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Union MF widens reach with merger of three PSU banks

Suresh P Iyengar | Updated on January 22, 2020 Published on January 22, 2020

Targets ₹10,000-crore AUM in 2 years

The proposal to merge three large public sector banks — Union Bank of India, Corporation Bank and Andhra Bank — has come as blessings in disguise for Union Asset Management Company which expects its customer reach to widen substantially. The bank merger will be completed by March-end.

G Pradeepkumar, CEO, Union AMC, told BusinessLine that the number of bank branches selling Union AMC mutual fund schemes will nearly double to about 8,500 from 4,500 once the merger is completed.

Interestingly, he added that both Corporation Bank and Andhra Bank do not own any asset management company and the merger will open a new business avenue for them.

The fund house attracted about two lakh unique investors through Union Bank alone and this is expected to double in couple of years with addition of two new banks to the sales channel. In fact, Union Bank has helped to get 65-70 per cent of first time investors to the fund house fold.

The fund house is building a dedicated team to service customers acquired through the banking channel as the needs of these investors would be much different from that gained through distributors, he added.

Moreover, post acquisition of stake by Japanese financial service major Dai-ichi Life Holdings Inc, Union AMC has got the mandate to sell its products through distributors and not restrict it to Union Bank alone as before.

In its recent new fund offer of large- and mid-cap scheme, Union AMC managed to increase sales through non-bank channel to 31 per cent from previous NFO sales level of 16 per cent.

About 57 per cent of the overall folios of the fund house is from beyond top-30 cities while the industry average is 41 per cent. Similarly, about 39 per cent of its AUM comes from B-30 compared with the industry average of 16 per cent.

Union AMC plans to launch mid-cap fund in the next few weeks to complete its product basket in equity.

With large salary and savings account, all the three banks would help triple systematic investment plan in two years from ₹22 crore a month now.

Union AMC targets asset under management of ₹10,000 crore in two years and ₹50,000 crore in five years including that of offshore fund, alternative investment fund and portfolio management services.

The fund house currently manages ₹230 crore of offshore fund of a Japanese insurance company registered as FPI in India from Cayman Island. The offshore business will grow substantially as there is lot of liquidity in Japan looking for investment in developing countries, said Pradeepkumar.

As of December-end, the Union AMC has asset under management of ₹4,130 crore.

Published on January 22, 2020
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