HSBC Asset Management (India) inked an agreement with
L&T Finance Holdings where the HSBC Holdings plc (HSBC) subsidiary will acquire the latter's L&T Investment Management Limited (LTIM) for $425 million.
L&T Investment is a wholly-owned subsidiary of LTFH and the investment manager of the L&T Mutual Fund.
HSBC highlighted that the proposed acquisition, subject to regulatory approval, will be another milestone as HSBC delivers on its strategy of becoming a leading wealth manager in Asia. Strengthening HSBC’s asset management business in India will add to its ability to serve the wealth needs of its customers in India as well as those of its growing non-resident Indian customer base across the world.
As part of the acquisition, following the completion and subject to regulatory approvals, HSBC intends to merge the operations of LTIM with that of its existing asset management business in India, which had an AUM of Rs117bn (US$1.6bn) as of September 2021.
Noel Quinn, HSBC’s Group CEO, commented, “This transaction enhances the strength of our business in India and reinforces our status as one of Asia’s leading wealth managers. Combining LTIM with our existing Indian asset management business gives us the scale, reach and capabilities to capture some of the 15-20% annual asset management market growth expected in India over the next five years3. It also boosts our ability to serve India’s growing wealth needs, along with those of the 18 million non-resident Indians around the world. Together with our recent announcement to acquire AXA Singapore, this demonstrates our commitment to capturing the Asia wealth opportunity. We will continue to invest significantly to achieve that goal.”
Surendra Rosha, HSBC’s Co-Chief Executive Asia Pacific, added: “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.”
The proposed acquisition will be funded from existing resources and will have a minimal (c.5bps) impact on HSBC’s Common Equity Tier 1 ratio. HSBC expects the acquisition to be immediately accretive to the earnings of the Group upon completion and to achieve a return on investment of greater than 10% in the medium term.
With assets under management (AUM) of Rs803bn1 (US$10.8bn) and over 2.4m active folios as of September 2021, LTIM is currently ranked as the 12th largest mutual fund management company in India. LTIM reported a pre-tax profit of Rs1.85bn (US$25.0m), the income of Rs3.48bn (US$46.9m) and costs of Rs1.63bn (US$21.9m) for the financial year ended March 2021. LTIM offers a distribution platform, encompassing leading banks, regional distributors, 50,000+ independent financial advisers, established digital platforms and a footprint across 65 locations throughout India.
On Sensex, L&T Finance was trading at Rs77.15 per piece down by 6.60%.
