Tata Sons transfers mutual fund arm to Tata Capital

Tata Capital, the financial services arm of the $100-billion Tata Group, is taking over the mutual fund (MF) business from the group holding company Tata Sons.

A proposal to transfer the business was taken a few months ago. The idea is to consolidate the financial services business under one roof for focused attention.

One may recall that Tata Sons (not Tata Capital) had applied for a banking licence with the Reserve Bank of India (RBI). It, however, withdrew its application midway saying it looks forward to participating in the banking sector at an appropriate time.

Clearly, the group has banking ambitions and Tata Capital, a non-banking finance company (NBFC), is best suited to convert into a banking entity.

Tata Capital currently covers retail and commercial finance, including home, car, and two-wheeler loans, wealth management, private equity, travel, forex services, etc. It clocked in revenues of Rs 3,500 crore and a net profit of Rs 353 crore in 2013/14. The company has a loan book of around Rs 29,000 crore.

Sources say the deal was struck at around Rs 150 crore for the 68 per cent stake in the mutual fund arm. Another group company, Tata Investment Corporation, holds the remaining 32.09 per cent stake. It is not known whether Tata Investment is also transferring its stake to Tata Capital.

Tata Investment is purely an investment company with a focus on equity as well as debt investment in the market.

Tata Capital has, however, refused to confirm or deny the deal.

Tata Mutual Fund, meanwhile, has been lagging in the industry with assets under management (AUM) of Rs 21,954 crore in March 2014. The largest player, HDFC Mutual Fund, has an AUM of Rs 1,12,962 crore.

The mutual fund arm has been a profitable company with revenues of Rs 173 crore and net profits of Rs 17 crore in March 2014. The mutual fund business under Tata Asset Management was set up by Tata Sons when the sector was opened up for private players.