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Consolidation in mutual fund industry inevitable: Experts

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Consolidation is likely to happen in the mutual fund sector going ahead, says Nilesh Sathe. Reuters Consolidation is likely to happen in the mutual fund sector going ahead, says Nilesh Sathe. Reuters
SummaryConsolidation is likely to happen in the mutual fund sector going ahead, says Nilesh Sathe

With the change in net worth requirement for mutual fund companies by market regulator Sebi, industry experts feel that consolidation will be inevitable in the sector going ahead.

"Consolidation is likely to happen in the mutual fund sector going ahead. I think some small players will be acquired by the big fund houses," Director and Chief Executive Officer of LIC Nomura MF, Nilesh Sathe told PTI over the weekend here.

When asked about the timeline, Sathe said it will depend on the holding capacity of the individual fund house. Last week, Sebi decided to raise the minimum capital requirement for an asset management company to Rs 50 crore from the present Rs 10 crore.

According to Sebi, 19 companies are operating in mutual fund space with less than Rs 50 crore of capital and they have been given three years to raise their capital as per the new norm.

Fund houses namely Quantum MF, Pinebridge MF, IDBI MF, BOI MF, ING MF, and Motilal Oswal MF, among others, have to raise their capital base to meet the new requirement.

Earlier, UTI MF Managing Director Leo Puri had said consolidation was necessary in the industry for better growth.

"I absolutely agree with Sebi that we have a highly fragmented industry with very large number of players who have no economic sustainability and who therefore create further disruption in the market by using tactics that engenders us all.

"These could be tactics related to pricing, inducing distributors to offer inappropriate products to gain position in the industry," Puri said while answering a query on need of consolidation in the MF industry.

Currently, while there are 44 players operating in the mutual fund industry, only one per cent of AUM is coming from the bottom 10 fund houses.

However, officials of small fund houses said consolidation is not likely to happen among domestic players.

"I don't see any domestic fund house exiting business due to higher net worth requirement. Previously some foreign players had exited India, which may also happen in the future," Quantum Mutual Fund Chief Executive Officer Jimmy Patel said, adding that stake sale may be seen among domestic players in the future than complete exit from the sector.

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