Financial Daily from THE HINDU group of publications
Tuesday, Oct 25, 2005
Financial Daily from THE HINDU group of publications Tuesday, Oct 25, 2005 |
|
|
|
|
|
|
|
Markets
-
Asset Management Companies Sundaram wangles a good deal from BNP Paribas Suresh Krishnamurthy
THE sale of a 49.9 per cent stake in Sundaram Asset Management for Rs 100 crore represents a profitable deal for Sundaram Finance. The deal values Sundaram Asset Management at Rs 200 crore. At 7 per cent of assets under management, the valuation is similar to the deals struck in the case of SBI Mutual Fund, in 2004, and Pioneer ITI Mutual Fund, in 2002. Given its assets under management of Rs 2,800 crore and return on net worth of less than 3 per cent for the year ended March 2005, Sundaram seems to have got a lucrative deal. Most established asset management companies generate returns on net worth of at least 10 per cent. In Sundaram's favour, however, is the proportion of funds under management in equity schemes. That is substantially high at about 80 per cent. In contrast, equity assets in the case of SBI Mutual Fund were about 15 per cent at the time of the deal in 2004. Since equity assets generate higher returns, despite the lower return on net worth, the valuation needed to be higher, and Sundaram appears to have convinced BNP Paribas on this score. The only loser appears to have been the Government of India. In the case of UTI Mutual Fund, the Government did not sell the stake to a single entity. It had also imposed restrictions on further sale of stake. These issues reduced the valuation of the largest mutual fund in India. The deals of SBI Mutual Fund and Sundaram appear to indicate that the value of UTI Mutual Fund, otherwise, could have been at least 50 per cent higher.
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2005, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|
