Blackstone in talks to acquire 100% stake in L&T MF

According to news report, Blackstone is in advanced talks with Larsen and Toubro Ltd.’s financial subsidiary L&T Finance to completely buyout the mutual fund business of L&T Asset Management Company as the New York-based PE firm is aggressively looking to enhance its India play, especially in the financial services space.

The deal, if goes through, will mark the first buyout of an Indian AMC by a foreign non-mutual fund company. L&T AMC, with 39 MF schemes has assets of around ₹63,057.2 crore as of the September quarter.

As per the sources, Sebi expressed its comfort with the proposal only in the second week of September. Blackstone had started the discussion in March. If the valuation is agreed upon by both L&T and Blackstone, the deal should get closed before 15 November.

Blackstone had sought the Securities and Exchange Board of India’s (Sebi) permission to buy a majority stake in L&T Mutual fund but since the matter had regulatory complications it took almost six months for the capital market regulator to give its green signal for the proposal, he said.

Blackstone has been aggressively pursuing opportunities in India’s BFSI space as a part of its larger strategy to gain from the growth prospects of lending businesses and investment culture among India’s large but underpenetrated population.

If the L&T AMC deal fructifies, it will add mutual fund business to Blackstone’s India buyout portfolio.

For the L&T Mutual fund deal, Sebi’s approval was crucial for Blackstone to acquire the entire business. As per the extant norms, any entity with 40% or more stake is classified as a sponsor in an AMC and such a sponsor needs to comply with the eligibility criteria stipulated by Sebi. The regulatory restrictions prevent any PE player from acquiring more than 39.99% in an AMC business.

But the issue before Sebi was that Blackstone is registered with Sebi as a PE fund under AIF rules. As per Sebi’s definition of AIFs, Blackstone is not classified as a company managing redeemable public deposits, which is why Sebi was initially conservative to allow Blackstone to be an AMC sponsor.