L&T MF plans to sell stake; what should investors do?
Various asset management companies (AMCs) announced stake sales in the past one year. DHFL AMC sold the stake to its joint venture partner Pramerica Global Investment Managers (PGIM). Even Reliance AMC sold assets to its joint venture partner Nippon Life Insurance, which is now Nippon India Mutual Fund.
Currently, Essel AMC is said to be in the process to finalise a suitable partner, who will take over its business. Also, Mahindra AMC sold 49 per cent stake to Manulife Investment Managers.
Now, L&T Finance is planning to sell the stake of its mutual fund business. It is said that this move is part of L&T's drive to monetise its non-core businesses and become a leaner conglomerate. With this deal, L&T Finance expects to get around Rs 4,500 crore.
L&T Finance acquired its MF business in two phases, firstly, by acquiring DBS Cholamandalam AMC in 2009 and secondly, by taking over Indian operations of Fidelity Investments in 2012. In May 2020, L&T Mutual Fund’s total assets under management (AUM) were Rs 59,136 crore. The AMC has 29 open-ended funds, of which, 12 are equity schemes, contributing 41 per cent of its total AUM.
Avendus Capital, Blackstone Group and ChrysCapital are in discussions to buy around 10 per cent to 15 per cent stake in L&T Mutual Fund. Further, its peers, Axis AMC, IIFL AMC, and ICICI Prudential AMC have appeared to be the top three candidates. Meanwhile, any final decision with respect to the deal will be subject to the approval from Securities and Exchange Board of India (SEBI).
What should investors do?
A change in management is always considered to be a sign of caution. However, in any way, it does not mean that you should straight away exit from your investments. Let things settle down first and think as to who will manage your investments now. It will help you in making the right decision. Further, even after the new asset manager takes over, it is prudent to take a wait and watch stance for at least a year. This will help you understand how the new management performs. Lately, we have an example of PGIM. After acquiring DHFL, the funds are slowly getting on track and some of them have started doing well. Therefore, as of now, it is suggested that you must hold on to your investments.