HSBC Asset Management (India) Pvt Ltd is acquiring the mutual fund business of L&T Finance Holdings (LTFH) for $425 million or Rs 3,200 crore.

In a late evening announcement on Thursday, LTFH said it has entered into a definitive agreement with HSBC AMC wherein the latter will acquire 100 per cent of L&T Investment Management Ltd (LTIM), its wholly owned subsidiary for an aggregate purchase consideration of $ 425 million subject to adjustments as set out in the definitive agreements. LTIM is the investment manager of L&T Mutual Fund.

The transaction is subject to the requisite regulatory approvals. LTFH said both LTIM and HSBC AMC will work to ensure that there will be continuity of services .

According to LTFH, the divestment of its mutual fund business fits with the strategic objective of unlocking value from its subsidiaries to strengthen its balance sheet.

“The transaction with HSBC is in line with our strategic objective of unlocking value from our subsidiaries which will help us to strengthen our balance sheet for our lending business,” Dinanath Dubhashi, managing director & CEO, LTFH said

“When seen alongside the recent capital raise it provides us with enough ammunition to increase the pace of retailisation in our lending portfolio, which is one of our long-term goals,’’ he said.

HSBC is planning to merge the operations of LTIM with that of its existing asset management business in India.

Ahead of the announcement, shares of LTFH gained by 3.57 per cent to settle at Rs 82.60 in the BSE.