Edelweiss Financial Services is looking to sell a minority stake in its mutual fund (MF) arm. The company has initiated the process by hiring an investment banker.
“To further strengthen our international business, we are open to exploring opportunities with minority strategic partners, ensuring there is a strong alignment in values and vision,” said Radhika Gupta, managing director and chief executive officer of Edelweiss MF.
The company also has plans to list Edelweiss MF and other businesses on exchanges in the coming years.
Edelweiss Financial is a diversified financial services company with subsidiaries across credit, asset management, asset reconstruction, and insurance.
Edelweiss MF is the 13th-largest fund house in India, with around Rs 1.5 trillion in assets under management (AUM).
Edelweiss Financial is likely to value the MF business at $700-$800 million, according to a Bloomberg report.
Edelweiss MF reported a profit after tax of Rs 38 crore in 2023-24, up 2.1 times from Rs 18 crore in 2022-23 (FY23). Revenue increased by 32 per cent, from Rs 119 crore to Rs 157 crore, in the same period.
Most of the fund house’s AUM is in debt, with Bharat Bond exchange-traded funds accounting for a large portion of it. However, following the change in debt fund taxation in 2023, the fund house has been expanding its share of equity and hybrid schemes in AUM. The share of debt funds, which stood at 74 per cent at the end of FY23, declined to 65 per cent by March 2024.
The focus on equity and hybrid spaces has also helped the fund house increase its systematic investment plan (SIP) book size by 35 per cent to Rs 234 crore during the one-year period. The number of SIP accounts grew by 51 per cent to over 600,000.
The MF space has seen many new entrants and mergers and acquisitions in recent years, amid strong growth tailwinds. However, these deals have mostly been complete acquisitions or majority stake sales, with IndusInd Holdings’ acquisition of a 60 per cent stake in Invesco Asset Management Company (AMC) being the latest deal in the MF space.
The industry has also stayed away from the primary market. Only four of the 45 AMCs in the MF business are listed on the exchanges. The last initial public offering was that of Aditya Birla Sun Life AMC in 2021.
