InvestorQ : What was the reason for Sundaram Mutual Fund acquiring Principal AMC?
Deepa Salunkhe made post

What was the reason for Sundaram Mutual Fund acquiring Principal AMC?

Arya Nanda answered.
1 year ago

The asset management space has been seeing a string of acquisitions with a large number of foreign AMCs selling out. In the latest major move, Principal has also opted out of the fund management business in India. Here are a few highlights of the deal.

· The latest boost to mutual fund sector consolidation comes from Sundaram AMC announcing the buying out of the AMC business of Principal Group.

· Sundaram AMC will not only acquire all the fund schemes managed by Principal Group but also buy out the 100% share capital of the AMC and take full control.

· The deal has to be approved by SEBI but there appears to be distinct advantages for both the parties to the deal.

· Currently, Sundaram AMC manages Rs.40,000 crores in AUM while Principal handles a much smaller sum of Rs.7,447 crore in AUM.

· For Sundaram, this deal is about expanding its equity funds reach while for IDBI, the AUM is too small to be sustainable when competing with bancassurance model.

· Both, Sundaram MF and Principal MF are equity oriented fund houses and hence Sundaram expands laterally and Principal could get a good price.

· Principal funds have focused track record in large and mid-cap segments while Sundaram AMC is predominantly focused on small caps and mid caps.

· Principal Global Services will continue operating out of Pune and Hyderabad to provide critical technical support to its vast global operations.

Overall, it is likely to be a win-win deal for both the parties.