5-Year Old Groww Acquires 21-Year Old IndiaBulls’ MF Business For Rs 175 Crore! How This Happened?

The latest development reveals that the online investment platform, Groww will be acquiring Indiabulls Mutual Fund for a total consideration of Rs 175 crore according to its announcement on Tuesday.

Groww Acquiring IBAMC
The digital platform plans to acquire Indiabulls Asset Management Company (IBAMC) and the trustee company for Rs 175 crore.

This also includes a cash and equivalent component of Rs 100 crore, as per the information provided by an official statement.

The statement further added that the transaction is subject to regulatory approvals.

To implement this, the Alternative Investment Fund (AIF) and Portfolio Management Service (PMS) businesses will be demerged from the existing IBAMC structure.

It will remain under Indiabulls Housing Finance.

First Fintech Entering Asset Management Space
The news comes months after capital markets regulator Sebi had allowed digital platforms like fintech to enter the mutual funds business.

So, with this move, Groww becomes the first fintech to enter the asset management space.

As of March 2021, Indiabulls Mutual Fund has 13 funds with the Quarterly Average Assets Under Management at Rs 663.68 crore, which is dropped from the Rs 921.33 crore in December 2021.

How Does This Affect?
The move of selling the MF is expected to help the parent Indiabulls Housing Finance’s capital position.

So far, Groww acquired more than 1.5 crore customers who use the platform to invest in mutual funds, stocks and exchange-traded funds (ETFs).

As per the statement, the firm wishes to increase retail participation in equity.

The chief executive and co-founder of Groww, Lalit Kesher said, “with the capability to create products, we plan to make mutual funds even more accessible – by making them simpler, more transparent, and by lowering the cost further,”.

From Indiabulls Housing Finance’s point of view, they plan to grow its Real Estate Asset Management business through AIF structures in line with its asset-light strategy.

At the same time, IBHFL will focus largely on retail disbursements and the AIF structure will be used for the wholesale opportunity of early-stage project finance.

The vice-chairman and managing director of Indiabulls Housing Finance, Gagan Banga, said, “We have made the decision to divest our interest in the retail mutual fund business to be able to consolidate capital and provide greater focus in building the company’s real estate asset management business by way of Alternate Investment Fund, in line with the company’s asset-light strategy,”.