Axis Bank to venture into MF business

The country’s third-largest private sector lender Axis Bank is all set to enter the mutual fund business in the next six to eight months.

Siddharth Rath, the bank’s senior vice-president and head of capital markets, told Business Standard that the bank has received in-principle approval from the Securities and Exchange Board of India (Sebi) to set up its own asset management company (AMC). The bank is now waiting for the equity markets to stabilise before launching its first fund.

“We received Sebi’s in-principle approval last month. The launch of our first fund will depend on the conditions of the markets, and investor confidence. We will have a balanced mix of equity, liquid and debt funds in our portfolio,” said Rath.

With its entry into the mutual funds business, Axis Bank would become the 36th AMC in the industry, which has been witnessing a continuous erosion in total assets under management (AUM) for almost a year. At the end of October, the industry’s AUM stood at around Rs 432,000 crore, recording a decline of nearly 19 per cent from about Rs 532,000 crore at the end of October 2007.

According to Sebi norms, a company requires a minimum capital base of Rs 10 crore to set up its own AMC. “We will invest as much capital as required to form our own fund house. Our initial investment will be Rs 25-30 crore,” said Axis Bank Executive Director M M Agarwal.

In June, the bank had received the Reserve Bank of India’s (RBI) approval to set up its own AMC. So far, the bank has been distributing mutual funds of other AMCs for its private banking customers.

“The new company will be a wholly-owned subsidiary of the bank and will carry out asset management business,” said Rath.

The bank has plans to employ up to 500 people for managing and distributing mutual funds across the country. Rath said the bank has already identified the CEO, chief investment officer, head of marketing, and other vertical heads for managing and distributing the bank’s mutual fund schemes. The executive, however, refused to divulge the identities of these people, explaining the business plans are still being firmed up.

Rath said that initially, the bank will market and distribute its products through the bank’s own network of about 750 branches across the country, without tying up with other banks.

Axis Bank is setting up another joint venture AMC with Banque Privee Edmond de Rothschild Europe, which is part of the LCF Rothschild Group, to provide investment advisory services for private banking and wealth management in India.