Two new players apply for licence to join the Rs 37-trillion MF market

The industry has seen a flurry of applicants in the past few months, including Samir Arora-led Helios Capital and Rakesh Jhunjhunwala's Alchemy Capital among others

The competition in the Rs 37-trillion domestic mutual fund (MF) industry is set to intensify with two new players submitting applications with market regulator Securities and Exchange Board of India (Sebi) for an MF licence.

These include Old Bridge Capital Management, promoted by former MF fund manager Kenneth Andrade, and brokerage house Angel One.

“As our next phase of transformation, we are foraying into the AMC segment. We plan to manufacture passive investment products for our clients that will be developed on the basis of Artificial Intelligence and Machine Learning. We strongly believe that passive investment products have the ability to outperform the actively managed funds and will come at a very low price point to all our clients,” said Prabhakar Tiwari, Chief Growth Officer, Angel One.

Andrade did not comment on the rationale for applying for a license at this juncture.

The industry has seen a flurry of MF applicants in the past few months. These include Helios Capital, led by popular Singapore-based fund manager Samir Arora; Alchemy Capital, co-founded by Hiren Ved and Rakesh Jhunjhunwala; Unifi Capital, a two-decade-old portfolio management firm, and Wizemarkets Analytics, promoted by Deepak Shenoy of portfolio management firm CapitalMind. Wizemarkets had applied for an MF licence in December last year under the Regulatory Sandbox regime. Altogether, seven entities are waiting to get the in-principal approval from regulator Sebi.

The regulator granted in-principle approval to Bajaj Finserv and Zerodha in August and September of this year, respectively. Players like NJ India and Samco Securities were among the latest to set up shop and kickstart operations.

Some of the new applications follow Sebi’s move last year to ease the profitability criteria for setting up an AMC. In December, Sebi said sponsors which don’t fulfill the profitability track record can still set up a fund house, provided they have a minimum net-worth of Rs 100 crore, instead of Rs 50 crore that is otherwise required.

Industry players said the entry of fintech firms can bring a technological revolution in the MF space, which is currently dominated by traditional bank-backed AMCs. The majority of the new players are likely to focus on the passive category.

Experts said distribution and product innovation will be key for the newer players to succeed.

“Financialisation of savings is on the verge of taking off in India and that leaves room for the entry of many more mutual fund players. Having said that, there will hardly be any scope to make money without product innovation. I don’t think players that intend to focus on the passive side are likely to become profitable any time soon,” said Kirtan Shah, CEO, SRE Wealth.

The Indian MF industry has seen a huge rise in assets, as well as participation from investors, attracting more into the money managing business. During the past 10 years, the assets under management have risen over four times and in the past five years alone, the number of unique investors, systematic investment plans and folio counts have gone up 3-5 times.