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
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
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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