Now, an MF route to e-commerce

Pramerica has approached Sebi to launch a scheme focused on the hot sector

Small investors now sitting out of the e-commerce boom would soon get an opportunity to join the party through a safe and familiar route. Pramerica, one of the younger fund houses, filed last week for an e-commerce fund with the Securities and Exchange Board of India (Sebi).

If cleared, Pramerica eCommerce Fund-Series 1 is likely to be the first of many such schemes that might hit the Street in the coming months.  The e-commerce sector has seen unprecedented rapid growth in India in recent months. Several new business models and entrepreneurs have emerged and raised funds from global private equity entities.

Abundant capital infusion and swelling smartphone and broadband internet penetration are expected to take the sector from the current size of $17 billion to $100 bn by 2019, according to a recent study by Assocham and PricewaterhouseCoopers.  

Pramerica’s closed-end scheme, benchmarked to the CNX 500 and rated ‘high risk’, will allow small investors a piece of this action for as little as Rs 5,000, the minimum investment. “The objective is long-term capital appreciation by investing in equity & equity-related securities, including derivatives of a diversified set of companies benefiting from rise of e-commerce in India,” the fund house said in the scheme information document filed last week.

The scheme, likely to take a few weeks to a few months to hit the Street, depending on how soon it gets the regulatory clearances, will invest in both direct and indirect e-commerce plays. The company believes the government push towards digital India and smart cities will give further impetus to the sector.

While new enterprises such as taxi apps, e-wallets and payment banks continue to change the way Indians transact and trade, it is not clear if the scheme will be able to take advantage of the early-stage ventures which are largely in the unlisted space.  

Brahma Prakash Singh, chief investment officer, equity, at Pramerica, who will manage the scheme,  did not respond to calls and texts sent to his mobile.

A sector veteran said, “Valuation of direct (e-commerce) plays are expensive. It would be better for them to play the theme through indirect plays in the telecom, information technology (IT) and logistics sectors.” He added one needed to wait and see how the regulator dealt with this first-of-its-kind product.

The scheme documents suggest as much. “The beneficiary companies can be in manufacturing as well as the services sector, which includes manufacturers who can potentially sell a large proportion of their products via the e-commerce route, IT companies providing software to enable e-commerce  transactions, payment solutions providers, banks, logistics, warehousing companies, etc.”

The scheme document  also talked about the sector’s potential to act as a bridge to meet unmet demand without much additional costs.

Pramerica, a fully owned arm of US-based Prudential Financial Plc, manages assets of around Rs 2,000 crore. Most of its assets are in liquid funds, while four equity schemes account for Rs 230 crore. It recently had a leadership change, with Ravi K Kumar taking over as chief executive.