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Birla Sun takes over Alliance schemes

By Our Special Correspondent

MUMBAI, OCT. 18. Birla Sun Life Asset Management Co Ltd (BSLAMC) today acquired the mutual fund schemes of Alliance Capital Asset Management (India) Ltd (ACAM).

ACAM had about Rs. 1,951 crore in assets under its management (of which equity mutual fund assets represented 33 per cent) as on September 30, 2004 and BSLAMC reported assets under management of Rs. 8,982 crores. The combined assets under management of BSLAMC after the acquisition would increase to Rs. 10,933 crores.

"Alliance Capital's Indian mutual fund assets have an excellent performance track record and are a good fit with BSLAMC's existing business,'' said S. V. Prasad, Chief Executive Officer, BSLAMC.

Meanwhile, Alliance Capital stated that, after a lengthy review of strategic options available for its Indian mutual fund business, it had decided that growth opportunities for ACAM, its joint venture asset management business, had diminished. "In transitioning the schemes to Birla Mutual Fund, a larger mutual fund house growing at a faster arte, Alliance Capital believes it is acting in the best interest of its investors,'' it added.

Completion in 2005

Birla Sun Life's near term plans are to maintain the separate identity, under its own brand, of the schemes transferred from ACAM. The proposed transaction is expected to be completed in early 2005.

Alliance Capital Management Corporation of Delaware, U.S., sponsors ACAM. BSLAMC is part of Birla Sun Life, a joint venture between the Aditya Birla Group and Sun Life Financial.

Alliance Capital further stated that it will continue its long history of investing in India, which began more than ten years ago with the launch of the India Liberalisation Fund (ILF), a Luxembourg-registered offshore fund, which was one of the earliest approved Foreign Institutional Investors (FIIs) Sub-accounts in India and which will continue to actively invest in India as an FII Sub-Account on behalf of its offshore clients.

Alliance Capital also intends to offer its offshore mutual fund family to individual investors in India. In addition it plans to maintain an office in Mumbai with an equity research team that provides research regarding Indian companies and markets and offers investment ideas to our global equity portfolio managers.

The domestic partner of ACAM, Ankar Capital India Pvt Ltd, intends to continue its involvement in India, supporting Ankar-related entities engaged in private equity investment in India and Asia.

Fair valuation

While terms of transaction are not disclosed, Alliance Capital commented that it has received a fair valuation for its business. Alliance Capital also stated that it has separately addressed the interests of the employees of ACAM.

Today's move by Alliance Capital is the culmination of its plans to sell its Indian business, which began in the later half of the year 2002. Negotiations started with various bidders from January 13, 2003 onwards and even while negotiations were on, Housing Development Finance Corporation too made a pre-emptive bid.

Samir Arora, ACAM's former fund manager also made a bid along with Henderson Global Investors to acquire the operations of ACAM. However, it resulted in Securities and Exchange Board of India (SEBI) prohibiting Mr. Arora from dealing in securities for five years as the capital market regulator found him guilty on three counts, relating to conflict of interest, market manipulation and insider trading.

However, the Securities Appellate Tribunal (SAT) last Friday exonerated Mr. Arora of all charges. The first charge of conflict of interest was related the aborted sale of ACAM based on the fact that Mr. Arora made a bid for its purchase along with Henderson Global Investors, while he was the Fund Manager of ACAM. But SAT noted, "No such violation of any regulation has been pointed to us by the SEBI to show that a fund manager cannot make an open and transparent offer for buying a fund in which he is employed as a fund manager... There was nothing secretive or sinister about this entire transaction. The charge therefore fails.''

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