Shinsei sayonara to MF venture

Japanese financial conglomerate Shinsei Bank, which promoted the Shinsei Mutual Fund with a couple of local partners has decided to exit the business by selling it to another Japanese financial firm Daiwa Securities. Investment banking sources have estimated the Shinsei-Daiwa deal size at around Rs 55 crore.

The board of Shinsei Mutual Fund will meet this week to finalise the deal. Shinsei Bank holds a 75% stake in Shinsei asset management company (AMC), with investor Rakesh Jhunjhunwala and country manager, Shinsei India, Sanjay Sachdeva's Freedom Financial Services Private Limited holding 15% and 10%, respectively. The business, which was set up in June 2009 had Rs 459-crore assets under management (AUMs) as at the end of February this year.
On the face of it, the valuation looks expensive, since it amounts to nearly 12% of overall AUMs. Recently, deals have been completed at much lower valuations (though some deals have been concluded at 10% levels in the past). For instance, L&T Finance's acquisition of DBS Chola in September 2009 was done at 1.7% of assets. Around the same time, T Rowe Price bought stake into UTI, giving it a valuation of 3.4% of assets. Interestingly, Shinsei MF has only Rs 19 crore worth of equity assets, which amounts to 4% of its overall assets. The rest comprises debt-based assets, which typically fetch far lower fees.
The Japanese major, which had a asset base of $121 billion on a consolidated basis as on March 31, 2009 and is among the most respected financial brands in Japan had decided to exit the Indian market as it is currently restructuring its domestic operations. Shinsei AMC had started operations in July 2009 with initial assets of Rs 203 crore and ever since it has not managed to improve its equity assets.