The mutual fund industry in India, currently placed at 37 asset management companies (AMCs), is set to grow bigger.
The 53-year-old Peerless General Finance & Investment Company (PGFI) has received the green signal from the Securities and Exchange Board of India (SEBI) to launch its own AMC. It will then become the first east India-based AMC.
Akshay Gupta has been designated as the Chief Executive Officer (CEO) of the company.
The company is in a reasonable state of launch preparedness. PGFI already distributes products of AMCs such as ICICI Prudential AMC, Tata Asset Management, SBI Funds Management, Reliance Capital Asset Management and Sundaram BNP Paribas AMC, apart from servicing various insurers.
Axis Bank was the newest entrant to the industry, to be followed by PGFI, and there are nine others waiting in the wings, in different stages of getting into the AMC space or have announced intentions of initiating an AMC.
Those wanting to come into the AMC space are Bank of India, IDBI Bank, Mahindra & Mahindra Financial Services, SREI Infrastructure Finance, Bajaj Allianz, Indiabulls Financial Services, L&T Finance and Motilal Oswal, while India Infoline and Union Bank of India have announced their plans of initiating an AMC.
The total assets under management (AUM) of the MF industry, as on November 30, 2009, stood at Rs 8,06,638.27 crore.
While there is intense competition in the industry, there is renewed optimism as the market potential is huge and rising fast, as is clear from the fact that the November, 2009 AUM figure is the highest-ever. Unsurprisingly, this is driving the rush into the space.
Concerns remain, however. With the market regulator abolishing entry loads recently, there has been an increase in the cost of running the business since it led to the AMCs having to take care of distribution charges themselves, apart from other aspects like branding. Also, the sums required, apart from the legal fee charged for initiating an AMC, to manage the fund business have increased manifold over the years.