HSBC, through its indirect fully-owned subsidiary HSBC Asset Management (India), has agreed to acquire L&T Investment Management (LTIM), the mutual fund business of L&T Finance, for $425m.
LTIM is the investment manager of the L&T Mutual Fund, an Indian mutual fund company. It provides a distribution platform, encompassing banks, regional distributors, over 50,000 independent financial advisers, and digital platforms.
The company has a presence across 65 locations across India.
HSBC said that the acquisition of the mutual fund management firm is part of its strategy to become a top wealth manager in Asia by 2025. The deal will bolster its asset management business in India and increase its ability to serve the wealth requirements of its customers in the country and non-resident Indian (NRI) customer base as well, said HSBC.
HSBC Asia Pacific co-chief executive Surendra Rosha said: “LTIM’s customer base and wide footprint in India will provide HSBC with much deeper access to a high-growth wealth management market. India’s rising income levels and higher life expectancy are driving an expanding and yet under-penetrated sector.”
As of September 2021, LTIM had INR803bn ($10.8bn) of assets under management (AUM) and more than 2.4 million active folios.
The mutual fund management company posted a pre-tax profit of INR1.85bn ($25m) and an income of INR3.48bn ($46.9m) for the financial year ended March 2021.
Upon closing of the deal, HSBC plans to merge the operations of LTIM with its existing asset management business in India.
As of September 2021, HSBC’s asset management business in India had AUM of INR117bn ($1.6bn).
For L&T Finance, the sale of its mutual fund business aligns with its strategic aim of unlocking value from its subsidiaries to make its balance sheet stronger.
L&T Finance managing director and CEO Dinanath Dubhashi said: “The transaction with HSBC is in line with our strategic objective of unlocking value from our subsidiaries which will help us to strengthen our balance sheet for our lending business.
“When seen alongside the recent capital raise it provides us with enough ammunition to increase the pace of retailisation in our lending portfolio, which is one of our long-term goals.”
The closing of the deal is subject to receipt of regulatory approvals.
