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L&T Finance Holdings Slumps After Selling Mutual Fund Business To HSBC Asset Management - Outlook India

Shares of LT Finance Holdings slumped as much as 7 per cent to hit an intraday low of Rs 76.85 after it sold its entire stake in its wholly owned subsidiary LT Investment Management Limited, the investment manager of LT Mutual Fund to HSBC Asset Management (India) Private Limited for an aggregate consideration of $425 million.

"LT Finance Holdings will also be entitled to excess cash in LT Investment Management (LTIM) until the completion of the acquisition. The transaction is subject to the requisite regulatory approvals. Both LTIM and HSBC AMC will work to ensure that there will be continuity of services to their investors and counter-parties in the interim," said LT Finance Holdings in a regulatory filing.

The divestment of Mutual Fund business is in line with the strategic objective of LT Finance Holdings of unlocking value from its subsidiaries to strengthen its balance sheet, the company said.

"The acquisition of LTIM is in line with the strategic growth plans of HSBC in India. HSBC stands to gain from an experienced team, diversified assets, strong retail customer base and the vast geographical reach that LT Mutual Fund has built over the years," LT Finance Holdings added.

“The transaction with HSBC is in line with our strategic objective of unlocking value from our subsidiaries which will help us to strengthen our balance sheet for our lending business. When seen alongside the recent capital raise it provides us with enough ammunition to increase the pace of retailisation in our lending portfolio, which is one of our long-term goals,” said Dinanath Dubhashi, managing director CEO, LT Finance Holdings.

LTIM is today the 12th largest Asset Management Company (AMC) in India and offers a basket of equity, fixed income and hybrid schemes to both retail and institutional investors.

HSBC intends to merge the operations of LTIM with that of its existing asset management business in India, which had assets under management (AUM) of Rs 11,700 crore as of September 2021.

J.P. Morgan and Citi were the financial advisors to LTFH. Cyril Amarchand Mangaldas acted as the legal advisors and PwC acted as due diligence and tax advisors to LTFH. As of 11:20 am, LT Finance Holdings shares traded 6.6 per cent lower at Rs 77.15, underperforming the Sensex which was down 0.7 per cent.