HSBC Inks $425M Deal to Snap up L&T Investment Management

As part of its target to become Asia’s leading wealth manager by 2025, HSBC Asset Management (India) Private Ltd, an indirect wholly-owned subsidiary of HSBC Holdings plc (NYSE: HSBC), has inked a deal to snap up L&T Investment Management Limited (LTIM) for $425 million. Notably, LTIM is a wholly-owned subsidiary of L&T Finance Holdings Limited (LTFH) and the investment manager of the L&T Mutual Fund.

The deal is likely to be funded from existing resources and will impact HSBC’s Common Equity Tier 1 ratio minimally. The company expects the acquisition to be immediately accretive to earnings and provide a return on investment of over 10% in the medium term.

Benefits of the Acquisition

Through this acquisition, HSBC’s position will be strengthened as a wealth manager in Asia. The bank’s strong asset management business in India is likely to serve the wealth needs of its customers in India as well as non-resident Indian clients globally.

LTIM offers a distribution platform that includes banks, regional distributors, over 50,000 independent financial advisers, established digital platforms, and has a footprint across 65 locations throughout India. As of September 2021, the company holds assets under management (AUM) worth INR803 billion ($10.8 billion).

Upon the closing of the acquisition, pending regulatory approvals, the operations of LTIM will be merged with that of HSBC’s existing asset management business in India, which had AUM of INR117 billion ($1.6 billion) as of September 2021.

CEO Comments

Noel Quinn, HSBC’s Group CEO, commented, “This transaction enhances the strength of our business in India and reinforces our status as one of Asia’s leading wealth managers. Combining LTIM with our existing Indian asset management business gives us the scale, reach and capabilities to capture some of the 15-20% annual asset management market growth expected in India over the next five years. It also boosts our ability to serve India’s growing wealth needs, along with those of the 18 million non-resident Indians around the world.”

Wall Street’s Take

The stock has picked up a rating from one analyst in the past three months. UBS analyst Jason Napier upgraded the stock to a Buy from a Hold but did not assign a price target.

Risk Analysis

According to the new TipRanks Risk Factors tool, HSBC stock is at risk mainly from two factors: Finance and Corporate and Macro & Political, which contribute 30% and 27%, respectively, to the total 37 risks identified for the stock.