Muthoot Finance to buy IDBI MF for Rs 215 crore

Mumbai: The humble paper is adding to the glitter of gold at Muthoot Finance. The company has entered into an agreement to buy IDBI Bank’s mutual funds business, stepping into an asset class that is emerging as the favourite store of value for an increasing number of Indian savers.


The business will change hands for Rs 215 crore, with the buyer assigning the fund a value of 4 per cent of the total assets managed. Promoted by IDBI Bank in 2010, IDBI Mutual Fund is one of the profitmaking AMCs with assets of Rs 5,348 crore.

The transaction is expected to be completed by February 2020.

IDBI MF runs 22 schemes spread across both the equity and debt segments and has close to Rs 2,400 crore of assets in the more profitable equity segment. IDBI MF ranks 26 by assets in the 43-member local mutual fund industry, in which the top10 players have 82 per cent of assets.

“Asset management is a longterm business that needs a lot of patience. Muthoot Finance has been a single-product gold-loan company that has had a successful track record and scaled up its business fast,” said Dhirendra Kumar, founder, Value Research.

Analysts point out that the asset management business is tough, and that companies need to invest in building distribution and show robust scheme performance.

The Indian mutual fund industry has been one of the fastest growing businesses in the past five years. Assets under management have increased from Rs 10.96 lakh crore in October 2014 to Rs 26.33 lakh crore in October 2019, a 2.5x rise in a span of 5 years.

Earlier this year, Reliance Capital sold its asset management business to Nippon Life Asset Management, while Torontobased Manulife picked up a 49 per cent stake in Mahindra Asset Management. Bank of Baroda and BNP Paribas AMC have also decided to merge their asset management arms.