JPMorgan AMC may sell India biz

Three foreign fund houses have exited the Indian mutual fund business in the past 18 months

US-based JPMorgan Asset Management is planning to sell its mutual fund (MF) business in India.

The fund house, in an internal communication to select top executives, has conveyed that this business is being put on the block, said sources.

JPMorgan MF has assets of Rs 16,000 crore, the 16th biggest fund house.

The decision comes at a time when the assets under management (AUM) of domestic MFs have crossed Rs 12 lakh crore, following robust investor inflow and sharp appreciation in stock prices.

If the plan of selling out goes through, JPMorgan will be fourth foreign fund house to wrap up its India MF business in 18 months. The sector has seen Morgan Stanley, PineBridge and ING MF sell out. For many, JPMorgan’s exit could come as a surprise, as the fund house has been quite active in launching new fund offers in the equity segment of late.

In response to a query from this newspaper, Nandkumar Surti, managing director and chief executive officer, said: “As a matter of policy, we don’t comment on speculation or rumours.”

Limited presence in India and core focus on institutional money makes it tough for foreign fund houses to rope in the more sticky and profitable retail money.

According to a source in the sector, another foreign fund house, Deutsche MF, is also said to be on the block. Deutsche had refused to comment on this, when asked by Business Standard in January.

“A few AMCs are on the block. However, due to a sharp increase in AUMs in the past one year, acquisition costs have gone up. Also, as the sector is seeing robust investor inflows, most players are content with the organic growth they are seeing,” said a top official with a major fund house.

Typically, fund houses are valued between three and five per cent of their overall AUM. A higher percentage of equity assets fetches better valuations. Proportionately less AUM in this category has been a problem for many foreign entities.

According to its website, JPMorgan MF had assets of Rs 16,452 crore as on end-February. Equity-oriented schemes accounted for only Rs 1,218 crore; around 90 per cent of its assets are in debt schemes.

JPMorgan AMC got a license to sell MF products in February 2007, a year before the world's financial crisis began to unfold. Since then, till mid-2014, the Indian MF sector went through challenging times, due to drying of investor flows and continuous regulatory change.

JPMorgan Asset Management India had a profit of Rs 4.06 crore in 2013-14. It had a loss of Rs 17.9 crore the previous year.

The MF sector had assets under management of Rs 12.02 lakh crore as of end-February, according to the Association of Mutual Funds in India.

EXIT MODE

• JPMorgan looking to exit domestic MF business, say sources
   
• AMC ranked 16th with AUM of about Rs 16,500 crore
   
• Bulk of the assets, however, in the debt segment
   
• Few other AMCs, including Deutsche MF, too, on the block, say industry players
   
• Sharp rise in AUMs over the past year has increased acquisition costs