The DSP-Blackrock split has come about because the two co-owners both wanted to own 100% of the business.
DSP Blackrock, India’s ninth largest mutual fund company, is undergoing a major upheaval in its ownership. Until now, 60% of the asset manager is owned by the DSP group, a home-grown financial services powerhouse, and America’s Blackrock, the world’s largest asset manager. Now, DSP is buying out Blackrock’s entire stake, thus taking over 100% of the ownership of the mutual fund company. Despite what it looks like at first sight, this is not the case of a foreign mutual fund exiting India. The DSP-Blackrock split has come about because the two co-owners both wanted to own 100% of the business. Since DSP was the majority stakeholder, it was able to have its way. Blackrock, for its part, is not planning to quit India—the news is that it’s looking to acquire another fund company and IDFC Mutual Fund is one possibility.
There’s nothing unusual in this news—there have so far been 25 ownership changes in India’s mutual fund companies. These have ranged from foreign companies selling the Indian mutual fund business and sailing away (Fidelity, Goldman Sachs), to foreigners buying stakes in home-grown ones (Reliance, SBI), and foreigners selling their stake to their Indian partners (DSP Blackrock, LIC Nomura). This sounds like a lot of upheaval, but it actually isn’t. However, I believe these changes are superficial, or at best preparatory, to the real upheaval that is coming. Despite managing Rs 21 lakh crore of people’s money (up 4X over the last decade), the mutual fund business in India is at a nascent stage. Over the next few years, it has the chance to see the kind of revolutionary scaling up as e-commerce or digital payments are seeing. There’s a savings revolution that India is set for, but one which will happen only if India’s mutual fund incumbents step up and shake off comfortable habits. So far, they are behind the curve.
My mind goes back to 1991, when the IPO of Mastergain, a closed-end fund from erstwhile Unit Trust of India, unexpectedly got 65 lakh applications. These were paper forms which people queued up to first buy and then deposit. Most banking, cheque clearing, record keeping statements, unit transfers, etc, were manual. A significant chunk of investors had long-running issues because of faulty records, signature mismatches and other problems. I know because I was one of them.
Even at the time, it was obvious that complete computerisation and networking was the only way forward. And yet, if you had told me back in the day that fully networked and computerised access to auto-rickshaws and taxis would arrive before it would for mutual funds, it wouldn’t even have sounded like a good joke. However, that change is coming now. The kind of push that is now coming from customers as well as regulators for end-to-end digital flow for investing means that it won’t be long before a digital savings revolution arrives.
The kind of asset management companies that are most likely to take the lead are those that have the size and also the drive to shake up the fossilised distribution conventions that seem to be holding back those that are settled at the top of the pecking order. Churn in ownership of mutual funds is undoubtedly a good sign for the future.
CEO, Value Research
As an expert in finance and mutual funds, I can confidently dissect the information presented in the article about the DSP-Blackrock split and delve into the broader context of the mutual fund industry in India. My extensive knowledge in this field allows me to provide a comprehensive analysis.
The DSP-Blackrock split, as outlined in the article, is a result of both co-owners desiring full ownership of the mutual fund company. DSP, being the majority stakeholder with 60% ownership, is acquiring Blackrock's entire stake, reaching 100% ownership. This move does not signify a foreign mutual fund exiting India but rather a strategic decision driven by ownership preferences.
Several key concepts and trends in the mutual fund industry are touched upon in the article:
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Ownership Changes in Mutual Fund Companies:
- The article mentions that there have been 25 ownership changes in India's mutual fund companies. These changes range from foreign companies selling their Indian mutual fund business (e.g., Fidelity, Goldman Sachs) to various other scenarios involving foreign and domestic partnerships.
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Evolution of the Mutual Fund Industry in India:
- The author emphasizes that despite managing a substantial amount of assets (Rs 21 lakh crore), the mutual fund business in India is still in a nascent stage. The article suggests that the industry has the potential for revolutionary scaling up, similar to the growth witnessed in e-commerce and digital payments over the last few years.
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Potential for a Savings Revolution:
- The article suggests that India is on the brink of a savings revolution, particularly in the mutual fund sector. The author posits that for this revolution to materialize, mutual fund incumbents need to adapt and embrace digital advancements.
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Comparison with Past Transformations:
- The author recalls the transformation of the mutual fund industry in 1991, drawing a parallel with the current shift towards digitization. The article highlights the need for mutual fund companies to adopt end-to-end digital processes to meet the evolving demands of customers and regulatory expectations.
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Role of Asset Management Companies in Leading Change:
- The article implies that asset management companies with both size and a proactive approach are likely to take the lead in the impending digital revolution. These companies are expected to challenge traditional distribution methods and bring about significant changes in the industry.
In conclusion, the article paints a picture of a dynamic and evolving mutual fund landscape in India, with the DSP-Blackrock split being just one example of the ongoing changes. The anticipation is that the industry will witness a transformative shift towards digitalization, driven by customer demand and regulatory support.
