If the deal goes through, it will be the third major buyout in the Indian wealth management industry in recent months.
The decision to sell Reliance Wealth Management is part of the strategy to sell non-core assets. Reliance recently sold its stake in the mutual fund business to joint venture partner Japan’s Nippon Life.
The buyout of Reliance Wealth, with about 3,500 crore of assets under management (AUM), will pave the way for InCred’s entry into the wealth management industry. InCred could rope in an industry veteran to head the venture, said the two people in the know.
The deal valuation could not be ascertained. InCred was started in 2017 by Bhupinder Singh, former corporate finance head at Deutsche Bank. Reliance Group and Singh didn’t respond to queries.
Recently, Reliance Wealth Management saw the exit of chief executive officer Nitin Rao. The unit was carved out from the group’s stock broking arm Reliance Securities as part of Reliance scion Anmol Ambani’s thrust to grow the financial services business.
The plan went awry as the Infrastructure Leasing & Financial Services (IL&FS) default last September triggered a liquidity squeeze, catching indebted companies on the wrong foot. Reliance has been on an asset-pruning spree to pay back creditors as some units have defaulted.
The profitability of the wealth management industry has been hit since April by the Securities and Exchange Board of India (Sebi) move to restrict commissions that mutual funds pay to distributors and investment advisors. They could be squeezed further once the capital market regulator tightens distributor fees for Portfolio Management Services (PMS), a product for the rich. The main impact of these steps has been on smaller wealth management firms or those that hired aggressively during the recent bull run.
Recently, IIFL Wealth and Asset Management, one of India’s biggest investment advisors, announced the acquisition of L&T Finance Wealth Management. The sale was part of L&T Finance’s decision to exit noncore businesses.
Earlier, WGC Wealth, the erstwhile wealth management arm of Wadhawan Global Capital, the holding company of stressed finance company DHFL, was taken over by LGT, a private banking and asset management group owned by Liechtenstein’s royal family.