Templeton May Merge Similar ITI Pioneer Schemes With Its Own

Mumbai, May 24: | Updated: May 25 2002, 05:30am hrs
Franklin Templeton Investments, is looking at deriving a synergistic balance from the acquisition of ITI Pioneer Mutual Fund (MF). Post-acquisition, FTI, which has its focus mainly in debt schemes, will stand to gain ITI Pioneer’s aggressive growth funds, which are mainly equity based.

In order to avoid product overlaps after acquiring ITI Pioneer, Templeton will merge its investment schemes with those the former’s, if the schemes are similar in terms of its offering, target consumers and positioning in the market.

Without mentioning ITI Pioneer by name, FTI president Charles Johnson said: “Currently, negotiations are on to acquire a local MF company in India as we see a lot of synergies in the form of distribution and products and this is an example of our commitment towards our business interest in India.”

Said Templeton Asset Management Ltd managing director Vijay Advani: “From the acquisition, Templeton will get the benefit of two divergent investment styles and will have presence in all the three segments — fixed income, value segment and the aggressive equity style of Pioneer.”

Mr Advani added that ITI Pioneer has very complementary products to that of Templeton, which will benefit investors of Templeton in the form of a wide product range.

Franklin Templeton country head (India) Rajiv Vij said: “Post-acquisition, we will re-christen Pioneer’s schemes. The growth funds will be known as ‘Franklin’ and the value funds will be called ‘Templeton.’”

The due diligence on ITI Pioneer is expected to be completed by June-end and Templeton will be shelling out around $50 million for the acquisition. The Raheja group, which has around 25 per cent stake in the Templeton asset management company in India, will also have to pay around $12.5 million for the acquisition deal. The combined asset base of both ITI Pioneer and Templeton, after acquisition, would be around Rs 8,000 crore.

Mr Johnson further said that among all the emerging markets, India is the best destination. Currently, Templeton has about $300 million invested in various portfolios in India. Elaborating on the advantages of India as an investment destination, Mr Johnson said: “Although India has problems like political instability and the Pakistan issue, there is a great opportunity as the underlying trend is very strong and positive. This is owing to major changes in the financial markets over the years with introduction of depositories, custodian and rolling settlements.”

Besides, India has a big competitive advantage in the form of its educational system which is churning out highly qualified labour force and management graduates, prompting multinationals like GE Capital, HSBC and Citicorp to operate in the country, Mr Johnson added.

Another possible area for Templeton will be the pension segment, as part of its expansion plans. Templeton is currently awaiting the Indian government’s stance on the pension segment, expected this June. Templeton has the expertise of managing pension funds abroad and has been successful at it, especially in the US.

On pension funds, Mr Vij said that currently Templeton is seeking expert comments on sectors which are opening up in India. However, Templeton’s main focus is managing people’s money and there are no plans of directly participating in pension, insurance or financial planning.

Templeton is also looking at future acquisitions, but not for increasing the asset base. Templeton will acquire another company only if it offers sufficient value addition and a scope for strengthening its existing products. Further, Templeton is also looking at the possibility of outsourcing software services from the Pioneer acquisition, especially to countries like Singapore and Hong Kong, where Templeton has its offices. Acquisition of small software companies is also not ruled out, provided it leads to the derivatives of value addition.