Sachin Bansal’s fintech business Navi Technologies recently received a green signal from market regulator SEBI for its initial public offering. Navi Technologies had submitted its draft red herring prospectus in March to raise up to ₹3,350 crore through the public issue. If the IPO succeeds, it will be the sixth listed asset management companies in the Indian bourses.
Navi Mutual Fund — a joint venture between Flipkart’s co-founder Sachin Bansal and the former Bank of America and Deutsche Bank banker Ankit Agarwal — acquired Essel Finance Mutual Fund in 2019 and renamed it as Navi Mutual Fund in April 2021. For Navi, the average asset management for the quarter ended June 2022 stood as ₹1,352.83 crore. The regulator, too, wants more players to enter mutual fund space at a time when the country is thinking of achieving $5-trillion economy by 2026-27 and $10 trillion by 2033-34.
One of the direct beneficiaries of such a massive expansion in economic growth will be asset management companies (AMCs). Even if the country achieves 75-85 per cent of the target that would give a huge fillip to AMCs for expansion, given the rising number of young population and under-penetration of mutual funds.
In fact, SEBI had constituted a committee under the chairmanship of A.Balasubramanian, Managing Director and Chief Executive Officer of Aditya Birla Sun Life AMC Ltd and Chairman of the Association of Mutual Funds in India, to facilitate growth and innovation in the mutual fund industry. The panel was mandated to review the role, eligibility and obligations of sponsors and trustees of AMCs.
“This is expected to not only foster competition in the mutual fund industry but also facilitate consolidation through mergers and acquisitions so as to reap economies of scale and scope. This is also expected to facilitate fresh flow of capital into the industry and to foster innovation,” SEBI had said in that note. It was reported that the expert panel had submitted its report to the regulator suggesting allowing of PE investors as sponsor with a lock-in period of three to five years.
Against this backdrop, new players entering the MF space and getting listed is a welcome step, as they will give more options to investors to choose from that nascent space.
Currently, only five mutual funds — HDFC Asset Management Company, Nippon Life India Asset Management Company (erstwhile Reliance MF), UTI Asset Management Co, Aditya Birla Sun Life Mutual Fund and Shriram AMC— are available for investment from the listed space. So far, the performance of these funds as a stock is a mixed. While UTI MF’s stock returned about 47 per cent on IPO, HDFC Mutual gave 76.75 per cent and Nippon India Life AMC just 16.05 per cent. Aditya Birla AMC, which hit the capital market in 2021, gave a negative return of 33 per cent for IPO investors.
However, If one believes on India’s economy growth story over the next few years, AMCs will definitely be a wealth creator for investors in the long-term.
The IPO route not only will provide liquidity to existing investors but also create a visible brand name for the AMC.