Indian asset management companies (AMC) logged their highest-ever net profit this financial year when equity markets surged, investments flowed and expenses fell.
Companies reported combined profits of Rs 6,859 crore for the 12-month period ended March 2021, according to data compiled by mutual fund tracking firm Value Research. The amount was 31 per cent higher than Rs 5,232 crore in the last financial year.
Of the approximately 40 fund houses, HDFC AMC reported the highest profits at Rs 1,326. It was followed by ICICI Prudential AMC at Rs 1,245.
Motilal Oswal AMC, DSP AMC and Axis AMC saw their profits more than double since the last fiscal.
The industry expects 15-20 per cent growth in profit during the ongoing financial year as equity markets remain buoyant. Strong inflows into equity schemes have sustained during the first half of the current fiscal at Rs 59,436 crore.
“While the salaries and rent have remained flat and costs for travelling and events came down significantly last fiscal. However, key reasons for the increase in profits of fund houses is the surge in stock market and equity assets,” said Sunil Subramaniam, managing director at Sundaram Mutual.
During the last fiscal due to the lockdown imposed to control the covid-19 pandemic, most of the branches were shut and people preferred to work from home.
All these factors led to cost reduction for fund houses.
Meanwhile, equity markets continued to rise, improving the equity AUM leading to higher profits. The data from Association of Mutual Funds in India (Amfi) shows that net AUM of equity funds was Rs 5.8 trillion at the end of March 2020, which rose to Rs 9.8 trillion in March 2021. During the financial year 2020-21, the S&P BSE Sensex and Nifty50 have rallied 68 per cent and 71 per cent, respectively.
Overall AUM for the industry stood at ~31.42 trillion at the end of March 2021 as against ~22.2 trillion as of March 2020.
The share of equity funds results in higher management fees and profitability for the industry.
“The asset management fee is the key source of revenue for fund houses, across all their products. Structuring products, according to the market cycle expected to prevail across the scheme life cycle, is what attracts more investors, resulting in higher AUMs and thereby higher asset management fees. Fund houses in India have always done this well traditionally and continue to do so,” said Vivek Iyer, Partner and National Head Financial Services, Risk at Grant Thornton Bharat.
Results of some of the listed players indicates that the momentum has continued during the first half of FY22
Aditya Birla Sun Life AMC saw its profit jump 48 per cent to Rs 328 crore, while Nippon Life India AMC saw its profits soar 31 per cent to Rs 395 crore during the first half. Net profit for HDFC AMC rose by 8 per cent to Rs 690 crore for the period under consideration.
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