Going by the data on SEBI web site on status of applications of new entrants seeking mutual fund license, interest has dried up. In the last two years, just two applications have been filed by Karvy Stock Broking and Microsec Financial Services. While Karvy Stock Broking runs a broking and distribution business, an affiliate company runs an R&T business. Microsec is a NBFC headquartered in Kolkata which provides retail broking and investment banking services.
There are two other pending applications - from Bajaj FinServ Ltd - Allianz Asia Pacific GMBH and Mahindra & Mahindra Financial Services. While Bajaj Finserv had applied with SEBI for a mutual fund license in July 2009, iIt received an in-principle approval in January 2011. Similarly, Mahindra & Mahindra Financial Services had applied for mutual fund license with SEBI in December 2008 and it got an in-principle approval from the regulator in October 2011.
Both Bajaj and Mahindra are supposed to revert to SEBI with further information, shows the information available on SEBI website.
Experts attribute the reduced interest to the tough market conditions. “SEBI wants to ensure that only serious players get licenses. The market conditions are tough. It is difficult to start from scratch unless you have a distribution network. Only a handful of players are making money in this business,” said a sales head of large fund house.
Among the domestic players, PPFAS is the only Indian entity which has entered the industry recently. The Chennai-based Shriram group which acquired SEBI license in 1994 and wound up its business in 2004 is trying to make a comeback now.
Mumbai based HDIL Constructions has sought SEBI’s approval to start a real estate mutual fund in 2008 and is yet to get an approval. Last year, SREI got a nod from SEBI to launch Infrastructure Debt Fund via the mutual fund route.
According to SEBI rules, the sponsor applying for a mutual fund license is required to be in the financial services business for five years and needs to have a positive net worth for five years. The sponsor should have earned profits in three of the previous five years, including the latest year. SEBI conducts an on-site due diligence of sponsors before granting an approval. If no scheme is launched within 12 months from the date of registration, the registration gets cancelled.
