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Muthoot Finance buys IDBI’s MF business to enter AMC segment

The transaction is expected to be completed by end of February 2020, subject to receipt of necessary regulatory approvals.

Muthoot Finance Limited (MFIN), a leading gold loan finance company with headquarters in Kerala, has entered into a definitive agreement to acquire IDBI Asset Management Limited and IDBI MF Trustee Company Ltd for Rs 215 crore, paving the way for its entry into the asset management space.

The transaction is expected to be completed by end of February 2020, subject to receipt of necessary regulatory approvals. “Upon closing, both IDBI AMC and IDBI MF Trustee Company will become wholly owned subsidiary companies of MFIN,” it said.

Promoted by IDBI Bank in 2010, IDBI Mutual Fund (IDBI MF) is one of the profit making AMCs in the mutual fund space, with an AUM Rs 5,300 crore. “IDBI MF runs 22 schemes with robust AUM across products, geography and investors,” it said.

LIC acquired IDBI Bank last year. According to Securities and Exchange Board of India (Sebi) norms, an entity cannot hold more than 10 per cent in more than one mutual fund. As LIC already owns a mutual fund, the MFIN deal will help LIC avoid legal issues with Sebi.

“The transaction will be completed pursuant to the Share Purchase Agreement dated November 22, 2019 entered into by and between Muthoot Finance, sellers and the target companies. After completion of the transaction, Muthoot Finance will purchase 100 per cent equity shares of IDBI Asset Management Limited and IDBI MF Trustee Company Limited held by the sellers for a total consideration of Rs 215 crore,” it said.

“The transaction is subject to receipt of approval from the regulators including Securities and Exchange Board of India. The proposed transaction has been approved by the board of MFIN, sellers and the target companies and is expected to close by end of February 2020 subject to closing conditions and receipt of necessary approvals,” it said.

George Alexander Muthoot, Managing Director of Muthoot Finance, said, “IDBI Mutual Fund is a trusted player in the mutual fund space with a steady loyal customer base. At Muthoot we pride ourselves in venturing into mutual fund space through such an established player. We are excited to venture into this new path in the financial services space and we are equally excited to partner with the management team at IDBI Mutual Fund as we embark upon the next level of our journey.”