AUM in B-15 cities grows; identification process of B-15 applications still not uniform

Slowly but steadily, AMCs are making inroads insmaller cities and towns.An analysis of AUM data published by AMFI shows that the AUM share of B-15 cities has increased from 12% in September 2011 to 13% in June 2013 with a consequent drop of  AUM share of T-15 cities from 88% to 87%.

The top five cities together continue to hold a major chunk (74%) of industry’s assets as on June 2013.Mumbai’s AUM sharehas dropped from 49% in September 2011 to 44% in June 2013. A large portion of institutional money comes from Mumbai since a majority of the corporate treasuries are based in Mumbai.

In the data published by AMFI in September 2011, the top 15 cities had listed Delhi and New Delhi separately; combined they constituted for 12% of industry’s AUM. Now, AMFI has merged New Delhiwith Delhi which accounts for 15.49% AUM now. Since September 2011, the AUM in Delhi has increased by 34%.

Some AMCs are relying extensively on their associate banks or distribution arms, others are enrolling the ‘new cadre of distributors’ in smaller towns.

In a recent CII MF Summit, U K Sinha said that SEBI will dis-incentivize AMCs which fail to garner money from B-15 cities. He had made a case for increasing their footprint in smaller towns.

Operational hurdles

AMCs have been allowed to charge a higher TER if they garner certain percentage of assets from beyond the top 15 cities. Thus, AMCs are paying 1.5 % to 1.75% higher commission to distributors in B-15 cities.

In order to prevent any misuse of this opportunity, the industry is now tracing investors’ residence PIN code to flag applications as T-15 or B-15. (For instance, a distributor gets an application from Pune,a T-15 city and submits it in Aurangabad, a B-15 city to get higher commission. Now, the distributor will not get additional commission because R&Ts will check the PIN code of investors’ residence).

Industry officials say there is no consensus on the PIN code AMCs have to follow to flag the applications as T-15 and B-15.

Earlier, applications were flagged as B-15 based on the location from where the application was submitted. Some officials feel that the increase in B-15 AUM may not be a true reflection of increased penetration since there is still some confusion on how AMCs should flag applications as T-15 and B-15.

All the four R&Ts are following a common master list. For instance, if the area PIN code is 400001 then it will be treated as T-15. If the PIN code is beyond a threshold, say, 400101, then the application will be treated as B-15. However, both MF and R&T officials say that the system is still evolving and certain ambiguities are yet to be resolved.

AUM

(Source: AMFI)