Axis chief Amitabh Chaudhry targets threefold growth in AUM of MF arm

Axis Bank’s new Chief Executive Officer Amitabh Chaudhry wants a three-fold growth in the assets under management (AUM) of the mutual fund arm in the near future. Axis Asset Management, which had an average AUM worth Rs 81,622 crore as of December 2018, wants to scale it up to Rs 2.5 trillion, he said. The bank has set a timeline of three to four years for this growth.

“The bank’s MF business, in terms of AUM, is ranked ninth. In this business you won’t make much money unless you are in the top five, especially after the changes introduced by Sebi (Securities and Exchange Board of India),” he said. Chaudhry wants the growth to happen in a sustainable manner.

Industry leaders HDFC Mutual Fund and ICICI Prudential Mutual Fund had AUMs worth Rs 3.35 trillion and Rs 3.08 trillion, respectively.   

In September, Sebi had lowered the ceiling on total expense ratio charged by a fund house. This would result in lower income for fund companies. 

Chaudhry joined Axis Bank last month. He has plans of growing Axis Asset Management as well as its broking arm, Axis Direct.

Axis AMC will expand its product range and leverage the parent bank’s distribution channel to improve sales and target better customer segments. Chaudhry said every subsidiary of the bank had its own three-year operating plan.

Axis AMC is a joint venture between the bank and the Schroders group. Axis Bank has the major stake of 74.99 per cent, while Schroders’ stake is 25 per cent. It posted net profit of Rs 43.01 crore on a total revenue of Rs 752.51 crore in 2017-18. In the previous year (2016-17), its net profit was Rs 56.95 crore on a total revenue of Rs 530.97 crore.

“The performance of the funds is very good, but profitability needs to improve,” said Chaudhry.

He said the AMC was focused on the performance of the funds, and was now becoming more focused on being aggressive.

The AMC will provide a full suite of products, by expanding its equity offerings, and plans to set up an alternative investment fund. It is also working on a strategy to add debt products by leveraging the bank’s wholesale banking relations. While the company might not be able to catch up with the top players, it plans to be in the top five or six, at least on an incremental basis. 

“Unless you are in the top three or four, the kind of profit you get is limited since you get a slightly lower quality of customers. They will put a slightly lower volume of transactions through you, so your profitability suffers,” said Chaudhry.