For an industry with 39 active players and Rs 6.76 lakh crore of assets, less than ten players manage more than Rs 25,000 crore of assets. And a large number, 18 players, manage less than Rs 5,000 crore.
Industry players feel that a lot of these small players may find themselves under pressure. Said a national head for mutual funds with a leading broking house, “In order to compete with the larger fund houses, small funds may have to make extra payouts to distributors. With the business increasingly getting big-house centric, it's getting quite difficult for the smaller players.”
Waqar Naqvi, CEO, Taurus MF, says, “Regulatory changes have affected all players with equal impact. However, larger funds have their advantages. The cost of business has gone up whereas earnings have slipped.”
According to industry estimates, the minimum annual running expense for an asset management company (AMC) with 15 offices in top cities is around Rs 15 crore annually. On top of it, there are distribution and other expenses that increase the costs to Rs 30 crore. To generate this income of Rs 30 crore, an AMC needs to have at least, Rs 3,000 crore of equity corpus – a distant dream in the current scenario.
No wonder, many are looking at other ways. Many fund houses have taken the awareness route – the only way to revive the equity segment by educating distributors and investors. However, the results are likely to be quite slow.
One of the news players, Mirae Asset, is looking to increase investor awareness to pay distributors for quality services. “As a new entrant, many of the earlier growth drivers are no longer valid. We have taken the initiative of making the investors aware of the need to pay for quality advice and service to the financial advisors,” explained Arindam Ghosh, CEO, Mirae Asset.
Even products are being tweaked. Some are looking to introduce hybrid products, like monthly income plans. These products ensure an element of safe returns to investors. “There is a drastic decline in retail participation and Systematic
Investment Plans (SIPs). Whatever is being sold in retail has shifted from equity to hybrid. We plan not to launch an equity fund for the next three-six months," said Akshay Gupta, chief executive officer of Peerless MF.
However, industry experts felt many of these players could turn niche – in terms of targeting specific cities or only having certain kind of products. “Niche players will still have a role to play. It depends on how fast these players can adapt,” said an industry watcher.
