Profitability Picture Improves for some Large and Small AMCs in FY12-13

Growth in Profit after Tax, or PAT, of the fund industry remained positive for FY12-13. While the consolidated figure indicates that this growth was marginal, on an individual basis, growth has been encouraging for some of the larger asset management companies. Smaller fund houses reported deeper losses, but unlike last financial year, this time around some have managed to break-even.

Assets under management for the 10 largest fund houses grew at an overall average of 22% and accounted for 77% of the mutual fund industry’s assets in FY12-13. While consolidated or total profits for these 10 largest fund companies rose marginally from Rs. 1,105 crores to Rs. 1,125 crores, none reported losses or witnessed a decline in AUM during the fiscal year. On the revenue front, they witnessed a growth of 12%, on a consolidated basis. Expenses have grown at a higher rate of 16% for FY12-13.

The most significant change came right at the top, HDFC Mutual Fund moved to the pole position, becoming the most profitable fund company for FY12-13. This occurred despite a lower than average growth in AUM of 13% (industry average of 22%). Total revenue for the company grew by 14%, while expenses grew at a slower pace of 9%. Profits for the year stood at Rs. 318.7 crores, up 18% from FY11-12.
Reliance Mutual Fund moved to second place this year after being the most profitable company for two consecutive years (FY10-11 & FY11-12). Revenue growth for the fund house stood at a respectable 11%, but expenses grew at an alarming rate of 31%, highest among the 10 largest. The company’s scheme related expenses outsourced, grew from Rs. 41 lakhs to Rs. 29 crores during the FY12-13. As per communication with the fund house, stand-alone net profits declined due to onetime provision of Rs. 56 crores, accruing since last 5 years in some of the company’s overseas subsidiaries. Further, as compared to previous year, the fund house had substantially increased spending in marketing, infrastructure and technology in FY12-13. The AMC expressed confidence that this expenditure would lead to better returns, which would be reflected in FY13-14.

SBI Mutual Fund saw a substantial growth in profits in comparison to its previous financial year. In FY11-12 the fund house saw a 23% decline in its profits, but managed a complete turn-around in FY12-13. At the end of FY12-13, profits for the company stood at Rs. 85.6 crores, a growth of 41% compared to Rs. 60.5 crores profits in the previous year. On the revenue front, the fund house saw a 23% growth in revenue and also managed to curb expenses to a slower growth of 13%. Birla Sun Life Mutual Fund and UTI Mutual Fund also saw a similar trend in their profitability.

Kotak AMC witnessed a major decline in profits. Total revenue growth for the fund house remained stagnant at 2%, while expenses grew at 21%. The fund house saw the sharpest decline in profits (-76%) among the top 10, despite its AUM growing at the highest rate (37%) within the same peer group. The fund house has seen a decline in equity AUM, while on the debt side; the AUM has grown substantially on a year-on-year basis.

IDFC Mutual Fund saw its profits rise to Rs. 26.6 crores during FY12-13, clocking a 157% growth in profitability, making it the highest among its peers. Growth in profitability saw some moderation with regards to the 470% growth witnessed in the preceding financial year of 2011-12.
The profitability of small fund houses was a mixed-bag in FY12-13. Consolidated or total losses for these companies rose to Rs. 115 crores from Rs. 85 crores in the previous financial year. But, while the losses deepened on a cumulative basis, a handful of the smaller fund houses managed to break even during the financial year. This reversal in performance compared to the previous financial year was primarily due to the reduction in expenses for these AMCs. Consolidated expenses for the smaller fund houses were down by 7%, while revenue growth remained stagnant at 1%.

Average assets under management for the smaller mutual funds grew by 13% to Rs. 7, 035 crores from the previous financial year. This growth was driven by the sizeable increase in assets managed by BOI AXA Mutual Fund. The fund house saw a 640% growth in its asset base, from a mere Rs. 100 crores at the end of FY11-12, to a substantial Rs. 1,104 crores by the end of FY12-13. However, assets managed by smaller cos. as a percentage share of the total industry AUM, slid from 0.93% to 0.85% during the fiscal year.

Motilal Oswal Mutual Fund was the stand-out performer among the smaller AMCs. The fund house reported profits of Rs. 5.28 crores during FY12-13, reversing the losses reported in the previous financial year. Total revenue for the firm grew at a rate of 9%. Moreover, the fund house managed to cut down expenses by 10%, adding to its profitability. Average asset under management stood at Rs. 539 crores for January-March 2013 quarter, a growth of 47% from the previous fiscal year.

Mirae Asset Mutual Fund also managed to turn profits in FY12-13. The fund house reported losses of Rs. 3.82 crores in FY11-12, but managed to reverse its losses in FY12-13, reporting profits of Rs. 1.2 crores. While revenue for the company was down by 3%, the fund house managed to cut down on the expenses font, boosting profitability. Expenses were down 18% from the previous financial year.

Pramerica Mutual Fund continued to be the least profitable among the smaller fund houses, although solely on account of its Rs. 48 crore extraordinary loss. The loss reported was on account of a default by Deccan Chronicle on its commercial paper, failing to pay maturity proceeds due on June 25, 2012 and March 14, 2013, as per the company’s financial statements. On the revenue front the fund house performed remarkably, clocking a 145% growth in revenue, from Rs. 8.5 crores to Rs. 20.8 crores in FY 12-13. Asset under management for the AMC rose by 40% during the financial year that ended on March 31, 2013.
this is a good news but i wonder if the benifits transfered to retail investors who borne the burnt of the fall and even after5 years are yet to see light

Similar threads

Intraday Higher Leverage

Save up to 90% in brokerage and get higher leverage for intraday trades.

Are you a day trader?