HSBC to acquire L&T Investment Management for $425 mn

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HSBC Asset Management India has entered into an agreement with L&T Finance Holdings (LTFH) to fully acquire L&T Investment Management (LTIM) for $425 million.

The proposed acquisition is subject to regulatory approval.

“Strengthening HSBC’s asset management business in India will add to its ability to serve the wealth needs of its customers in India as well as those of its growing non-resident Indian customer base across the world,” it said.

At present, LTIM is ranked as the 12th largest mutual fund management company in India.

It had assets under management (AUM) of Rs 803 billion ($10.8 bn) and over 2.4 million active folios as of September 2021.

LTIM reported a pre-tax profit of Rs 1.85 billion ($25 million), income of Rs 3.48 billion ($46.9m) and costs of Rs 1.63billion ($21.9m) for the financial year ended March 2021.

It offers a distribution platform, encompassing leading banks, regional distributors, over 50,000 independent financial advisers, established digital platforms and a footprint across 65 locations throughout India.

Following the completion of the acquisition, and subject to regulatory approvals, HSBC intends to merge the operations of LTIM with that of its existing asset management business in India, which had AUM of Rs 117 billion ($1.6 bn) as of September 2021.

“This transaction enhances the strength of our business in India and reinforces our status as one of Asia’s leading wealth managers. Combining LTIM with our existing Indian asset management business gives us the scale, reach and capabilities to capture some of the 15-20 per cent annual asset management market growth expected in India over the next five years,” HSBC’s Group CEO Noel Quinn was quoted as saying in a statement.

“It also boosts our ability to serve India’s growing wealth needs, along with those of the 18 million non-resident Indians around the world. Together with our recent announcement to acquire AXA Singapore, this demonstrates our commitment to capturing the Asia wealth opportunity. We will continue to invest significantly to achieve that goal.”

HSBC’s Co-Chief Executive Asia Pacific Surendra Rosha said: “LTIM’s customer base and wide footprint in India will provide HSBC with much deeper access to a high-growth wealth management market.”

“India’s rising income levels and higher life expectancy are driving an expanding and yet under-penetrated sector.”

Besides, the proposed acquisition will be funded from existing resources and will have a minimal impact on HSBC’s Common Equity Tier 1 ratio.

“HSBC expects the acquisition to be immediately accretive to the earnings of the Group upon completion and to achieve a return on investment of greater than 10 per cent in the medium term,” the statement said.

In February 2020, HSBC combined its retail banking and wealth management, asset management, insurance and private banking businesses to create Wealth and Personal Banking which serves over 39 million customers globally.

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