Weeks After Zerodha’s Mutual Fund JV, Groww Completes Acquisition Of Indiabulls’ MF Business

Investech unicorn Groww has executed the acquisition of the mutual fund business of Indiabulls Housing Finance for a consideration of INR 175.6 Cr.

“We have… informed the exchanges about the divestment by the Company of its entire stake in the mutual fund business, being carried out by Indiabulls Asset Management Company Limited, to Nextbillion Technology at an aggregate purchase consideration of INR 175.62 Cr (including cash and cash equivalents of INR 100.62 Cr),” said Indiabulls in a regulatory filing.

The deal included a cash equivalent, which stood at around INR 100.62 Cr. As per the company, the acquisition was undertaken after receiving all necessary approvals from regulatory authorities.

The deal will enable Groww to launch new mutual fund offerings and strengthen its portfolio.

The transaction was finally closed on May 3 this year, after being nearly two years in the making. The development comes nearly two years after the wealthtech startup signed a definitive agreement to acquire the mutual fund business of the company’s two subsidiaries — Indiabulls Asset Management Company (IAMCL) and Indiabulls Trustee Company.

Subsequently, the competition watchdog Competition Commission of India (CCI) also gave its nod to the transaction in September 2021.

The deal comes a month after Groww’s competitor publicly announced that it had formed a joint venture (JV) with investech platform smallcase to launch an asset management platform to foray into the mutual fund business. Groww’s move to speed up the acquisition comes as a resurgent Zerodha looks to launch its mutual fund offerings while awaiting final clearance for an AMC from market regulator SEBI.

Zerodha bagged an in-principle clearance from SEBI for an asset management company back in 2021. 

Founded in 2017 by the ‘Flipkart cartel’ comprising Harsh Jain, Lalit Keshre, Neeraj Singh, and Ishan Bansal, Groww is a wealthtech startup that enables its users to invest in stocks, exchange-traded funds (ETFs), and IPOs. 

With more than 5.3 Mn active clients, Groww is the second biggest wealthtech player in the country by users, just behind Zerodha. However, while the startup has bagged big numbers and has received the backing of big investors such as Sequoia and Tiger Global, soaring expenses and customer discounts weighed heavily on financial numbers.

The company saw its losses surge to INR 239 Cr in the financial year 2021-22 (FY22), compared to a profit of INR 167.6 Cr in the year-ago period. However, operating revenue jumped 11.8X YoY to INR 350.9 Cr in FY22, up from INR 29.5 Cr in FY21. 

The focus on mutual funds comes at a time when SEBI has introduced a slew of reforms to spur the penetration of mutual funds in the country. In December last year, the market regulator’s top boss Madhavi Puri Buch said that mutual fund platforms could charge ‘some commission’ from customers for executing transactions.

It also introduced a regulatory framework for Execution Only Platforms (EOP), which allows users to invest in direct mutual fund schemes. As per SEBI, the mutual fund industry had INR 38 Lakh Cr worth of assets under management (AUM) at the end of April 2022.