Dhanalakshmi Bank in Talks With Partners to Set Up Asset Management Unit

Dhanalakshmi Bank Ltd., an Indian lender, is in talks with potential
partners to set up an asset management unit as it expands its fee-based
income business.

The bank, based in the southern state of Kerala, will own 20 percent of
the money manager, Managing Director Amitabh Chaturvedi said in an
interview in Mumbai today. The dominant partner will control 51
percent, while a third company will own 29 percent, Chaturvedi said
without identifying the companies. Dhanalakshmi expects to start the
venture by December, he said.

“Our preferred route will be to hold major management control with a
minority stake and discussions are in process,” Chaturvedi said. “The
optimism is coming from the opportunities we are anticipating in this
segment.”

Rising income levels in the world’s third-fastest growing major economy
are prompting companies including Dhanalakshmi, meaning goddess of
wealth in Sanskrit, to tap emerging opportunities. Indians may see a
10-fold increase in their incomes by 2025, according to a study by
McKinsey Co.

Dhanalakshmi gained 1.5 percent to 192.75 rupees in Mumbai. The stock
has advanced 32 percent this year while the benchmark Bombay Stock
Exchange’s Sensitive Index has risen 4.3 percent.

India’s mutual funds industry grew more than fivefold in as many years,
with assets under management increasing to 8.05 trillion rupees in May,
according to data compiled by Bloomberg. India’s 1.1 billion people,
almost half of whom are under 25 years old, are spending more on
electronics, clothes and cars.

Economic Recovery

Dhanalakshmi Bank in July raised funds from 42 select institutional
investors, including the local units of JPMorgan Chase Co. and HSBC
Plc to boost capital.

The lender aims to increase consumer lending to as much as 90 billion
rupees ($1.9 billion) by March from 50 billion rupees a year earlier,
Chaturvedi said.

“We won’t need to raise any further capital in this financial year
after the completion of the placement,” Chaturvedi said.

Bank lending in India, Asia’s third-largest economy, to companies and
individuals grew more than 21 percent in the year through July, the
fastest pace since January 2008, signaling rising demand. Reserve Bank
of India Governor Duvvuri Subbarao on July 27 said India’s economic
recovery is “firmly in place and strengthening.”

Dhanalakshmi plans to increase loans for vehicles and homes fivefold to
30 billion rupees, Chaturvedi said, as more Indians borrow to purchase
motorcycles and cars.

Tata Motors Ltd., an Indian car and truck maker, reported sales in July
climbed 41 percent, while motorcycle maker TVS Motor Co. said on Aug. 1
its sales grew 35 percent last month.

The central bank last week raised India’s growth forecast to 8.5
percent from 8 percent for the year ending March 31.

Regards
Anoop Agrawal aagrawal8@bloomberg.net.