Fidelity Agrees to Sell India Funds Business to L&T Mutual Fund

Fidelity Worldwide Investment, the world’s second money manager, is selling its Indian business to a unit of the country’s biggest engineering company seven years after entering India’s $135 billion mutual fund market.

Fidelity’s Indian unit managed 88.8 billion rupees ($1.7 billion) of assets at the end of 2011, according to Association of Mutual Funds of India, an industry group.

L&T Mutual Fund’s second purchase in three years will help the company almost triple its assets to 134.96 billion rupees, data compiled by Bloomberg show. The industry manages a total 6.87 trillion rupees in stocks and bonds, according to the data.

“The purchase catapults L&T Mutual into the top league in rankings because of Fidelity’s large equity assets,” Dhirendra Kumar, managing director at Value Research, a firm that tracks funds, said by phone from New Delhi. “L&T was struggling to find fund managers. The sale works for Fidelity as it would have to shell out a substantial chunk if it had to pay severance to employees.”

The sale comes two months after billionaire Anil Ambani’s Reliance Capital Ltd. (RCAPT) sold a stake in its fund management unit to Nippon Life Insurance Co. Nippon Life paid about 22 billion yen ($287 million) for 26 percent of India’s second-largest money manager, valuing it at 6.6 percent of its 843 billion rupees of assets, according to data compiled by Bloomberg.

Mutual-fund assets in India have dropped 15 percent since peaking in November 2009, after the country banned firms from charging investors a fee at the time of purchase, according to AMFI. The restriction caused distributors, which previously shared the fee with the manager, to reduce marketing.

T. Rowe Price Group Inc. bought a 26 percent stake in UTI Asset Management Co. in 2009 that valued India’s oldest money manager at 3.3 percent of its money under management. L&T Asset acquired DBS Cholamandalam Asset Management that same year for 450 million rupees, or 1.6 percent of the managed assets.

India’s benchmark Sensitive Index (SENSEX) dropped 25 percent last year, the worst performer among Asia’s 10 biggest markets. It gained 17 percent in 2010 and 81 percent in 2009.

To contact the reporters on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net; Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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