Nextbillion Technology Pvt. Ltd, which operates wealth management platform Groww, has entered into a definitive agreement with Indiabulls Housing Finance Ltd (IBHFL) to acquire the mutual fund business of its subsidiaries Indiabulls Asset Management Company Ltd (IAMCL) and Indiabulls Trustee Company Ltd, the trustee of IAMCL, for ₹175 crore, it said on Tuesday.
The deal includes a cash equivalent of ₹100 crore, to be invested by Groww, and is subject to regulatory approvals by the Securities and Exchange Board of India (Sebi). The transaction is expected to be concluded by 30 June 2022, IBHFL said in a filing on the BSE.
The sale of IAMCL will be limited only to the mutual fund part of the business, while the alternate investment fund (AIF) and portfolio management service (PMS) will be de-merged from the existing structure and remain under IBHFL, subject to regulatory approvals.
The acquisition will allow Groww to create newer investment products, as the operations team of IBHFL’s mutual funds business joins Groww. Barely a month ago, Groww raised $83 million in a funding round led by Tiger Global Management, fetching it a valuation of $1 billion.
Taking over IBHFL’s mutual fund business will also pave a strong revenue moat for the five-year-old startup, which is expected to gain from the expense ratio charged on the mutual fund products offered through the asset management company.
“Indiabulls’ mutual fund teams joining Groww, will set us up for a faster go-to-market strategy. Through leveraging our technology stack, we expect to offer newer investment products to first-time investors, at competitive market rates. Groww’s digital platform already has a large presence in tier two and three geographies, which helps us keep distribution cost in control, without the necessity to deploy physical feet-on-street,” Lalit Keshre, chief executive and co-founder of Groww, in interaction with Mint.
Keshre refused to share timelines on the launch of these new products.
As a part of the filings, Indiabulls said it will be narrowing its focus on its real estate asset management business through AIF structures, as it aims to have an asset-light strategy. “The real estate asset management business is complementary to the core business of the company and the sponsor IBHFL plans to grow this business in partnership with global player(s). Therefore, the mutual fund business does not remain a core focus area for the company,” Indiabulls said as a part of its filing.
IBHFL will focus on retail disbursements, while the AIF structure will be used for the wholesale opportunity of early-stage project finance, the company said.
