Mahindra Finance has formed a joint venture with Manulife to expand the mutual fund business of subsidiary Mahindra AMC. (Photographer: Vivek Prakash/Bloomberg)

Mahindra Finance Partners Canada’s Manulife For Expanding Mutual Fund Business

Mahindra & Mahindra Financial Services Ltd. has formed a joint venture with global financial services group Manulife Financial Corp. to expand the mutual fund business of subsidiary Mahindra Asset Management Co. Pvt. Ltd.

Under the agreement, more than a century-old Manulife will invest $35 million to pick up 49 percent stake in Mahindra Asset Management Company.

"Manulife will pick up 49 percent equity share capital of Mahindra AMC for $34.9 million and a similar quantum of equity in Mahindra Trustee Company for $0.1 million. After the sale, Mahindra Finance will hold 51 percent in the joint venture," the company said.

The Singaporean arm of Manulife is picking up the stake in the Mahindra AMC, it added.

Mahindra Finance vice-chairman and managing director Ramesh Iyer expects the partnership to help drive their efforts to increase mutual fund business. “We would bring on table the knowledge of what the consumer is looking for, while Manulife will help us design the products that our consumers want,”Iyer told reporters announcing the partnership.

Iyer also said the money will remain in the AMC business and will be used for future growth, which will include investments in technology, channel development, people, and building capabilities.

According to Mahindra AMC Managing Director Ashutosh Bishnoi, Manulife fit as the right strategic partner as they bring in a pool of fund management talent which is backed by “global best practices and processes”. “Their experience in global markets will help us meet the needs of retail fund market."

Mahindra AMC had assets under management of Rs 5,019 crore with over 1.6 lakh customers spanning 400 cities as of March 2019, while the Toronto-based Manulife is into wealth and asset management and life insurance with presence around the world and had AUM of over $849 billion as of March 2019.

On the liquidity situation, Iyer said Mahindra Finance is not finding any pressure as of now. "Look at our balance sheet, we have an excellent ALM match. So we don't have any liquidity pressure in the sense of our ability to raise funds," he said.

Iyer said they source funds from multiple avenues such as banks, mutual funds, insurance companies, provident and pension funds and through securitisation and that "not depending on any one source has been a good strategy." Backing the industry's call for a separate refinance window for non-bank finance institutions at the Reserve Bank of India, he said such a system can make help NBFCs feel a little more comfortable.

The 51:49 joint venture, with Mahindra as the majority partner, aims to expand mutual fund offerings and prenetration of retail mutual funds.

Toronto-based Manulife provides financial advice, insurance we well as wealth and asset management solutions for individuals, groups and institutions. As of March 2019, it had over $849 billion in assets under management.

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