The commission income of MFDs did not keep pace with the AUM growth in the last six years. An analysis of commission data released by AMFI shows that top distributors' AUM doubled in the last 6 years from Rs.5.16 trillion in FY 2015 to Rs.10.19 trillion in FY 2021. During the same period, the gross commission earnings rose by only 39% from Rs.4,745 crore to Rs.6,617 crore.
SEBI's ban on upfront commission in September 2018 is the biggest reason why commission growth has lagged. As a result of this ban, commission income contracted in FY 2019 and FY 2020. From Rs.8,550 crore in FY 2018, the figure declined to Rs.6,148 crore in FY 2020. The next year was slightly better as commissions rose to Rs.6,617 crore in FY 2021.
Year-on-year comparison of AUM and commission data:
Source: Draft IPO document of Prudent Advisory
Top 10 distributors account for 50% commission
In FY 2021, 1,087 distributors collected aggregate commission of Rs.6,618 crore of which the top 10 alone accounted for over Rs.3,243 crore, which is almost 50% of the total amount, Prudent Corporate Advisory noted in its draft IPO prospectus.
"Over the years, the share of these distributors in the commission has been increasing, indicating increasing gravitation of market shares towards distributors with a wider, well entrenched network and offering ease of investing through the requisite technological platforms," the document stated.
On the basis of AUM, the share of top 10 distributors has risen from 30% in FY 2015 to 45% in FY 2021. The share in commission growth has remained almost constant in the last four years.
