Reliance Asset Management Company (AMC) has edged past HDFC AMC to become the most profitable mutual fund house in the country. As per the released data, the Profit After Tax (PAT) for Reliance AMC stood at R261 crore for the financial year ended 2010-11 against R242 crore for HDFC AMC. Profits of Reliance AMC grew at a faster pace 32% compared with 16% for HDFC. This is the first time a fund house has surpassed HDFC in terms of profits ever since it took over zurich mutual fund way back in June 2003.
?When scale of business grows, expenses come down while topline growth contributes directly to higher profits? said Sundeep Sikka, CEO of Reliance AMC.
He added that the company has been investing a lot in the past few years to improve retail participation which has now paid-off in the form of consistent retail inflows into their funds.
According to the fund house, about R400 crore worth of money flows every month in the form of systematic investment plans (SIPs) from its 12 lakh active SIP accounts.
As a trend, bigger fund houses?especially the top five in terms of profitability – saw their profits grow at a healthy rate while many medium sized fund houses slipped into red. Reliance MF, HDFC, Franklin Templeton, Birla Sun Life and SBI MF remained the most profitable fund houses in the country for the financial year 2010-11 while UTI profit figures were not available on public domain.
?Despite the challenging environment, we had posted good numbers helped by our healthy asset mix focused on long term assets, in both equity and debt categories? said Harshendu Bindal, president, Franklin Templeton Investments-India.
Interestingly, LIC Nomura MF, HSBC MF, Edelweiss MF, Principal MF and BNP Paribas AMC slipped into red for the financial year 2010-11 after reporting profits in the previous year.
?Since the abolition of entry loads, many fund houses paid commissions to distributors from their own pockets, to get equity assets, which has hit mutual fund profits? said Dhirendra Kumar, CEO of Valueresearch.
He added that in the previous financial year, no new money also came into the industry with equity markets remaining weak, which again impacted profitability of smaller fund houses.
However, bigger fund houses such as Birla Sun Life AMC posted a robust profit of R84.5 crore in 2010-11 which was 75% higher than the previous year. A Balasubramanian, CEO of Birla Sun Life MF said, ?The profit growth was largely possible due to higher equity inflows while keeping costs lower.? He added that inflows have been coming into its funds despite volatile equity markets through SIPs as well as lump-sum investments.
While Reliance MF is the top fund house in terms of assets and now in terms of profits, HDFC MF continues to have the best equity schemes under its ambit which in turn has helped it clock regular inflows into its schemes. Offlate, Reliance AMC has been facing the challenge of seeing erosion in some of its equity assets and last week, it was in talks with Japan?s Nippon Life for a stake sale.