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MUMBAI, July 1

PRINCIPAL Mutual Fund, which recently acquired full control of its asset management company by buying out its joint venture partner IDBI for about Rs 90 crore, today said it had reached an agreement with Sun F&C mutual Fund to take over and manage its schemes in India.

Principal, which currently has assets worth about Rs 2,300 crore under management, would take over about Rs 500 crore in assets managed by Sun F&C and a retail client base of over 70,000 investors. The valuation of Sun F&C was, however, not available.

Enam Financial Consultants Pvt Ltd advised the Sun group in structuring the deal.

Mr Sanjay Sachdev, Country Manager, Principal Financial group, said: "For Principal, this is a good move creating tremendous value." He , however, declined to say how much the group would pay Sun F&C.

Asked if there would be any rationalisation of manpower in Sun F&C, he said he was "not in a position to comment".

According to an industry source, the valuation depends on different variables and the exact valuation could only be done as per the value of assets under management on the date of transfer.

A joint press release issued by Principal and Sun F&C said: "This agreement entails a change in management, trusteeship, and administration of Sun F&C's schemes". The release quoted Mr Nikhil Khatau, CEO, Sun F&C MF, as saying: "We have entered into the transaction with the aim of serving the interest of our trusted unitholders."

The proposal for the takeover was filed with the Securities and Exchange Board of India on June 30, 2003. "It will take approximately 60 days for the deal to go through as the regulator's approval would take around 30 days and then we need to give another 30 day notice to the investors of Sun F&C to either migrate to Principal or exit without a load," said a spokesperson for Principal Mutual Fund.

An industry expert said, "In deals where only the assets are taken over, usually for equity schemes, the valuation is pegged between three and six per cent of the total assets under management at the time of actual transfer of assets; for bond schemes it is usually one per cent and for short maturity plans it is less than one per cent."

There was talk in the market that the mutual fund was valued at around 4 per cent of the assets under management. This works out to about Rs 20 crore. This is the third buy-out of a mutual fund by a rival, the previous ones being HDFC Mutual Fund's purchase of Zurich AMC and Franklin Templeton taking over Pioneer ITI.

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