanley and Fidelity, in exiting the mutual fund business in Asia’s third-biggest economy. Japan’s Nippon is at present the biggest foreign mutual fund manager in India, where asset management is dominated by fund houses of the State Bank of India and HDFC Bank.
After the exit, Invesco will not be able to enter this business in India for two years, the people quoted above said. This is because Invesco has signed a non-compete clause with IIHL that restricts the American asset manager from starting a mutual fund business in the country for two years.
In 2023, its rival BlackRock announced a re-entry into the Indian mutual fund business via an equity tie-up with Jio Financial Services after it had sold its interests in DSP BlackRock Investment Managers to its then Indian partner DSP Group, headed by Hemendra Kothari, in 2018.
The people cited above further said that Invesco’s pact with IIHL also requires the US firm to settle a securities law violation case with market regulator, the Securities and Exchange Board of India (Sebi). The local unit has already filed a settlement application with Sebi in this regard.
Invesco and IIHL declined to comment.
Sebi Lens
Last year, Sebi had issued a show-cause notice to Invesco Asset Management India after it received complaints from one of the fund’s former employees about mismanagement of schemes. The regulator’s notice alleged lack of segregation between mutual fund and portfolio management service activities, questionable inter-scheme transfer of securities compromising investor interests, and the transfer of certain securities to offshore funds ahead of potential downgrades.
Resolving the case with Sebi is crucial for securing the market regulator’s approval for the deal, said the people. The deal also requires the nod of the competition regulator.
The 18-month lock-in period ensures none of the parties (Invesco and IIHL) would exit the mutual fund unit and resolve all issues. This will also bring stability to the business, industry officials said. Further, IIHL has promised to give Esops (5-7% of the mutual fund unit’s total share capital) to the existing leadership of Invesco Asset Management India, including its CEO.
For IIHL, a majority stake in Invesco’s India unit gives it a ready platform to boost its financial services play. People cited above said the mutual fund house will be renamed as IndusInd Invesco to reflect the new ownership structure.
Invesco entered India’s mutual fund industry in 2012 by buying a 49% stake in Religare Asset Management for Rs 460 crore. Four years later, in 2016, it purchased the balance 51% stake in the fund house. At present, it is the fifth largest foreign player in India. In FY23, Invesco Asset Management India made a profit of Rs 45 crore on a total income of Rs 200 crore.
