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  • FEBRUARY 12, 2000

IDBI MF, Principal of USA tie the knot

According to a press release from IDBI Investment Management Company Ltd. (IIMCO), the latter will offer 50% equity stake to Principal Financial Group, USA. IIMCO is the asset management company that manages IDBI Mutual Fund's schemes.

Industrial Development Bank of India (IDBI) with an asset base of US$ 17 bn is India's largest development financial institution (DFI) and the seventh largest in the world. It has interests in commercial banking, mutual funds and capital market services. Currently, IDBI has an investor base of 3.3 m.

Principal Financial with assets in excess of US$ 113 bn and more than 10 m customers worldwide, is a member of Fortune 500 and Fortune's Most Admired Companies' list. It has operations outside the US in Asia, Europe and Latin America. It provides administrative services to more 401 (k) plans than any other provider in the USA.

The press release revealed that IIMCO will be involved in the management of MFs and introduce pension/pension-related products when permitted by the law, in addition to long term savings and tax-advantaged products targeted at businesses and individuals in India.

IDBI MF has been in the mutual fund business for over 4 years and has sufficient insight about the domestic mutual fund industry. However, IDBI MF's schemes are yet to witness the kind of explosive growth that some of the private MFs have witnessed over the past 6-8 months.

IIMCO's joint venture with Principal Financial will ensure that IDBI MF gets the requisite inputs in terms of technology and products from a US player with wide experience. With a range of MF reforms on the anvil (particularly) related to pension products, IDBI MF will able to draw from Principal's experience about the US MF industry, where pension products have prevailed for quite some time now.

IIMCO will hope that its tie-up with an established US player will do for it, what Prudential's tie-up with ICICI did for the latter. Prudential-ICICI MF with assets in excess of Rs 40 bn, is the second largest MF player in the private sector. Prudential had an instrumental role to play in the turnaround in ICICI's fortunes, which were going nowhere until the tie-up. IIMCO will seek to repeat that.

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