Standard Life grows and Zurich AM exits

Standard Life Investment has announced two deals in India.

Standard Life Investments has announced that it intends to increase its stake in India's HDFC Asset Management Company. This follows the announcement on March 16 that it had purchased Zurich Asset Management in India. The acquisition makes HDFC AMC the sub-continent's largest private sector mutual fund company. The terms and conditions of the two deals are confidential and have not been disclosed, although the Zurich acquisition is a straightforward purchase of shares. The deal's completion is dependent on the approval from regulators and Standard Life says it hopes to get this within six to eight weeks.

HDFC AMC is currently the 3rd largest private sector mutual fund company, while Zurich is the 6th largest. HDFC has $1.45 billion in assets under management and Zurich's Indian asset management business has approximately $680 million. Standard Life says there is some overlap of branches in key cities. Through the acquisition HDFC will more than double its number of retail accounts from 260,000 to approximately 695,000.

The sale is part of Zurich's aim to get back to its core insurance business and move away from what it perceives as non-core markets and businesses. Sandy Leitch, chief executive of Zurich Financial Services' UKISA (United Kingdom, Ireland, Southern Africa) and Asia Pacific business division says, "This decision has been taken in line with our recently announced strategy to allocate our capital to core markets in order to generate sustained profitable growth." Last year Zurich sold Zurich Scudder Investments to Deutsche Bank.

Standard Life Investments plan to purchase an additional 10% in HDFC AMC, a fund management joint venture set up in July 2000 between the Housing Development Finance Corporation of India and Standard Life Investments, taking their stake in the company up to 49.9%.

Commenting on the announcement Nathan Parnaby, managing director client funds, Standard Life Investments says, "We firmly believe that there is considerable potential in the Indian mutual fund market and that the acquisition of Zurich Asset Management in India will significantly enhance HDFC's penetration in both the retail and institutional sectors. It will also improve efficiency and profitability by spreading fixed costs over a larger asset base."

The joint venture has seen new business grow by $1.4 billion over the last two and half years. Parnaby estimates that the mutual fund market in India is worth $25 billion per year and will grow by 15% over the next ten years.

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