“We are now worried that a new buyer may be less open to retaining existing employees of IDBI AMC. One of the proposals we have made is inserting a clause in the share purchase agreement (SPA), which makes it incumbent upon the buyer to ensure employees are retained and all HR-related liabilities are carried forward,” said an employee at IDBI AMC.
In a letter to the senior management of IDBI Bank
and IDBI AMC — which is reviewed by Business Standard — senior employees have requested that the SPA “include condition about retaining the mandatory HR obligations due to employees, such as gratuity, provident funds, carry forward of leave balance, etc after acquisition”.
Employees have also suggested that for all the parties concerned, the merger of IDBI AMC with LIC AMC would be the most desirable outcome.
“There are a lot of synergies between the two AMCs. IDBI AMC has been strong on the equity side, while LIC AMC has a stronger position on the debt front. More importantly, we have an experienced team, with significant presence in various pockets of the country,” said another employee.
An internal study of IDBI AMC (in 2017) showed that its employee costs were among the lowest when compared to a peer group of 10 other AMCs. In 2017-2018, the AMC reported profits of Rs 8 crore, according IDBI Bank’s annual report.
Since the April-June quarter of the last financial year, the fund house’s asset size has halved from the levels of Rs 10,540 crore. Insiders say the slide in asset size has been on account of a dip in performance after certain fund managers and senior sales team personnel left due to a difficult working environment following changes in the top management.
If the company gets valued at 5 per cent of its asset under management (AUM) as seen in the industry, it would get valued at Rs 267 crore. According to the data from the Association of Mutual Funds in India, the fund house had an average AUM of Rs 5,347 crore in the July-September quarter. Once the AUM recovers, the AMC may fetch higher valuations, an investment banker pointed out.
The two AMCs’ merger was on track after LIC’s Rs 21,000-crore takeover deal of IDBI Bank was announced in 2018. Sources suggest that a one-to-one mapping of employees at the two AMCs had also been initiated.
Raj Kumar, then chief executive officer of LIC AMC, had said the fund house would benefit from IDBI AMC’s distribution channel, which uses IDBI Bank’s branch network.
Earlier in the year, IDBI Bank — now majorly-held by LIC — sought bids for divesting its stake in IDBI AMC. This move put the employees of IDBI AMC in a fix, who were expecting to get absorbed within LIC AMC.
On borrowed time
IDBI Bank looking to divest stake in IDBI AMC
Staff concerned over retention by new buyer
After LIC’s buyout of IDBI Bank, employees see merger with LIC AMC as suitable for all
Merger with LIC AMC will put combined assets under management at Rs 20,814 crore