Mumbai: Private sector Axis Bank Ltd has received the Reserve Bank of India’s (RBI) approval to set up an asset management company (AMC) that will allow it to offer products such as mutual funds. The bank now awaits approval from capital markets regulator Securities and Exchange Board of India to enter the fast growing segment.
The new company will be a wholly owned subsidiary of the bank and will carry out asset management, advisory and related services, said Asok Kumar, executive director of the Mumbai-based bank.
“The bank is also exploring the options of entering the broking business. We are evaluating the business proposal, but nothing has been finalized yet. We may look for a partner (for this business) or go on our own,” Kumar added.
Exploring different options: P.J. Nayak, Axis Bank’s chairman and managing director. There are about 35 players in the asset management segment in India, managing more than Rs6 trillion (Photo by: Ashesh Shah/Mint
There are about 35 players in the asset management segment in India, managing more than Rs6 trillion as on 31 May, according to the Association of Mutual Funds in India. Reliance Capital Asset Management Ltd is the largest player with a market share of 16.4%, followed by ICICI Prudential Asset Management Co. Ltd with a 9.84% share, HDFC Asset Management Co. Ltd with 9.35% and UTI Asset Management Co. Ltd with 9.1% of the total market.
The fast growth and higher margins in India’s asset management segment are attracting several foreign and domestic players. The segment has grown 47% year-on-year (y-o-y) between 2003 and 2007 in India, according to a study in March by consultancy firm McKinsey and Co.
Except for Russia and China, which grew at a much faster pace, growth of the segment in other countries, such as the US, the UK and Brazil, was much lower, said the study, Indian Asset Management: Achieving Broad-based Growth.
The margins are also higher in India’s AMC segment compared with markets such as the UK and the US, it said.
“Mutual funds have grown phenomenally in India and there is definitely space for more players in the industry,” said Hemant Rustagi, chief executive of Wiseinvest Advisors Pvt. Ltd, an advisory firm.According to him, the main competition to mutual funds is from bank deposits. But investments in mutual funds are more tax-efficient, he added.
Rustagi, however, said there will be consolidation in the mutual funds industry.
In May, Infrastructure Finance Development Co. Ltd acquired Standard Chartered Asset Management Co. Pvt. Ltd, the Indian mutual fund business of British bank Standard Chartered Plc., that was managing Rs14,000 crore of assets.
On 18 April, Mint had reported that LIC Mutual Fund Asset Management Co. Ltd, promoted by state-owned Life Insurance Corp. of India, has been looking for a strategic partnership with an overseas financial services firm and that the partner could be Japan’s Nomura Group.
The newest entrant in this business is Bharti AXA Investment Managers Pvt. Ltd, a joint venture between Bharti Ventures Ltd, AXA Investment Managers and AXA Asia Pacific Holdings. Mirae Asset Global Investment Management India Pvt. Ltd, JPMorgan and AIG Global Investment Group have also set up their asset management business recently.
Axis Bank, India’s third largest private lender, has assets worth more than Rs1 trillion and its net profit for the year ended 31 March had crossed Rs1,000 crore. It had, in September 2007, launched a wealth management business for non-resident Indians in association with Banque Privee Edmond de Rothschild Europe.
“The mutual fund industry has been growing at a compounded annual growth rate of around 40% for the last five years. We are likely to see a similar momentum in the years to come,” said Sameer Kamdar, country head for mutual funds at Mata Securities India Pvt. Ltd. The current volatility in the stock market should not impact long-term investors’ plans, he added.
The McKinsey report predicted total assets under management in India could grow at around 33% y-o-y to $350–440 billion (Rs14.98-18.83 trillion) by 2012 from $92 billion in March 2007.