DSP BlackRock Asset Management Company (AMC) might 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 per cent stake of DSP in their Indian joint venture. BlackRock currently has a 40 per cent 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 per cent 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 per cent 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 per cent for the industry), a higher valuation cannot be ruled out.
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 deal-maker, 71-year-old Hemendra Kothari.
In December 2005, he had sold a 47 per cent stake in DSP Merrill Lynch, a joint venture floated in 1995 by DSP Financial Consultants and Merrill Lynch, for $500 million (about Rs 2,270 crore). FE