But top 5 cities? share in industry assets slips to 74.04% from 74.26% in previous quarter

Despite incentives to widen their geographical spread beyond the top 15 cities, the top metros continue to contribute the most to the assets garnered by the mutual fund industry.

Mumbai remains the largest contributer to MF assets, garnering a 43% share of the overall assets, latest data put up on industry body AMFI?s website show. Mumbai is followed by Delhi at 15%, Bangalore (5.7%), Chennai (4.98%) and Kolkata (4.94%).

However, the share of top 5 cities to the industry?s assets has dipped marginally to 74.04% from 74.26% in the previous quarter. Also, the share of top 15 cities to the overall AUM has dipped to 86.87% from 87.71% in the same period. The share of 20 cities beyond the top 15 cities, on the other hand, has risen marginally from 5.33% to 5.56%.

Interestingly, the share of Mumbai has dipped significantly from 48.65% in September 2011, the earliest quarter for which data are available, to 43% as on March 2013. The share of top 5 as well as top 15 cities has dipped marginally during this period. However, the share of 20 cities beyond the top 15 cities has also fallen from 5.95% to 5.56%.

?It?s still early days to assess the push into B15 (beyond 15) cities, more so since equities schemes have been out of favour for the past few quarters,? said Dhirendra Kumar, CEO, Value Research, a mutual fund tracker. ?My guess is that it will take at least a year or two for the penetration in these cities to improve.?

According to Debasish Mallick, MD & CEO, IDBI Asset Management, it would be more meaningful to look at the average ticket size as well as the number of applications coming from B15 cities, instead of the AUM percentage, to assess the kind of inroads fund houses have made into these cities. ?The number of high networth individuals in a city like Mumbai will be much higher than B15 cities. Consequently, the average ticket size will be higher as well, and bridging this gap will be a tall order,? he said.

Fund houses have taken initiatives to expand into B15 cities. For instance, HDFC Mutual Fund recently opened 20 new branches in B15 cities. AMCs such as IDBI MF, Birla Sun Life Asset Management, SBI Mutual Fund and Peerless MF have announced tie-ups with PSU banks to sell MF products in the hinterland. These deals, however, may not translate into significant addition of MF clients, said industry observers.

?It?s one thing to sign a deal with a bank but quite another to convince banking personnel to sell MF poducts,? said a top industry official.

Fund houses are allowed to charge an additional expense ratio of up to 30 basis points depending upon the extent of new inflows from locations beyond top 15 cities, according to Sebi guidelines brought out last year.