As a result of poor performance by many mutual funds, investors no longer opt for them. In spite of the market potential, some players are opting to move out of business. This trend is of concern for investors.
In
the last twelve months the mutual fund industry has seen
a real turnaround on three counts: Mergers and
acquisitions (M&A), restructuring of UTI and new
scheme launches. The acquisition of Pioneer ITI by
Templeton in August 2000, has been one of the biggest
ever merger in the Indian mutual fund industry. And
while Alliance Mutual Fund had taken back its proposal
to withdraw, HDFC Mutual Fund has recently acquired
Zurich, making HDFC the second largest private sector
fund with assets worth Rs. 10,237 cr, just after
Prudential ICICI.
As
a result of the HDFC-Zurich alliance, the structure of
the mutual fund industry is undergoing a dynamic change.
Close to 60% of the net assets of the non-UTI funds are
managed by five players: Prudential ICICI, HDFC-Zurich
combine, Templeton-Pioneer combine, Alliance Capital,
and Birla Sun Life. In the wake of these developments,
foreign players who ventured into India after 1994 are
reconsidering their plans. Though the M&A activity
has come to the industry, it cannot be said with
certainty that foreign players are losing interest in
India. The latest exit of Industrial Development Bank of
India (IDBI) proves that IDBI has decided to divest its
entire equity stake in IDBI-Principal Asset Management
Company (I-P AMC) to the foreign joint venture partner
Principal Financial Group for Rs.94cr. This is due to
the fact that Indian market is the most lucrative market
for the mutual fund sponsors of AMC as India has the
highest savings rates in the world. Thus, there is a
sufficient market for mutual funds in India. In spite of
the market potential, some players are opting out of
business. What are the reasons for these consolidations
and will this continue?
|
