Industry Sheet - Indian AMC Industry - As on 5 February 2021
Customer Segments for Asset Management Industry in India can be divided on the basis of –
1. Investor Type – Retail, Corporate, Banks/Financial Institutions, FII/FPI and HNI.
2. Geography Wise – Top15 (T15) Cities and Below Top 15 (B15) cities
3. Income Level – On the basis of Average Income levels.
Products & Services
AMC Industry offers Asset Management services in multiple categories of assets. The broad categories are-
1. Liquid Fund/ Money Market Fund/ Floater Fund
2. Debt Oriented Schemes
3. Equity Oriented Schemes
4. Balance Scheme
The products under each category can also be seen.
Activities and Participants
Key Activities to be taken care of while operating in AMC –
1. Asset Management Framework – Sponsor, Mutual Fund, Custodian, Trustee Company
2. Regulatory Compliance
3. Scheme Portfolio Management
4. Fund Managers and Employee Management
5. Distribution -Direct and Distributor Network
6. Marketing and Branding Activities
Key Players that companies in AMC industry have to deal with –
1. Fund Managers and Analytical Team
3. Intermediaries and Stock Exchnage
5. SEBI, NSE, BSE and AMFI.
6. Different Channels for Direct Distribution
SEBI regulates the maximum Expense Ratio that a fund can incur. The table shows the maximum expense ratio that can be incurred. However, different companies have different pricing power about how much they pay as commissions to distributors.
Competitive Life Cycle
AMC Industry is in Growth Stage. This is as the following characteristics can be witnessed –
1. Rapid increase in sales
2. Product Suite Improvements
3. Increase in Competition
4. Increase in Profits
5. Reduction in Price
6. Strengthening of Distribution Channel
AMC Industry currently faces a number of Innovative and Disruptive Forces at play-
1. New Asset Selection concepts such as Smallcase.
2. Rising Dominance of Dynamic Asset Allocation
3. ETF and Passive Investing gaining market
4. New Distribution Channels coming up and gaining traction. Rise of Fin-tech distributors.
AMC Industry in India is regulated by SEBI under SEBI(Mutual Funds) Regulations, 1996. All the rules, regulations and actions for AMCs are monitored by SEBI. To operate in the space, adequate license needs to be obtained from SEBI. SEBI operates with the purpose of safeguarding investor interests.
Porter's Profit Forces
Threat of Substitution
Threat of Entry
Competitive Rivalry within Industry
Financial Health of Companies in the Industry
ROE and DuPont Analysis
HDFC AMC – FY 20 ROE = 59% x 0.63 x x 1.07 = 31%
Nippon Life AMC – FY20 ROE = 35% x 0.41 x 1.11 = 19%
UTI AMC – FY20 ROE = 37% x 0.28 x 1.13 = 12%
AMC is a high margin, low asset turnover and negligible leverage industry.
Trends in the Industry
Major Trends in AMC industry in India are-
1. Impact of Demonetization – Catalyst for Financial Assets.
2. Continuous Rise in Participation through SIPs
3. Rise in Share of Financial Assets against physical assets.
4. Shift from Distributor to Direct Channel
5. ESG Funds starting to enter market.
6. Passive Funds and ETFs gaining market share
7. Rise of Individual Investors in AUM.
8. Bank backed AMCs gaining AUM.
Industry Specific Risks
Major Growth Factors for AMC Industry are as follows-
1. Shift from Physical Assets to Financial Assets
2. Increased Distribution and Information through Digitalization
3. Increasing Financial Planning
4. Decline in Fixed Deposit Rates
5. Increase in Institutional Segment
Variables For Success in Industry
Evolution of Industry
Evolution of AMC in India can be divided in multiple stages –
1. 1963-1987 – The Initial Years (Introduction of Mutual Funds in India with UTI)
2. 1987-1993 – Entry of Public Sector Banks in the space
3. 1993-2003 – Formal Regulation and Entry of Private Players
4. 2003-present – Development of Regulatory landscape and growth of sector
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