HSBC signs $ 425 million deal to take over L&T Investment Management
As as part of its goal of becoming Asia’s leading wealth manager by 2025, HSBC Asset Management (India) Private Ltd, an indirect wholly-owned subsidiary of HSBC Holdings plc (NYSE: HSBC), signed an agreement to acquire L&T Investment Management Limited (LTIM) for $ 425 million. Notably, LTIM is a wholly owned subsidiary of L&T Finance Holdings Limited (LTFH) and the investment manager of L&T Mutual Fund.
The transaction will likely be funded from existing resources and will have minimal impact on HSBC’s Common Equity Tier 1 ratio. The company expects the acquisition to immediately generate profits and provide a return on investment of over 10% over the medium term.
Advantages of the acquisition
With this acquisition, HSBC’s position as an asset manager in Asia will be strengthened. The bank’s strong asset management business in India is likely to meet the wealth needs of its clients in India as well as non-resident Indian clients around the world.
LTIM offers a distribution platform that includes banks, regional distributors, over 50,000 independent financial advisers, established digital platforms and a presence at 65 locations across India. As of September 2021, the company had assets under management (AUM) worth INR 803 billion ($ 10.8 billion).
Upon closing of the acquisition, pending regulatory approvals, LTIM’s operations will be merged with those of HSBC’s existing asset management business in India, with assets under management of $ 117 billion. INR ($ 1.6 billion) in September 2021.
Noel Quinn, CEO of HSBC Group, said: “This transaction strengthens our business in India and strengthens our status as one of Asia’s leading wealth managers. Combining LTIM with our existing Indian asset management business gives us the scale, scope and capabilities to capture some of the 15-20% annual growth in the asset management market expected in India. over the next five years. It also strengthens our ability to meet India’s growing wealth needs, as well as those of the 18 million non-resident Indians around the world.
The Taking of Wall Street
The stock has earned an analyst rating in the past three months. UBS analyst Jason Napier raised the stock to a buy from an expectation, but did not assign a price target.
According to the new TipRanks Risk Factors tool, the HSBC stock is mainly exposed to two factors: Finance & Business and Macro & Politics, which respectively contribute 30% and 27% of the total of the 37 risks identified for the stock.
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