Bandhan-led consortium acquires IDFC MF; what it means for investors
On Wednesday, 6th April 2020, Bandhan Financial Holdings Limited, ChrysCapital and Government of Singapore Investment Corporation, collectively as a Bandhan-led consortium, have agreed to buy IDFC Mutual Fund for Rs 4,500 crore.
In this consortium, Bandhan Financial Holding, ChrysCapital and GIC will hold equity in the ratio of 3:1:1, respectively.
ChrysCapital, with around $4 billion of AUM across eight funds, is India’s leading private equity investment firm. While GIC, with about $360 billion in AUM, is the leading global reinsurance company. GIC has investments in around 40 countries worldwide.
The parent of IDFC MF, Infrastructure Development Finance Company Limited, aka IDFC, stands as India’s one of the most successful Asset Management Companies. As of December 2020, IDFC AMC has crossed a milestone of Rs 1,20,000 crore with more than 60 mutual fund schemes making it a strong game player as an MF company.Â
During the previous financial year, the IDFC fund house registered more than Rs 140 crore as profits after tax, which was a little less than twice the profits in 2020.
How will this impact mutual fund investors
While the merger is under way, the MF investors, especially IDFC MF investors, are eager to know the effects of the takeover on their investments.
As an investor, this takeover might have infused a few questions in your mind. Let’s see how this will impact investors’ investment goals.
Will the fund management change?
No, there will be no changes in fund management. Bandhan just wanted to step into the mutual fund industry, and this would not have any direct impact on the fund’s management.
Is there any merger of schemes happening?
Since the Bandhan-led consortium has no AMC (Asset Management Company) and no schemes to be merged, the merger of any schemes will not take place.
Will this takeover cause any interruption in business plans, scheme management or team?
No. Vishal Kapoor, the CEO of IDFC AMC, wrote in an email to investors, “The Bandhan consortium has expressed its appreciation of our high-quality platform and processes, and is keen to have our business plans continue uninterrupted. Therefore, we do not envisage any change in the management of our schemes or the team at IDFC AMC.”
Should investors stop SIPs or sell mutual fund units?
As of now, the investors need not stress about selling fund units due to any assumptions about the performance of funds in future.
Can investors trust the consortium?
BFHL, holding a 40% stake in the bank, is an associate of Bandhan bank. GIC, with investments of more than 100 billion dollars in 40 economies, is one of the world’s leading sovereign wealth funds. ChrysCapital has extensive experience in the investing industry. It seems like a fair deal, but you should consult your financial advisor regarding the same.
Our view
The Bandhan-led consortium is a way for Bandhan Bank to enter the mutual fund business, having no direct impact on fund management or strategy. Hence, there is no need to withdraw money or sell fund units right now. However, it is always good to keep an eye out for any email communication from the fund house on any major changes to the scheme information or strategy. You can also track the performance of the funds. If in doubt, you can talk to your financial advisor for further clarity.
