Mumbai: Japan’s Shinsei Bank Ltd is set to start mutual fund operations in India within three months, becoming the latest global firm to target the country’s promising asset management market, a senior official said on Tuesday.
Optimistic outlook: Shinsei Bank’s India asset management company hopes to break even in three-five years. Robert Gilhooly / Bloomberg
“We think it’s an opportune time,” Piyush Surana, chief executive of Shinsei Asset Management India Pvt. Ltd, told Reuters in an interview. “Within three months, we should have the products out in the market.”
Shinsei will start with an equity, a liquid and a bond fund, part of a plan to launch at least six funds in the first 12 months of operations as investment climate improves in Asia’s third largest economy.
India’s main stock index leapt 14.1% last week, its biggest weekly rise in 17 years, after the ruling coalition won an unexpectedly larger number of seats in Parliament and raised hopes for speedier pro-market reforms.
The Bombay Stock Exchange’s benchmark index, the Sensex, which closed down 2.3% on Tuesday, has gained almost 70% since early March and is up nearly 40% this year after slumping nearly half in 2008.
Rakesh Jhunjhunwala, named India’s Warren Buffett by Forbes, has a 15% stake in the Shinsei asset management firm. It has a 32-member team, including former SBI Funds Management Pvt. Ltd executive Sethuram Iyer as chief investment officer.
Shinsei hopes to break even in three-five years, Surana said, but did not give details of the size of assets it aimed to manage. Boston Consulting Group Inc. (BCG), a global management consulting firm, has estimated an Indian mutual fund firm needs about $2 billion (Rs9,520 crore) to break even.
“I think there is much more optimism in the industry,” he said, referring to a revival in activity after investment flows had dried up for about a year.
ICICI Prudential Asset Management Co. Ltd had said last week it collected nearly Rs800 crore in a new equity fund, the highest since at least March 2008. Reliance Capital Asset Management Ltd launched an infrastructure fund on Monday.
Shinsei joins JPMorgan Chase and Co., South Korea’s Mirae Asset Financial Group, Pioneer Global Investments Ltd—the fund arm of Italian bank UniCredit SpA—and France’s Axa SA, who have launched funds in India over the last two years.
India’s savings rate of nearly 32%, much of which is in low- yielding bank deposits, an emerging middle class and the world’s second largest population also make the market a powerful long-term attraction to international fund management firms.
Nearly 20 foreign money managers, including Credit Agricole SA and UBS AG, are considering entry into India’s promising, but fiercely competitive fund market to manage $520 billion by 2015, a forecast by BCG said.