Fidelity kicks off review of India MF biz

MUMBAI: Fidelity Worldwide Investment, which runs Fidelity Mutual Fund in India , is conducting a strategic review of its India operation, which may eventually lead to a change in the shareholding pattern of the asset management company (AMC). Usually every year, Fidelity does a country-specific strategic review of all its businesses and the current review is part of the same.However, this time it is more intense for its India operations, sources said.
The strategic review is being done to find out the best valuation that the fund house can get and, if the price discovered through this process is attractive , Fidelity Worldwide may even decide to exit India. However , at the other end of the broad spectrum of options that the global fund management major has is to continue with the current structure of 100% ownership. “It may even offload a partial stake to bring on board a local partner with a strong distribution network,” asource said.
When contacted, a spokesperson for Fidelity MF said that Fidelity Worldwide Investment was conducting a strategic review of its onshore asset management business in India and, as with strategic reviews, all options were being covered.
“The review is underway and it is too preliminary to discuss any outcome. We remain fully engaged in and committed to the process of successfully managing money for clients using all the resources of the company as required. In addition , the outcome of this review will take full account of our fiduciary duty to, and the interests of, our clients,” an email response from the fund house said.
In India, as of December 2011, Fidelity MF managed nearly Rs 8,800 crore worth of assets, down marginally from Rs 8,900 crore a year ago, compared to a marginal rise in the industry’s assets under management (AUM) to Rs 6.81 lakh crore from 6.75 lakh crore a year ago, according to data released by the fund industry trade body AMFI.
On the valuations front, industry watchers pointed out that, in the latest deal in the MF space, when Reliance MF, the second-largest AMC in terms of assets, sold a 26% stake to Japan’s Nippon Life for Rs 1,450 crore, it was valued at 6% of its December 2011 AUM. As of now, the industry benchmark is about 5% of equity assets and about 2% of debt assets. Going by Fidelity’s assets mix of 69% in equity assets and 31% in debt, the base valuation works out to about Rs 360 crore.
“Reliance (MF)’s valuations cannot be taken as a benchmark. It got a much better valuation because of its distribution reach, the leadership position in SIP and a host of other positives,” the head of a fund house said.
It may be pointed out that there have been speculations about Fidelity’s India CEO, Ashu Suyash, quitting to join UTI MF as the CEO for a while now and the current development only adds fuel to that. Employees of Fidelity, meanwhile , remain an anxious lot since they were communicated about the review process around the end of Monday’s working hours.
Future shock?
Fidelity Worldwide runs Fidelity MF in India, which has nearly Rs 8,800 crore of assets (as of Dec 2011) Fund house may exit India if valuation is attractive It can also offload partial stake to bring on a board local partner Buzz over Fidelity’s India CEO, Ashu Suyash, quitting to join UTI MF as CEO has now gained traction