New networth norms for fund launches to hamper growth:Industry

Terming as "prohibitive" the proposed Sebi norms mandating higher networth for new fund lauches, small mutual fund houses stated that the move would hamper growth of the sector, which has of late shown some momentum.
"We are waiting for the Sebi circular regarding the rise in networth to Rs 50 crore for asset management companies if they were to launch new scheme. Though it looks like a done deal as of now, we feel that the Sebi decision will adversely impact us," an industry player, who didn't wish to be named, said.
Sebi, at its last board meeting in February, had raised the minimum capital requirement for setting up a mutual fund house to Rs 50 crore from the existing Rs 10 crore over the next three years. The circular is expected any time from now.

The regulator had also said without higher new networth, fund houses will not be able to launch any new schemes.
This has created discomfort within small fund houses which now have to raise their capital to comply with the new rule.
"As such, rise in networth may not be an issue for most fund houses. But, restriction on new fund launches without the higher networth will impact their growth and diversification strategies going ahead," said another industry player.

As of September 2013, as many as 19 AMCs had networth less than Rs 50 crore, of which 11 were below Rs 25 crore. There are 45 fund houses operating in the country but most of them are not making money. The Sebi move is widely seen as a measure towards consolidation in the fractured industry.

Fund houses like Quantum MF, IDBI MF, BoI-Axa, ING MF, Motilal Oswal MF, Sahara, Taurus, India Bulls and IIFL are among those with net worth below Rs 50 crore and have to comply with the new guidelines.
Meanwhile, another fund official also said they are waiting for clarity from the regulator regarding this issue.
"We are not sure whether we will be allowed to launch an FMP or a close-ended scheme without Rs 50 crore networth or not," he said.