Blackstone Plans to Buyout L&T Mutual Fund, to Expand its Financial Business in India

The American investment management firm, Blackstone is trying to buyout the engineering giant Larsen and Tourbo’s financial subsidiary - L&T Finance, to acquire its mutual fund business of L&T Asset Management Company. It is been said that the company is in the advanced talks with L&T. According to the sources close to the company, the New York-based company is planning to develop its business in India, particularly in the financial services space.

If this deal works, then this would the first buyout of an Indian AMC by a foreign non-mutual fund company. On the company’s worth, L&T AMC has about 39 MF scheme and assets worth around 63,057.2 crore as of the September quarter.

Although Blackstone had initiated the deal’s discussion in March, Sebi has expressed its acceptance for the proposal in the mid of September. However, if the deal holds good for both parties, the further acquisition procedures are expected to be closed by the mid of November. Blackstone has been pursuing various opportunities in India’s BFSI space to grow its lending businesses and investment culture in massive India’s population.

Thus, the company has invested more than $15 billion in India, so far. The investment has been made across private equity ($6.9 billion), real estate ($7.8 billion), and tactical opportunities ($400 million). Furthermore, the company could not bid on the Edelweiss’ wealth management business in early September. Hence, it is holding steady on its strategy to strengthen its base in India’s financial services space.

“Blackstone is currently a PE firm but has a track record of managing public investments in its previous avatar. Also, Blackstone manages Real Estate Investment Trust (REIT), which is related to market volatility and public money. So, Sebi should allow Blackstone to be a 100% owner of an AMC," states a person close to Blackstone.

The company has invested about $2.5 billion in India in 2019-2020, to execute India's largest buyout in the financial services. If the deal falls in right place, it would add mutual fund business to Blackstone's Indian buyout portfolio.

Blackstone was awaiting Sebi's approval, as it is crucial for it to acquire the entire business. According to the extant norms, if an entity has around 40 percent or more stake is classified as a sponsor in an AMC, such sponsor has to comply with the eligibility criteria designed by Sebi. Furthermore, the regulatory restrictions could restrict any PE player from acquiring more than 39.99% in an AMC business.

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