Bharti-AXA to roll out first product next year

With Bharti-AXA Investment Managers will roll out its first product in the Indian market only next year as it wants to first assess the market, according to the chief executive officer, Sandeep Dasgupta.

The asset management company, a 75:25 joint venture between the France-headquartered AXA Investment Managers and Sunil Mittal-promoted Bharti Ventures recently received Sebi's approval to commence mutual fund operations in the country.

The key team members are in place. Prateek Agrawal, the equity head is from ABN AMRO AMC, Sujay Das, the fixed income head came from DSP Merrill Lynch AMC and Nanda Kishore S, the marketing head is from Sundaram BNP Paribas AMC. Dasgupta himself is from Deutsche AMC. Bharti-AXA has a 35-member strong team, which would be expanded to 70 by June.

"We would initially stick to core products such as pure play equity diversified, cash, cash plus and fixed maturity plans and launch offshore products from AXA's suite at a later date," Dasgupta asserted.

The costs of managing the asset management business have gone up in the last ten years, thanks to the increasing spends on workforce, marketing and premises, according to Sandeep Dasgupta, chief executive officer, Bharti-AXA Investment Managers.

"Revenues have risen as the asset size has gone up, but the margins have gone down. It now takes longer now to break even," said Dasgupta.

According to a recent Mckinsey report, the profitability of asset management industry in India is at par with global peers despite relatively reduced revenues and profit pools. The Indian players are able to charge higher fees due to lower competition.

The fund house has a corporate office in the suburb of Santa Cruz and a sales office in South Mumbai. "Most of the employees prefer to be in the suburbs. It saves commuting time. Thanks to technology, we can manage even without a main office in South Mumbai," Dasgupta pointed out.

A slew of players such as Religare-Aegon, Dawnay Day AV, Indiabulls, India Infoline and Edelweiss Capital are waiting in the wings to launch mutual fund operations in India. Does the industry have room for so many AMCs?

"If the growth in the industry continues, there is room. Players are in for various reasons and have different business models. Some want to be seen as niche players, others want to focus on a particular asset class, while a third category are here for strategic reasons. Unlike investment banking or equity broking, AMC is a defensive business since it takes time to break even. A fund house investing in distribution and brand building would typically take 3-4 years to become profitable," said Das Gupta.

AXA Investment Managers acquired the UK-based Framlington Group from HSBC Holdings and Comerica in 2005. It also holds a minority stake in a joint venture with SPDB and Shanghai Dragon in China called AXA SPDB Investment Managers.