In the first such deal since regulations allowed fintech firms to own asset management companies, online investment platform Groww on Tuesday announced it will fully acquire Indiabulls Mutual Fund for Rs 175 crore.
Groww's co-founder and chief executive Lalit Keshre told PTI that it would have taken long time for the company to build a business from scratch, and the acquisition of Indiabulls Asset Management Company (IBAMC) and the trustee company also comes with the learnings which the operating team has gained in its journey.
Parent Indiabulls Housing Finance will continue to run the Alternate Investment Fund (AIF) and Portfolio Management Service (PMS) businesses, a statement said, adding the two businesses will be demerged from IBAMC.
The acquisition announcement comes months after capital markets regulator Sebi had allowed fintech firms to enter the mutual fund business and amid reports that other fintechs are also eyeing an entry into the space.
Indiabulls Mutual Fund has 13 funds with the Quarterly Average Assets Under Management at Rs 663.68 crore as of March 2021, down from the Rs 921.33 crore in December 2020.
Selling the MF will help the parent Indiabulls Housing Finance's capital position.
Groww has over 1.5 crore customers who use the platform to invest in mutual funds, stocks and exchange-traded funds (ETFs) and it wishes to increase the retail participation in equity.
"With the capability to create products, we plan to make mutual funds even more accessible -- by making them simpler, more transparent, and by lowering the cost further," Keshre said, adding that the entire team at the fund house will be absorbed.
Groww, which is backed by investors like Tiger Global and Sequoia, is financing the acquisition from its previously raised capital and will not be requiring any new capital raising rounds, Keshre said.
Indiabulls Housing Finance plans to grow its Real Estate Asset Management business through the AIF in line with its asset-light strategy.
While IBHFL will focus largely on retail disbursements, the AIF structure will be used for the wholesale opportunity of early-stage project finance, the statement said.
"We have made the decision to divest our interest in the retail mutual fund business to be able to consolidate capital and provide greater focus in building the company's real estate asset management business by way of Alternate Investment Fund, in line with the company's asset-light strategy," Gagan Banga, the vice chairman and managing director of Indiabulls Housing Finance, said.
However, investors did not seem to be enthused with the announcement, as the Indiabulls Housing Finance scrip closed 1.04 per cent down at Rs 184.90 a piece on the BSE on Tuesday as against a correction of 0.69 per cent on the benchmark.