Banks owning asset management companies (AMCs) are set to reap a golden harvest, according to a recent report published by McKinsey & Company.
As a fallout from the ban on entry loads imposed by the Securities and Exchange Board of India (SEBI), effective August 1, all those mutual fund entities that are not dependent on distributors to sell their products would get an added advantage over others as they will be able to leverage a captive infrastructure.
According to the data available, there are around 37 AMCs in existence at the moment, out of which almost one-third are owned by banks.
The move by SEBI has compelled AMCs to take a new look at their revenue models as they cannot charge sales and distribution expenses from investors. As such, competitive edge would be with banks as they will retain all economies within a group.
The report added that the top five firms in the industry as of now are either sponsored by banks or have captive distribution channels. And not surprisingly, they constitute around 50 per cent of the industry as far as assets managed are concerned.
Reliance Capital Asset Management remained at the top of the table, managing assets worth Rs 1.17 trillion as per figures of August, the report states. The AMC has offices in 300 locations apart from having the outreach benefit flowing from Reliance Money, which has a presence in over 5,000 locations in India.
The report states that after Reliance, HDFC AMC and ICICI Prudential AMC are next and not surprisingly, both are owned by banks. While HDFC AMC had Rs 93,874 crore average assets in August, ICICI Prudential managed close to Rs 78,000 crore.
Similarly, UTI AMC is the fourth-largest and has around Rs 74,000 crore in assets. UTI AMC is owned by three public sector lenders — State Bank Of India (SBI), Punjab National Bank and Bank of Baroda — and state-owned insurer Life Insurance Corporation.
Birla Sun Life AMC, which manages Rs 62,866 crore, and does not have any bank support, will still be able to bank on the benefit flowing from the 40-branch network of Birla Sun Life Distribution Company, the report stated.
Among the rest, SBI Funds Management Private Limited (Rs 34,056 crore), Canara Robeco AMC (Rs 7,892 crore) and Baroda Pioneer AMC (Rs 5,414 crore) would also benefit from their parent’s large network of branches.
The report also suggested that as far as independent AMCs were concerned, they would have to look at developing a direct selling model that would be based on online platforms. It also suggested that the use of remote channels like mobile and internet would greatly help in selling of mutual funds apart from stating that there was a huge scope for evolution of independent financial advisors.