Here's How The Merger Of Bank Of Baroda And BNP Paribas' Mutual Fund Business Impact Investors
Oct 15, 2019

Author: Divya Grover

(Image source: photo created by snowing - www.freepik.com)

Bank of Baroda on October 11, 2019 announced that it has entered into a binding transaction with BNP Paribas Asset Management Asia for the merger of Baroda Asset Management India with BNP Paribas Asset Management India. It also announced the merger of BNP Paribas Trustee India with Baroda Trustee India. The merger announcement comes at a time when the Deputy CEO of BNP Paribas MF Mr Anand Shah has resigned from the fund house.

Post-merger BoB will hold 50.1% and BNP Paribas AMC will hold 49.9% of the paid up share capital of the merged AMC. Meanwhile, BoB's stake in the trustee company will be 50.7% and that of BNP Paribas AMC will be 49.3%.

There is no cash consideration in the proposed transaction. The merger is subject to regulatory and other legal approvals.

As per the stock exchange filing by BoB, the rationale behind the transaction is to leverage on BNP Paribas' global asset management know-how and BoB's experience in running Indian retail networks to further grow the business, while the consolidation of operation will lead to better business synergies.

It further stated that the consolidation of schemes will create a more complete range of schemes as well as larger-sized schemes. Additionally, the merger aims to build a stronger balance sheet and net worth to meet capital needs for future growth and expansion along with distribution relationship with different types of intermediaries to widen the coverage and outreach to the customers.

The total income of Baroda AMC during FY 2018-19 was Rs 50.19 crore and BNPP AMC was Rs 96.12 crore. Baroda AMC had average AUM of Rs 10,664 crore for the quarter ended September 2019, while BNPP AMC had average AUM of Rs 7,300 crore.

Will the merger affect mutual fund investors?

The merger of the two AMCs constitutes a change in fundamental attribute. Therefore, investors of both AMCs will be provided a load-free exit option when the merger comes into effect.

Here is how the various schemes of the two fund houses have fared over 1-year, 3-year, and 5-year time frame:

Table 1: Performance of various Baroda mutual fund schemes

Scheme Name 1 year
(%)
3 year
(%)
5 year
(%)
Equity Schemes
Baroda Large Cap Fund 12.40 5.65 7.15
Baroda Mid-cap Fund 4.74 2.76 1.35
Baroda Multi Cap Fund 9.46 4.61 7.63
Baroda ELSS 96 6.27 3.18 NA
Hybrid Schemes
Baroda Hybrid Equity Fund 4.14 4.66 7.46
Baroda Conservative Hybrid Fund 15.78 7.74 8.92
Debt Schemes
Baroda Credit Risk Fund-B 4.50 6.90 NA
Baroda Dynamic Bond Fund 0.02 3.40 7.26
Baroda Gilt Fund 14.11 6.66 9.26
Baroda Liquid Fund 7.25 7.13 7.63
Baroda Treasury Adv Fund -16.20 -1.11 3.13
Baroda ST Bond Fund 10.01 8.48 9.14
Baroda Ultra Short Duration Fund 8.30 NA NA
S&P BSE 100 - TRI 10.20 9.57 8.95
S&P BSE 200 - TRI 9.61 8.96 9.37
S&P BSE 500 - TRI 8.26 8.16 9.02
CRISIL Hybrid 35+65 - Aggressive Index 9.53 8.88 9.45
CRISIL Hybrid 85+15 - Conservative Index 12.63 7.54 9.21
Crisil Composite Bond Fund Index 13.50 7.06 9.05
Crisil Liquid Fund Index 7.30 7.09 7.48
Crisil Short Term Bond Fund Index 10.76 7.46 8.34
Direct Plan - Growth option considered. Those depicted over 1-Yr are compounded annualised.
Data as on October 13, 2019
(Source: ACE MF)

Table 2: Performance of various BNP Paribas mutual fund schemes

Scheme Name 1 year
(%)
3 year
(%)
5 year
(%)
Equity Schemes
BNP Paribas Large Cap Fund 21.61 10.71 10.97
BNP Paribas Mid Cap Fund 7.19 3.85 10.26
BNP Paribas Multi Cap Fund 12.64 8.65 10.92
BNP Paribas Long Term Equity Fund 18.33 8.47 9.93
Hybrid Schemes
BNP Paribas Substantial Equity Hybrid Fund 19.08 NA NA
BNP Paribas Arbitrage Fund 6.82 NA NA
BNP Paribas Conservative Hybrid Fund 10.84 7.87 9.66
Debt Schemes
BNP Paribas Corp Bond Fund 1.87 4.45 7.00
BNP Paribas Flexi Debt Fund 10.75 6.68 9.09
BNP Paribas Liquid Fund 7.31 7.10 7.54
BNP Paribas Low Duration Fund 8.53 7.57 8.14
BNP Paribas Medium Term Fund -0.79 3.14 5.99
BNP Paribas Short Term Fund 8.43 6.97 8.19
S&P BSE 100 - TRI 10.20 9.57 8.95
S&P BSE 200 - TRI 9.61 8.96 9.37
S&P BSE 500 - TRI 8.26 8.16 9.02
CRISIL Hybrid 35+65 - Aggressive Index 9.53 8.88 9.45
CRISIL Hybrid 85+15 - Conservative Index 12.63 7.54 9.21
Crisil Composite Bond Fund Index 13.50 7.06 9.05
Crisil Liquid Fund Index 7.30 7.09 7.48
Crisil Short Term Bond Fund Index 10.76 7.46 8.34
Direct Plan - Growth option considered. Those depicted over 1-Yr are compounded annualised.
Data as on October 13, 2019
(Source: ACE MF)


Baroda and BNP Paribas have a similar equity and hybrid fund range of portfolio and the merger will enable them to create larger sized scheme. The debt range of the two fund houses' portfolio slightly differs from another and so the merger can help in creating a more complete range of portfolio.

In terms of relative comparison, the performance of most schemes of BNP Paribas MF have been better than the respective schemes of Baroda MF. It remains to be seen if the synergy of business leads to improvement in the performance of its schemes.

Before taking any buy/sell decision relating to mutual funds, be mindful of how it will impact your investment objective and overall asset allocation plan. When selecting funds for your portfolio, evaluate its performance based on various quantitative and qualitative parameters.

Investors must therefore analyse the performance of the schemes post-merger over a period of time. Do not conclude that the alliance will improve or deteriorate the performances of the schemes. Instead, pay attention to the changes and practices put in place by the merged AMC as a result of consolidation of operation and how prudently they manage your money.

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