Edelweiss buys J.P. Morgan's India mutual funds business

MUMBAI (Reuters) - India’s Edelweiss Asset Management has bought J.P. Morgan Asset Management’s India unit, the two firms said on Tuesday, in the latest example of consolidation in the country’s fragmented, but reviving, mutual funds industry.

Neither firm disclosed the terms of the deal, but two sources familiar with the transaction said J.P. Morgan’s business was valued at around 2 percent of assets under management, or 1.4 billion rupees ($20.99 million).

However, a third source familiar with the deal put the valuation at under 1.5 percent of assets under management.

Investments into mutual funds by domestic retail investors have surged as a period of low inflation is pushing individuals to search for alternatives to traditional physical assets such as gold and real estate.

That is raising expectations of more deals among India’s more than 40 asset managers, especially by foreign players looking to exit given the relatively small size of their operations.

“It’s the right opportunity, and it gives us critical size,” Nitin Jain, CEO of Global Asset and Wealth Management at Edelweiss Group told Reuters.

“A lot of retail savings are moving towards the mutual fund space, and that’s a big theme we are playing for.”

With the acquisition of J.P. Morgan’s assets under management of 70.8 billion rupees ($1.06 billion), Edelweiss more than quadruples its domestic funds business, bringing its total assets to 87.6 billion, according to a statement by Edelweiss.

About 35-40 percent of J.P. Morgan Asset Management’s assets were invested in equities, while the rest was is debt, and the Indian firm will absorb the U.S. firm’s around 70-strong team, Jain added.

Mutual funds in India have seen net inflows of 2.07 trillion rupees in the current financial year, with 822.52 billion rupees going into equity funds alone.

The fortunes of India’s asset management sector have revived since 2014, when stock markets started a powerful rally, ending years of scant retail interest in mutual funds.

India's mutual funds industry has already seen a slew of deals, including Prudential Financial Inc's PRU.N purchase of Deutsche Asset Management's India unit last year.

Reporting by Rafael Nam and Himank Sharma; Additional reporting by Sumeet Chatterjee; Editing by Biju Dwarakanath and Louise Heavens