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DBS Chola is now L&T Mutual Fund
January 14, 2010

L&T Finance entered into Memorandum of Understanding to buy 100% stake of DBS Cholamandalam Asset Management (DCAM) on 25 September 2009.

Author : FSM Content Team

Untitled Document

DBS Chola Mutual Fund has undergone a change in control and from now on, will be known as L &T Mutual Fund. L&T Finance has bought 100% stake in DBS Cholamandalam Asset Management (DCAM) for a sum of Rs. 45 crores.

Larsen and Toubro (L&T) has a presence in the financial services sector through its two wholly-owned subsidiaries - L&T Finance Ltd. and L&T Infrastructure Finance Ltd. The overall size of the entities is over Rs. 9000 crores. With the acquisition of DCAM, the group can expand its presence in asset management business. The deal has happened at slightly more than 1.5% of the fund assets.

Cholamandalam DBS Finance Limited has decided to exit from the asset management business in order to strengthen its position as a Non-Banking Financial Corporation. L&T Finance is currently into asset backed financing, channel finance, micro-finance and distribution of insurance and mutual funds. DCAM manages 6 debt funds and 11 equity funds and the average assets under management (AUM) stands at Rs. 2893 crores as on 31 August 2009.

All the schemes of DCAM will undergo a change in name (see Table 1).

The investors with DCAM have an option to withdraw from the schemes between 15 January 2010 and 15 February 2010. This option is not available to investors of close-ended funds or ELSS unless they have completed the statutory lock-in period. In addition, the investors who haven’t yet claimed or received redemption or dividend payout, for a period not more than 6 months, need to place a request with CAMS, the registrar and transfer agent, specifying the folio number, scheme name and the payment information.

In the last one year, mutual funds have experienced a wave of reforms with removal of entry load and uniformity in exit loads across all classes of investors i.e., retail and institutional.  Amidst the credit crisis in 2008, Religare took over Lotus Mutual Fund and Nomura picked up a stake in LIC mutual fund. However, the valuations of asset management companies have been better in the past. Standard Chartered PLC sold its Indian asset management arm to Infrastructure Development Finance Corporation in early 2008 for approximately US$205 million which was almost 5% of the assets.


Table 1: Proposed change in scheme name

In fact, DCAM was previously known as Chola Mutual Fund. In June 2005, Development Bank of Singapore (DBS), the largest banking group in South East Asia, entered into a joint venture with the Murugappa group to form Cholamandalam DBS Finance Ltd, the promoter of DBS Chola Mutual Fund. The partnership was formed to extend retail financial services such as personal and vehicle loans, home equity, asset management and securities. DBS had pumped in Rs. 228 crore (US$ 87 million) to gain a 37.5% shareholding. The other partner of Murugappa group for its non-life insurance business is Mitsui Sumitomo of Japan.

iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.


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