Bank of India buys 51% in Bharti-AXA joint venture, returns to mutual fund business

India's fifth largest state-owned bank, Bank of India (BoI), will buy 51% stake in the mutual fund joint venture between telecom major Bharti Enterprises and AXA Investment Managers, a statement from the bank said.
This paves the way for Bank of India's re-entry into the 41-member-strong local mutual fund (MF) industry. BoI had shut its MF business in 2004.

BoI will buy Bharti's 25% stake and AXA's 26% stake in the in the asset management company. The deal brings down the Paris-headquartered AXA's stake in Bharti AXA Investment Managers to 49%.

Financial details of transaction wasn't disclosed, but an official familiar with the deal said BoI could have paid about 3% of Bharti AXA Investment's total assets under management of Rs 176 crore as on September 30. Total AUMs of the mutual fund industry was Rs 7.12 lakh crore as on September 30.

This values the deal at about Rs 5.3 crore. BoI will exclusively sell Bharti AXA Investment's products through its branch network, the person said, asking not to be named.

Bharti has been scouting for a buyer for its stake in the mutual fund venture for the past two years. The hunt for a prospective partner has largely been confined to banks, mainly state-owned, because their reach across the country would help the fund sell its schemes better.

Since the ban on entry load, or the fee that mutual funds used to charge investors to pay distributors, in August 2009, which have made distributors disinclined to market mutual fund schemes, banks have been in demand as partners for funds. In particular, small funds, which lack the network to market their equity schemes, are keen to tie up with banks.

Currently, most state-owned banks such as State Bank of India, Bank of Baroda and Canara Bank, which hold stakes in mutual fund ventures, own at least 49% in them.

Mutual fund industry officials said AMCs in emerging markets are usually valued at 4-6% of their assets. Recently, L&T Finance, the financial services arm of engineering major Larsen and Toubro, bought DBS Cholamandalam Asset Management for Rs 45 crore, valuing DBS at 1.55% of its total assets under management.

In June last year, Japan's Nomura bought a stake in LIC Mutual Fund for about 2.5% of fund's assets. In 2009, IDFC bought Standard Chartered Bank's asset management business for close to 5.7% of its assets.

Siemens sets up financial services arm in India

MUMBAI: German multinational Siemens today said it has set-up a financial services arm Siemens Financial Services Private Limited (SFSPL) in India.

The newly-set-up company has filed an application for a Certificate of Registration to commence business of a non-banking financial company with the Reserve Bank of India ( RBI )), a press release issued here stated.

Subject to regulatory approval, SFSPL will focus on asset financing business by offering products such as loans, leasing solutions and hire purchase.

The company aims to provide financing offerings to Siemens customers in India, particularly in the healthcare, industry and energy sectors, the release said.

Sunil Kapoor has been appointed as the CEO of the company based in Mumbai.

The Siemens division Financial Services (SFS) is a global provider of financial solutions in the business-to-business segment.

With over 2,000 employees and an international network of financial companies, SFS supports Siemens as well as non-affiliated companies, focusing on the three sectors of energy, industry and healthcare.

SFS finances infrastructure, equipment and working capital and acts as a competent manager of financial risks within Siemens, the release said.

Bank of India to open subsidiaries overseas

Bengaluru: Bank of India plans to acquire small-sized or mid-sized banks in African countries, New Zealand, and Canada. The bank is also looking at the organic route in other countries, said a top official.

“We are shortly opening subsidiaries in New Zealand, Canada and a few countries in Africa. We want to consolidate in countries where there are opportunities,” Mr N. Seshadri, Executive Director, Bank of India, told Business Line. Explaining that the RBI also advocated the subsidiary route for overseas locations, he said that the bank plans to acquire small-sized and mid-sized banks in these countries.

“If at a reasonable size we can acquire and grow inorganically, we could do that,” he added. The bank is currently present in 18 locations with over 30 branches. The bank already has permission for setting up operations in Botswana, and would actively pursue the inorganic route for this country.

According to industry estimates, a small-sized bank in the African continent would typically have 5-6 branches and could be acquired at anywhere between $5 million and $10 million. Though a location like New Zealand could be expensive , “it would add a lot of value and make business sense, since we can cover Australia too. Both the countries have a substantial Indian population,” pointed out Mr Seshadri. The bank also plans to convert its representative office in Johannesburg, South Africa, into a branch, he said.

In order to grow its balance sheet and augment future credit needs, Bank of India is looking at raising funds in the first half of the next fiscal. The bank had recently raised $750 million through the medium-term note (MTN) route and also expects about Rs 1,000-crore capital infusion from the government. With this infusion, the government holding in the bank would go up to 66 per cent from the current 64 per cent.

In addition to this, “we would also be raising additional capital in the first half of this fiscal, though we have not firmed up our budgeting plans yet,” said Mr Seshadri. As an international bank, he pointed out that Bank of India is required to maintain a tier-I capital of 8 per cent, and “there is enough headroom available in tier-II also,” he added, indicating that a dual issue is possible.