Edelweiss planning to expand presence to 100 cities across India

The asset management company is looking to expand into smaller towns and cities where a growing number of investors are looking to funnel their savings into Indian stocks, Chief Executive Officer said

By Ranjani Raghavan

 

Edelweiss Asset Management Ltd. plans to expand its presence to 100 cities across India as it seeks to tap into a wave of interest among retail investors in the country’s stock market.  

 

The asset management company is looking to expand into smaller towns and cities where a growing number of investors are looking to funnel their savings into Indian stocks, Chief Executive Officer Radhika Gupta said in an interview with Bloomberg.  

 

“There are amazing wealth stories coming out of Tier 2, Tier 3 and Tier 4 cities in India,” Gupta said, adding that the firm is looking beyond the top 60 business cities. “Some of these cities are now very, very meaningful in terms of asset base.” 

 

When the company opens a new presence in a Tier 3 city, the outlet is able to break even in “as early as 18 to 24 months,” she said. 

 

Edelweiss’s push into smaller cities is part of the country’s financialization boom that has given rise to a growing equity culture, with first-time investors opting to enter the stock markets instead of buying traditional fixed-income products. 

 

And while the number of mutual fund investors has doubled in the last five years, the opportunity remains vast, with only around 10% of the country having exposure to stocks, bonds or mutual funds, according a survey released by market regulator Securities and Exchange Board of India earlier this year. 

 

The firm will face stiff competition from entrenched fund houses backed by major lenders such as HDFC Bank Ltd., ICICI Bank Ltd. and State Bank of India, which command big distribution networks that reach small towns and villages.

 

Starting from 20 locations mainly in India’s major cities a few years ago, Edelweiss plans to expand its asset management business to 70 locations by next year and then to at least a 100 locations in the coming years. 

 

The expansion is part of the asset manager’s ambitious growth plans over the coming years. It also sold a 15% stake in August to WestBridge Capital for 4.5 billion rupees ($50 million) in a rare private equity transaction in the mutual fund industry. 

 

“We have received SEBI approval for the transaction and we expect to complete it very, very soon. I think it’s a good step to eventually becoming a listed company,” Gupta said, without specifying a time line.

 

The Indian mutual fund industry is seeing a spate of listings recently, with the book for ICICI Prudential Asset Management Co.’s initial public offering set to open for anchor investors on Thursday. Canara Robeco Asset Management Co. listed in October, while State Bank of India and Amundi SA plan to tap the public market next year to list SBI Funds Management Ltd.

 

Gupta sees around 12 to 15 listed asset management companies in India over time.

 

“It is a business that lends itself very well to the public markets,” she said, pointing to the stable model, reliable earnings growth and strong understanding from investors as key reasons.   

 

The company’s growth plans are underpinned by its view that Indian companies are on the cusp of an earnings revival that will propel Indian markets to outperform their global peers next year.  

 

“It will be a consumption-driven growth,” Edelweiss Chief Investment Officer Trideep Bhattacharya said in the same interview. 

 

Indian stocks have underperformed emerging markets by the most in decades this year.

 

Edelweiss is also bullish about Specialised Investment Funds, a new asset class for asset management companies, which allows mutual funds to take hedge-fund-like bets, executives said. 

 

The new asset class could drive newer firms to take up asset management licenses in India, Gupta said, adding that the country is likely to see over 100 asset management companies by the end of the decade.