In 2018, IDFC was in advanced talks with Avendus to sell the business, but negotiations ultimately fell through due to reports that the IDFC board was seeking high valuations. After that, there was talk that the IDFC board would hold an initial public offering for the mutual fund business, but that didn’t see the light of day either.
Existing shareholders have questioned the IDFC board about the slow progress of unlocking value, and veteran investor Madhusudan Kela has said it is frustrating to be a shareholder in the company and has asked management to provide a timeline to shareholders for the sale of the asset management business. Industry sources say this has accelerated the sale of the mutual fund business now.
IDFC MF is ranked No. 11 in terms of total assets – at ₹ 1.28 lakh crore. This, equity assets represent ₹ 27,000 crore with the balance in hybrid and debt schemes. He has a strong equity and debt fund management team, led by Anoop Bhaskar and Suyash Choudhury.
According to industry sources, the fund house is seeking a valuation of ₹ 6,000-7,000 crore for its mutual fund business. IDFC AMC is a profitable company and posted an after-tax profit of Rs 144 million for the year ending March 2021, an increase of 81% from the previous year and the best profit ever.
recorded a PAT of ₹ 1,376 crore in the same period.
Given the expected growth in the Indian MF industry, several new
Players seek to enter space, while foreign players seek to expand their reach.
“The business is strong and the team is good and it will interest both foreign players and new-age fintech players. It doesn’t make much sense for an existing industry player to take over the AMC as there will be an overlap of schemes and under SEBI regulations it could only have one scheme in each category, ”said the CEO of a house of national funds.
Competition in the industry is increasing and margins are declining even for established players due to flows to passive funds where margins are low.
The mutual fund industry AUM has grown from Rs 15.18 lakh crore on July 31, 2016 to Rs 36.09 lakh crore on August 31, 2021. Analysts at ICICI Securities estimate that the Indian MF AUM will grow to 15% CAGR between 2021 and 2030 at ₹ 100 lakh crore. Competition in the mutual fund business is intensifying with several new and fintech players like Zerodha, Samco, Navi and NJ coming into the fray with their schemes soon.