DSP BlackRock Asset Management Company (AMC) may soon lose the DSP tag, with the street abuzz with talk of BlackRock, the New York-based asset manager that’s the world’s largest, planning to buy out the 60% stake of DSP in their Indian joint venture.
DSP BlackRock Asset Management Company (AMC) may soon lose the DSP tag, with the street abuzz with talk of BlackRock, the New York-based asset manager that’s the world’s largest, planning to buy out the 60% stake of DSP in their Indian joint venture. BlackRock currently has a 40% stake. It seems that while there is some agreement on the structure of the deal, talks around valuation may take a little longer to be ironed out. Typically, AMCs are valued at a percentage of their assets under management (AUM). With DSP BlackRock’s average AUM at Rs 86,236 crore for the January-March 2018 quarter, this would imply a deal value of about Rs 3,100-3,600 crore, if a 6-7% value of AUM is factored in for the deal.
While several deals in the past — like L&T Finance acquiring Fidelity AMC and Nippon Life buying in Reliance AMC — were done at about 6% of AUM, with the strong brand credentials of DSP BlackRock, its industry standing (ranking ninth among over 40 AMCs on AUM) and the strong growth in the mutual fund business (AUM for Q4FY18 grew 26% for the industry), a higher valuation cannot be ruled out.
When contacted by FE on the deal, the DSP BlackRock spokesperson said the company would not comment on speculation. If the deal goes through, it may well mark the last big-ticket transaction by the master deal-maker, 71-year-old Hemendra Kothari, one of the three Ks in the legendary deal-making troika that also comprised Uday Kotak (chairman, Kotak Mahindra Bank) and Nimesh Kampani (chairman, JM Financial).
In December 2005, he had sold a 47% stake in DSP Merrill Lynch, a joint venture floated in 1995 by the 1975-founded DSP Financial Consultants and global investment bank Merrill Lynch, for $500 million (about Rs 2,270 crore). He exited his remaining 10% stake in 2009 and stepped down as chairman of the venture soon after he decided to focus on the asset management business that had floated a joint venture with BlackRock in January 2008.
The veteran investment banker, who has two daughters, has of late been focusing more on social interventions. He founded the Wildlife Conservation Trust in 2002, which focuses on livelihood for villagers in forest areas and is working in over 17 national parks and reserves. He also set up the Hemendra Kothari Foundation in 2008 with a focus on education and healthcare and is engaged with the family initiative, DN Kothari Hospital in south Mumbai. He is also reported to have set aside over Rs 50 crore for venture capital investments.