L&T Finance sells its Mutual Fund business to HSBC AMC for $425 million

L&T Finance Holdings Limited (LTFH) on Thursday announced that it has entered into a definitive agreement with HSBC Asset Management (India) Private Limited (HSBC AMC) whereby HSBC AMC shall acquire 100 per cent equity shares of L&T Investment Management Limited ("LTIM"), a wholly-owned subsidiary of LTFH. LTIM is the investment manager of the Mutual Fund business of L&T.

HSBC AMC will acquire the stakes for an aggregate purchase consideration of USD 425 million (subject to adjustments as set out in the definitive agreements).

The divestment of Mutual Fund business is in line with the strategic objective of L&T Finance Holdings of unlocking value from its subsidiaries to strengthen its balance sheet. Further, the acquisition of LTIM is in line with the strategic growth plans of HSBC in India. HSBC stands to gain from an experienced team, diversified assets, a strong retail customer base and the vast geographical reach that L&T Mutual Fund has built over the years.

In addition, LTFH will also be entitled to excess cash in LTIM until the completion of the acquisition. The transaction is subject to the requisite regulatory approvals. Both LTIM and HSBC AMC will work to ensure that there will be continuity of services to their investors and counterparties in the interim.

Mr. Dinanath Dubhashi, Managing Director & CEO, L&T Finance Holdings Ltd. commented: "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."

He further added "Over the past 10 years, L&T Mutual Fund has garnered the trust of stakeholders across the spectrum, backed by steady and stable performance. The journey from an AUM of a few thousand crores to over Rs 80,000 crore this year speaks of the strength of the L&T Brand."

LTIM, at present, is the 12th largest Asset Management Company (AMC) in India and offers a basket of equity, fixed income and hybrid schemes to both retail and institutional investors. With a technologically advanced and robust risk monitoring and management framework, together with an experienced investment team, the company has built a long-term, stable and strong retail investor base that comprises 64 per cent of its overall AUM. L&T MF has an established and well-diversified distribution channel mix of Banks, Private Wealth Firms, National Distributors and Mutual Fund Distributors (MFDs) across India.

HSBC intends to merge the operations of LTIM with that of its existing asset management business in India, which had assets under management (AUM) of Rs 117 billion (US$1.6 billion) as of September 2021.

J.P. Morgan and Citi were the financial advisors to LTFH. Cyril Amarchand Mangaldas acted as the legal advisors and PwC acted as due diligence and tax advisors to LTFH.