Mutual funds losing lustre as a lucrative business

The mutual fund industry lost a staggering Rs 1.27 lakh crore from its average assets in June, of which Anil Ambani group’s Reliance MF alone accounted for a full 15 per cent.

Industry experts claim that falling margins and certain regulatory steps have adversely affected the business and has resulted in many potential entrants putting entry plans in the back burner and even some existing players developing a cold feet.

Dearth of buyers

Compounding their woes is the fact that those looking to exit are unable to find buyers, especially at the price sought by them. Currently, there are about three dozen fund houses operating in the country, although there are about a dozen more entities registered with the market regulator Securities & Exchange Board of India (Sebi).

Among existing players, at least half a dozen are exploring ways to partly or fully selling their stakes, a senior official at a leading fund house said.

The average assets under management (AUM) of the 39 fund houses in the country plunged by Rs 1.27 lakh crore or 16 percent in the last month. The average AUM of the industry stood at Rs 6,75,858 crore, as per the data available with the industry body AMFI.

Drop in AUMs

While there was no official word on exit from any of the players, reports suggest that those eyeing stake sale include promoters of asset management arms of entities like Anil Ambani group firm Reliance Capital, IDFC, ING, Benchmark and Religare.

Those funds which saw a drop in their AUMs also include Fortis MF (32 per cent), Taurus MF (20 per cent) and Canara Robeco (20 per cent) and SBI MF (7 per cent).

The lack of interest from those who had earlier announced plans to enter the business can be gauged from the data about processing status of mutual fund applications with Sebi. Out of 24 pending applications, as many as 18 are those where the companies have been asked to furnish further information and such pending applications date way back to 2006.

“The margins of the existing players are getting squeezed. Although there are a lot of players on the block, but there are few takers for them,” SMC Capitals Equity Head Jagannadham Thunuguntla told PTI.