Sebi speeds up NFO approval process; move comes as boost for newer players

The Securities and Exchange Board of India (Sebi) has sped up the process of clearing applications for raising funds via mutual funds (MFs) new fund offers (NFOs), said people in the know.

Industry players said the pendency of applications has reduced drastically compared to last year. In several cases, NFOs have managed to obtain regulatory clearances in less than a month.

The move has helped the Rs 48-trillion domestic MF industry time their product launches better, and also roll out topical schemes.

Earlier this year, a fund house applied to the regulator for NFO to launch a smallcap oriented scheme. Within seven days, the asset management company (AMC) received Sebi’s go-ahead. Within 45 days from the filing of the document, the NFO opened for subscription.

Earlier, Sebi took between one and two months to grant approvals to NFOs.

In September 2022, the number of MF schemes that were pending for approval with the regulator for more than six months stood at 69; those pending for between three and six months stood at 33, and those between 1 and three months stood at 45, according to a Sebi presentation in July.

At present, there are barely any approvals pending for over three months, said people in the know.

“Sebi has indeed eased the approval process as part of their ‘ease of doing business’ initiative. Another factor contributing to the higher number of NFOs is the fact that new AMC players have begun launching their first set of funds, which due to categorisation of funds is a smooth process,” said NS Venkatesh, Chief Executive, Association of Mutual funds in India (Amfi).

While there have been a slew of filings from existing fund houses, newly set up fund houses such as Zerodha and Helios Mutual Fund have also filed for NFOs.

According to Sebi’s website, Helios MF’s first fund—a flexicap—draft documents were filed on August 29, and the fund is set to open for subscription within two months on October 23.

Bajaj Finserv AMC also filed for a ‘Banking and PSU Fund’ in August and is set to open later this month.

“Existing AMCs are also launching NFOs in the thematic and sectoral categories, where multiple funds can be launched within a single category. Hence you are seeing faster approvals and more NFOs,” Venkatesh added.

According to the Amfi website, there were 47 NFOs launched during the September 2023 quarter against 24 approvals in the June 2023 quarter.

These figures only account for the NFOs which were launched and have completed the process of initial subscriptions.

“Several new entities have established AMCs. Faster approvals for NFOs is good news for them. As a bulk of new fund offers will come from them to fill the product gap. This will in a way help them innovate and also lead to an overall growth for the industry,” said an industry official.

However, some AMCs said that they have not seen much change as their applications filed in July are still pending. On the other hand, a few other entities are in the queue for fresh approval as asset management companies—including the broking firm Angel One and Jio financials which announced a partnership with Blackrock.

According to Sebi, it approved two applications for MF license in the March quarter, which took only 1 to 3 months processing time, while two others approved in the same quarter took between 3 to 6 months.