)
Asset management companies (AMCs) with net worth less than the Securities and Exchange Board of India (Sebi)’s new threshold of Rs 50 crore aren’t facing hurdles in launching new mutual fund (MF) schemes alone; fresh offerings in portfolio management services (PMS) and alternative investment funds (AIFs) are concerns, too.
Earlier this year, Sebi had mandated have net worth of at least Rs 50 crore, against Rs 10 crore earlier. The regulator had given fund houses three years to raise net worth. It had said it wouldn’t allow the launch of new MF schemes till AMCs met the new net worth norm.
Industry players yet to meet the Rs 50-crore net worth requirement, however, say the market regulator has been withholding approvals for products filed under their portfolio management and AIF arms. “Our applications to launch new products have been returned. Informally, Sebi has told us as we haven’t met the new norm of Rs 50-crore net worth, our products in the PMS and AIF categories will not be approved,” said the head of a fund house.
India’s Rs 10-lakh-crore mutual fund sector has 43 asset management companies, of which about 10 have net worth less than Rs 50 crore.
Industry players are crying foul over Sebi’s reluctance in approving new products when the deadline for increasing net worth is more than two years away. “With the three-year timeframe to comply with the regulation, Sebi should follow the circular in letter and spirit,” said Jimmy Patel, chief executive of Quantum Mutual Fund.
Companies in the sector say it is important that they continue with their business to help generate capital. “In the absence of new products, how will fund houses do any business and expand capital?” questioned the head of a domestic mutual fund house.
Some fund house officials believe the fact that Sebi’s move of not approving new products might be a precautionary measure. “Maybe regulatory officials are being overcautious to ensure fund houses are serious about meeting the criterion,” said an official.
Dhirendra Kumar, chief executive of MF tracker Value Research, said Sebi’s move will ensure speedy compliance by fund houses. “This is the only way Sebi can enforce this regulation sooner,” said Kumar.
The sector has made representations to Sebi, urging fund houses be allowed to launch products in the MF segment, as well as in other asset management categories. At a recent meeting of the Association of Mutual Funds in India, chief executives of fund houses asked Sebi Chairman U K Sinha to reconsider its stand on product approvals.
