Kotak Mahindra Asset Management Company has acquired the schemes of Pinebridge Mutual Fund. Speaking to CNBC-TV18's Sonia Shenoy and Senthil Chengalvarayan, Gaurang Shah, President (asset management, life insurance and international business) at Kotak Mahindra Group said the new buy will add to its existing AUM, which he says, is expected to grow under the current market situation.
Below is a verbatim transcript of the interview
Sonia: Just tell us a little bit about these schemes that you have acquired. Why have you done this acquisition? How much has it been for?
A: We have acquired the schemes, which are around 7 odd schemes, including around Rs 300 crore of equity and Rs 350 crore of debt. This scheme acquisition is mainly to build the AUM. Also, some of these schemes have a very good track record. It helps us in terms of scaling it up.
Sonia: So what will this do to the overall Assets Under Management (AUMs). Kotak's AUMs as of August stood at about Rs 37,000 crore. Post taking these schemes on board what will it look like?
A: Overall, we are acquiring around Rs 660 crore odd and it just adds to our existing AUM, which in any case is expected to grow under the current market situation. A couple of these schemes which we acquired particularly the infra scheme which is a five star rated scheme and it can be scaled up.
Senthil: This may be a slightly small acquisition but the buzz now is that you have an appetite and you are on the look out for more, is that correct?
A: If you look at the mutual fund industry it is actually consolidating. It is one industry where the top 10 player have a very large market share and they have a long tail. The current environment will probably bring us many more such opportunities. So, definitely we will look out for acquisition of schemes which are of similar nature and where probably there is a potential to scale it up.
Sonia: What will the overall capital markets business look like going ahead because in the quarter gone by the AMC bottom line was a bit of drag and it dragged the overall performance as well. Going forward what is the prognosis?
A: Capital market prognosis is very positive at this stage because all macro factors are saying they are improving and there is an expectation of earning growth increase in the next couple of years which of course the market is building in big time into the current pricing and for the bottom line of Kotak AMC the issue is about the sales. If your gross sales improve you end up paying a lot of money upfront. So there is a lot of upfront spend for which the benefit is likely to accrue in future. So, it is inversely proportionate to the way which we are doing sometime.
Sonia: You did mention that there might be more acquisitions on the cards, anything before the end of this calendar year?
A: Nothing really. I don't know anything on table yet. If something comes up we will be certainly interested in looking at it.
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