Mutual fund industry to see many mergers in next couple of years, says Aditya Birla Sun Life AMC’s CEO

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© Aditya Birla Sun Life AMC Mutual fund industry to see many mergers in next couple of years, says Aditya Birla Sun Life AMC’s CEO

  • Aditya Birla Sun Life AMC’s IPO opens today and will close on October 1.
  • One of the top five mutual fund companies is looking to raise ₹2,768 crore through public listing.
  • The mutual fund industry will witness consolidation in the next 3-4 years of players who won’t be able to survive, says CEO of Aditya Birla Sun Life AMC.

The ₹36 trillion mutual fund industry, in India, with 44 players may see consolidation happening in the next couple of years considering the majority of the market is held by the country’s top 10 fund houses.

As of June quarter 2021, the top 10 mutual fund companies held 82% of the market share, as per Association of Mutual Funds in India (AMFI) data.

The fourth largest mutual fund (MF) company Aditya Birla Sun Life AMC, which opened its IPO on September 29, alone holds over 8% market share.

Top five fund houses with the highest average assets under management (AUM):

Fund House Average AUM (Apr-Jun 2021)
SBI MF ₹5.23 lakh crore
HDFC MF ₹4.16 lakh crore
ICICI Prudential ₹4.16 lakh crore
Aditya Birla Sun Life MF ₹2.75 lakh crore
Kotak Mahindra MF ₹2.46 lakh crore

Source: AMFI data

Commenting on the increasing competition as new players are entering the industry, A Balasubramanian, managing director and chief executive officer at Aditya Birla Sun Life AMC said in conversation with Business Insider that, “The MF industry will witness consolidation in the next 3-4 years of players who won’t be able to survive.”

More competition in the market will only expand the MF industry and not increase competition, he added.

The mutual fund business seems to be a lucrative opportunity for firms in the wealth advisory, broking or management space given at present, four new firms are set to enter the asset management business — Groww, Zerodha, Samco MF and White Oak Capital.

“More competition is coming in the market, which will only expand the market. The new guys will have to establish themselves as a player extremely committed to business. They will have their own struggles because established players like us have made a large presence over the period of time,” said Balasubramanian.

Aditya Birla Sun Life AMC is the fourth largest mutual fund house in the country with ₹2.75 billion average assets under management after SBI MF, HDFC MF and ICICI Prudential MF as of June quarter, this year.

For new players entering the industry, they may have a long way to go given the top five players holding the majority of the market share have a strong reputation.

He believes that “the mutual fund industry to become one of the most prominent industries like that built in the US because (MF) penetration is still very very slow in India,” he said.

“Mutual fund business is about track record, you need to create investment track record, people’s track record. Therefore, the new players coming can only help in increasing the market size and as market size increases, established players like us will continue to get our pie of shares,” added Balasubramanian.

While the industry has seen an increase in the number of mutual fund players, it has also witnessed consolidation, especially among the mid-sized and smaller AMCs. The larger players (top 10) enjoy the lion’s share not only in the industry’s assets, but also in revenue and profit.

Here is the list of consolidation of fund houses in recent years:

Year Fund house exited Merged with AUM share in the industry while exiting (for the exiting entity)
2012 FIL Fund Management L&T Investment Management 1.31%
2013 Daiwa Asset Management (India) SBI AMC 0.03%
2014 ING Investment Management India Aditya Birla Sun Life AMC 0.06%
2014 PineBridge Mutual Fund Kotak Mahindra AMC 0.07%
2014 Morgan Stanley Investment Management HDFC AMC 0.28%
2015 Goldman Sachs Asset Management (India) Nippon India AMC 0.68%
2015 Deutsche Bank Asset Management India DHFL Pramerica Asset Managers 1.89%
2016 JP Morgan Asset Management India Edelweiss Asset Management 0.47%
2019 DHFL Pramerica Asset Managers PGIM India Asset Management 0.31%
2020 BNP Paribas Asset Management India Baroda Asset Management India 0.25%

Source: Aditya Birla Sun Life AMC DRHP

In January 2021, Principal MF had announced a merger with Sundaram MF.

When asked about whether Aditya Birla Sun Life AMC is looking to acquire any fund houses in the near term, Balasubramanian said, “We are known for buying mutual fund companies in the past like ING MF. My belief is that product consolidation, scheme consolidation and customer consolidation will keep happening at regular intervals. At this point we are not looking for anything (any prospects to acquire)…otherwise we are always in a position to acquire, but it is different from case to case.”

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