INDIA BUSINESS WORLD - APRIL - MAY 2007
The Month that was ...

FIDELITY INTERNATIONAL BUYS OUT BURMANS' 25% STAKE IN INDIAN ARM

FIDELITY International, one of the largest asset management companies in the world, has bought out the 25% stake of the Burman family, the promoters of Dabur group, in its Indian arm. The move is another evidence of the increasing interest among global financial giants in the Indian market and their desire to consolidate operations. Post this transaction, Fidelity International will be the sole shareholder in its Indian AMC, which had over Rs 6,500 crore in assets until the end of last month.

"We can confirm that the Fidelity International group now owns 100% of the share capital of Fidelity Fund Management," a Fidelity India spokesperson said. "As the business has grown, Fidelity wished to achieve full ownership in line with its general practice. We continue to enjoy good relations with the Burmans," she said.

Fidelity International is expected to infuse more capital in its Indian arm and expand its operations here. When Fidelity entered India three years ago, it had roped in the Delhi-based Burman family as a minority partner in its domestic asset management company.

The Burman family still holds 74% stake in its insurance joint venture, with UKbased Aviva called Aviva Life Insurance India. Fidelity International manages over $280 billion for major institutions and millions of investors in regions other then US. In the US, Fidelity managed and advised assets more than $2.9 trillion as of December 31, 2006.

The fund house is yet to break even in its India operations. While it accumulated losses of around Rs 22 crore for financial year ended March 2005, the losses worsened to Rs 56 crore last year.

The company has not given out numbers for the year ended March 2007. However, considering that Fidelity has more than 88% of its assets in equity, the fund house is expected to be valued at least 6-8% of its total assets. Merchant bankers typically value an AMC based on its brand equity, distribution network, product mix and good retail clientele, among others.

The Indian asset management industry is one of the fastest growing industries in India with nearly 36 players striving to make their mark and presence felt. Recently Rajan Raheja, the Mumbai based real estate magnate, bought out ING Vysya Bank stake in the ING Vysya Mutual fund for an undisclosed amount.

Four global giants, including Schroders, Blackstone and the US-based Capital, had previously offered to buy a small stake in Reliance Capital's mutual fund business.