Standard Life Investments of UK will buy 25% stake in Housing Development Finance Corporation's (HDFC) proposed mutual fund (MF). This was reported by a leading financial daily.

HDFC is India's largest housing finance company with a client base of more than 2 m.

Standard Life and HDFC go back a long way (5 years), and the former has a 5% equity stake in HDFC, as well as a stake in all other HDFC ventures.

Investment in the MF business will have synergies for both the partners. HDFC's strengths lies in its distribution network (52 branches), investment management skills, and back office processing.

Moreover, HDFC has experience in equity research and advises Commonwealth Equity Fund, the Invesco India Growth Fund and the Standard Life group. In addition to that, HDFC has its own investment portfolio (of Rs 24.5 bn), with approximately Rs 3.4 bn in equities.

Standard Life will contribute with its investment expertise at the global level. The MF venture between the two partners is expected to give impetus to their proposed insurance foray.

With the passing of the insurance bill, many overseas insurance companies are eyeing the Indian mutual fund market. Some like Prudential (with ICICI) and Sun Life (Birla) have already established their MF operations in the country. The next step for these companies is to establish a presence in the lucrative insurance segment.

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