RBI shoots down Muthoot’s plan to acquire two IDBI group firms

‘Sponsoring MF, owning AMC not in consonance with present business’

KOCHI/November 24-2020: The Reserve Bank of India (RBI) has shot down the Muthoot Finance’s plan to acquire IDBI Asset Management Company (AMC) and IDBI MF Trustee Company Ltd.

It’s more than a year since Muthoot Finance started working on the plan to buy these two IDBI group firms

In a stock market filing today, Muthoot Finance, the largest gold loan company in the country with interests in several other financial services including auto finance, micro finance and home finance, said its request for a no objection certificate (NOC) in this regard was not acceded to by RBI on the ground that, “the activity of sponsoring a Mutual Fund or owning an Asset Management Company is not in consonance with the activity of an operating NBFC”.

“Consequently, we have informed SEBI vide our letter dated November 23, 2020 that Muthoot Finance Ltd is unable to proceed with the proposed transaction,” the Muthoot Finance filing said.

According to a share purchase agreement signed in this regard on November 22, 2019, Muthoot Finance, with a consolidated asset base of Rs61,964  crore and an equity capital of Rs13,500 crore, was to acquire 100 per cent equity shares of IDBI Asset Management held by IDBI Bank and its nominees and IDBI Capital Markets & Securities; and 100 per cent equity shares of IDBI MF Trustee Company held by IDBI Bank and its nominees, subject to receipt of regulatory approvals.

LIC’s entry

IDBI Bank had mooted the plan to sell its AMF business following the bank’s acquisition by Life Insurance Corporation (LIC) of India, which already runs a large asset management division.

LIC had bought 44 per cent stake in IDBI Bank in January, 2019, for Rs21,624 crore raising its stake to 51 per cent, and thus becoming the largest shareholder in the bank.

Muthoot Finance with a country-wide network of 5,381 branches, has a consolidated loan book of Rs52,139 crore and has reported a net profit of RS1,788 crore for the first half ending September 30, 2020.

 

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