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MF News Top 10 AMCs paid gross commission of Rs4,000 crore last fiscal

Top 10 AMCs paid gross commission of Rs4,000 crore last fiscal

ICICI Prudential Mutual Fund paid the highest commission of Rs738 crore to its distributors in FY 2016-2017
Padmaja Choudhury Jul 13, 2017

Top 10 fund houses paid gross commission of Rs4,000 crore to their distributors in FY 2016-17, shows an analysis of annual commission disclosure of individual fund houses.

ICICI Prudential Mutual Fund, the largest fund house in terms of AUM, paid the highest commission of Rs738 crore to its distributors last fiscal as against Rs471 crore in FY 2015-16, a growth of 57%.

Among its distributors, the fund house paid the highest commission of Rs193 crore to its sponsor ICICI Bank. It paid another Rs30 crore to its group associates. AMFI data shows that ICICI Bank received Rs280 crore as commission last fiscal. This means, ICICI Bank received a major part of its commission from its subsidiary company.

HDFC Mutual Fund followed ICICI Prudential Mutual Fund. The fund house paid Rs718 crore as commission to its distributors as against Rs585 crore in FY 2015-16, a growth of 23%. Of this, the fund house paid Rs167 crore as commission to HDFC Bank.    

In terms of percentage, SBI Mutual Fund clocked the highest increase in commission paid to its distributors. The fund house paid Rs446 crore last fiscal compared to Rs206 in FY 2015-16, an increase of 117%.  The fund house paid Rs175 crore or nearly 40% of the total commission to its sponsor State Bank of India.

D.P. Singh, CMO, SBI Mutual Fund attributed this growth to increase in AUM. “SBI Mutual Fund has grown nearly 50% last fiscal due to good sales number.”

Commenting on the industry’s growth in commission, he said that the growth in gross commission is due to the introduction of forward charge mechanism.  In the 2016 budget, the finance minister of India introduced the forward charge mechanism in mutual funds, paving the way for AMCs to pay gross commissions to distributors without deducting service tax.

Kaustubh Belapurkar, Director-Fund Research, Morningstar India, believes that the increase in commission is due to market gains and consistent inflows in equity funds. “The net inflows in equity funds, which include pure equity, ELSS, and balanced funds, have been very strong last year. In addition, the market inched up by 17% last fiscal. Since distributors get higher commission in equity funds, the gross commission of top 10 fund houses increased substantially in FY 2016-17.

During the same time, the assets under management of the mutual fund industry rose 42% in FY 2016-17, i.e., from Rs12 lakh crore to Rs18 lakh crore. As on March 2017, equity funds recorded net inflows of Rs1.31 lakh crore while it was Rs1.02 lakh crore in the preceding fiscal.

Here is the gross commission top 10 fund houses paid (in Rs crore)

Fund house

Commission disclosed in FY 2016-2017

Commission disclosed in FY 2015-2016

Change percentage

ICICI Prudential

738

471

57%

HDFC

718

585

23%

Reliance

495

398

 

24%

Birla Sun Life

444

N.A

N.A

SBI

446

205

117%

Franklin Templeton

356

251

42%

Kotak Mahindra

252

179

41%

DSP BlackRock

223

129

73%

UTI

139

107

30%

IDFC

121

97

25%

Total

3,933

 

 

                                                                 Source: company disclosure

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