In a battle for acquisition of IDFC's mutual fund business, Bandhan Bank’s parent won against the consortium led by Hinduja-controlled IndusInd Bank.

The Bandhan Financial Holdings-led consortium will acquire IDFC AMC, the ninth-largest mutual fund in the country, for Rs 4,500 crore. This is the biggest buyout in the Rs 38-trillion Indian asset management space.

For the Bandhan Group which began as a microfinance company, this marks an entry into the fast-growing asset management business occupied by giants such as State Bank of India, HDFC and ICICI.

The other members in the consortium include private equity firm ChrysCapital and Singapore’s sovereign fund GIC. 

The transaction is part of IDFC’s plan to exit non-core businesses and reverse-merge with IDFC Bank Ltd. Said IDFC chairman Anil Singhvi, “This transaction is a significant milestone in our plan of unlocking value, and the consideration demonstrates the strong position of IDFC AMC in the Indian mutual fund space. We have achieved signing within six months of the board’s decision to divest, which further demonstrates IDFC board’s commitment to consummate the merger of IDFC Ltd and IDFC Financial Holding Co. with IDFC First Bank."

The acquisition, subject to regulatory approvals from Sebi and the Reserve Bank of India (RBI), will enable Bandhan Group to get a foothold in the mutual fund space. As of 31 March, IDFC AMC had assets under management (AUM) of Rs 1.15 trillion for over one million investor folios. Bandhan Bank currently sells products from 8-10 mutual funds.  

Bandhan Financial Holdings managing director  Karni S Arha said, “Bandhan has always focused on financial inclusion and making formal financial services available to the masses. We believe that the asset management industry will be one of the fastest growing segments in the Indian financial services industry and hence has been identified as a key vertical in our future growth plans. The acquisition of IDFC AMC provides us with a scaled‐up asset management platform, with a stellar management team and a pan India distribution network."

The deal envisages continuity of the current management team and investment processes at IDFC AMC. 

Infrastructure Development Finance Co. Ltd, the parent of IDFC AMC, said the selection was through a “highly competitive divestment process”. The sale will comprise the entire shareholding of IDFC AMC and IDFC AMC Trustee.

The others in the race to win IDFC AMC were private sector lender IndusInd Bank Ltd and another consortium led by American fund manager Invesco.

While Bandhan Financial Holding will bring in 60% of the investment to acquire IDFC AMC, ChrysCapital and GIC will invest 20% each.

ChrysCapital managing director Ashish Agarwal said, “ChrysCapital is very excited to partner with BFHL and GIC to buy out IDFC AMC, a quality platform with a seasoned management team. The company is well poised for the future with strong industry tailwinds including increasing financialisation of savings and a growing equity culture among the younger generation."

Citigroup Global Markets India acted as the exclusive financial advisor and Cyril Amarchand Mangaldas as the legal advisors to IDFC Ltd.

JM Financial acted as the exclusive financial advisor and Khaitan & Co and Trilegal as the legal advisors to the Bandhan consortium.