M & As may take a back seat as there will be no takers for small fund houses, say officials
Executives at India’s mutual fund (MF) houses are frowning over recent talks the net worth requirement might be raised tenfold to a whopping Rs. 100 crore. They say this would not only be detrimental for the already squeezed fund industry; it would also prevent foreign buyers from entering the large untapped Indian market.
Though the move was being deliberated & nothing had been finalised yet, sources told BS industry body Association of Mutual Funds in India (AMFI) was against any such proposal. MF houses - big & small are not in favour of the move.
Securities and Exchange Board of India (SEBI chief Mr. U. K. Sinha has been flagging concern on non-serious players in the industry, but many doubt whether raising the net worth criteria is the right way to weed out non-serious players.
Mr. Aditya Agarwal, MD, Morningstar India, says, “I am not sure how it would help the industry. Is it the only way to drive seriousness among fund houses?.The sector was already under stress & such regulatory measures, if any, would only aggravate problems. If this comes through, it would mean showing the door to almost half the existing asset management companies”
Officials say even if a foreign entity was looking for a foothold in the Indian MF industry, an upfront requirement of Rs. 100 crore would probably lead to the plan being called off.
“Who would commit so much investment in a business that may end up making losses for 5 years or / more?” asked the chief executive of a mid-sized fund. He termed such anticipated measures “forced”.
Mr. Dhirendra Kumar, Chief Executive,Value Research, says, “I have always been opposed to any such move. I would rather prefer the net worth requirement be halved to Rs. 5 crore.” Kumar, also a member of SEBI’s mutual fund advisory committee, added, “The MF industry is a pass-through business and does not require large capital.”
He agreed foreign firms might not find it an interesting venture if the net worth criteria was scaled up. “A sum of Rs,100 crore is too big to be committed at a time when returns are expected to be negative,” he said.
Earlier, when it was proposed the net worth requirement be raised to Rs. 50 crore, it had met stiff opposition from industry members. “This time, too, I feel the sector will not let it happen, as MF houses have a unanimous call on the matter,” said the chief executive of a small fund house.
No comments:
Post a Comment