Global biggies line up for India's R&T pie
With the mutual fund (MF) industry growing at a rapid pace (40% last year), it comes as no surprise that the support structure surrounding the industry makes good business sense.
MUMBAI: With the mutual fund (MF) industry growing at a rapid pace (40% last year), it comes as no surprise that the support structure surrounding the industry makes good business sense.
With the asset size or AUMs pegged at around Rs 3,58,000 crore, several players are looking at finding a foothold in the registrar & transfer (R&T) business. Arguably there are one crore MF investors and a registrar typically earns 8 to 10 bps based on the kind of investor accounts he handles.
Deutsche Group has become the first foreign entity to enter the registrar business in the country. Others like Citi, HSBC and BNP Paribas are said to be looking at this space. Deutsche, which has a strong presence in custody, fund accounting and cash management, has started its R&T business through Deutsche Investor Services.
It has already bagged its first client, JP Morgan Asset Management. Citi had earlier ventured into the R&T business in 2001 but exited in 2004. In the current environment while the custody business has enough participants, the R&T space has only two focussed players — CAMS and Karvy Computershare. The major players in the custody business other than Deustche Bank are HSBC, Citi, StanChart and JP Morgan.
According to Mrugank Paranjape, board member, Deutsche Investor Services, “The MF industry is at a juncture where it is growing phenomenally. During the period between 1999 and 2003, this business was driven more by debt in terms of AUMs. However, 2003 onwards it has been driven largely by retail and equity. But one needs to understand that it is a competitive space, with margins under pressure. And we don’t expect to be paid a premium for our brand alone.”
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Reiterating this is V Shankar, MD, CAMS, which is one of the largest registrars of MFs in the country with a marketshare of over 50%. “The revenues in this industry is very small. It’s a painful job. Decisions have to be taken after considering the full complexity of the business,” Mr Shankar said.Another player reportedly interested in this space is BNP Paribas, which has a strong global presence in this business, specially in Europe. “The Indian custody and registrar markets are attractive for our global focus. We will have a presence in this segment at the right time,” said
Frederic Amoudru, CEO, BNP Paribas India. Responding to a query on why Citi was re-entering the space again Ashish Bajaj, MD, Global Transaction Services, Citi, said it was due to the continuing growth in the investment industry in India across insurance and MF, customer interest in the end-to-end service provider, and our strategy to be a full-service provider to the funds industry.
All these foreign entities are looking at being a one-stop shop, providing custody, fund accounting, registrar and cash management services under one roof. Mr Paranjape believes it is a volume game and to keep pace with competition, expansion is the key. “What this market needs is retail expansion. We need the right model in terms of scalability and ability to expand at the pace required and we now think we have it.” he added.
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