L&T Finance Holdings shares tumbled about 7% on December 24 after the business stated on December 23 that it will sell L&T Investment Management to HSBC AMC for $425 million.

HSBC AMC will purchase 100% of the equity shares of L&T Investment Management, a wholly-owned subsidiary of L&T Finance Holdings, and the investment manager of the L&T Mutual Fund.

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Aside from the $425 million purchase price, LTFH will be entitled to surplus funds in LTIM until the deal is completed. In the meanwhile, both LTIM and HSBC AMC have said in a regulatory filing that they will assure the continuation of services to their investors and counterparties.

L&T MF is India’s 13th largest fund house, and experts believe the market is displeased with the deal’s values, which is putting pressure on L&T Finance Holdings’ shares today.

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It reached an intraday low of Rs 77.05 on the BSE and was trading 6.3% down at Rs 77.40 at 10:24 a.m.

“The transaction with HSBC is in line with our strategic objective of unlocking value from our subsidiaries which will help us to strengthen our balance sheet for our lending business. When seen alongside the recent capital raise, it provides us with enough ammunition to increase the pace of retailisation in our lending portfolio, which is one of our long-term goals,” said Dinanath Dubhashi, Managing Director and CEO, L&T Finance Holdings in the filing.

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The data from the Association of Mutual Funds in India (Amfi) shows L&T Mutual Fund (MF) has average assets under management (AAUM) worth Rs 78,273.80 crore, while HSBC MF has AAUM of Rs 11,314.32 crore as in the July-September quarter. If the conversion rate of Rs 75 is taken, the deal will be worth approximately Rs 3,188 crore.

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HSBC aims to consolidate LTIM’s activities with its current asset management business in India. L&T Finance Housing’s financial advisors were JP Morgan and Citi. Legal counsel was provided by Cyril Amarchand Mangaldas, and due diligence and tax advice were provided by PwC.

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