Mutual Fund industry largely under-penetrated in India, says Deepak Parekh

The Rs 37-trillion domestic mutual fund (MF) industry has seen a sharp surge in assets under management (AUM) over the past two years. But HDFC Asset Management Company (AMC) Chairman Deepak Parekh believes India’s MF industry remains significantly under-penetrated.

“Despite a healthy compound annual growth rate of 16 per cent in AUM over the past five years, the MF industry in India remains significantly under-penetrated, compared to global averages,” he said, addressing the HDFC AMC’s 23rd annual general meeting.

Despite high growth, India’s MF AUM-to-gross domestic product ratio is a low 16 per cent, against the global average of 74 per cent, he said.

Similarly, he said, equity AUM-to-market capitalisation is at 6 per cent, against the global average of 33 per cent.

The MF industry’s total AUM had risen 20 per cent to Rs 37.6 trillion in 2021-22 (FY22). The industry added 31.6 million net new folios, taking the total count to 129.5 million.

Systematic investment plan (SIP) flows ballooned to Rs 12,328 crore in FY22, with new SIP registrations at 26.6 million.

Lauding the Securities and Exchange Board of India (Sebi), Parekh said its framework played “a very important role in the industry’s growth”.

The markets regulator (Sebi), he said, played the dual role of building investor confidence by regulating the industry, while creating an environment conducive to growth.

HDFC AMC’s profit after tax rose 5.1 per cent year-on-year to Rs 1,393 crore in FY22. Total income increased 10.5 per cent to Rs 2,433.20 crore in FY22. The company’s networth increased 15.8 per cent to Rs 5,530 crore in the last financial year.

“Your company endeavours to deliver sustainable growth that benefits all stakeholders aided by our goal of spreading financial literacy, increasing the acceptance of capital market oriented products, and deepening MF penetration levels in the country. Our wide and robust distribution network, nationwide presence, and best-in-class digital infrastructure will continue to be the backbone of our growth,” he added.

At the end of FY22, the fund house’s AUM stood at Rs 4.1 trillion, with nearly half of it coming from the equity segment.

Equity oriented closing AUM accounted for Rs 2.1 trillion, with equity schemes contributing over half.

Parekh said there are reasons to be optimistic about economic growth, on the back of prospects of a normal monsoon, pick-up in discretionary spending, robust exports, improved balance sheets of corporates and the banking sector, and signs of revival in private capital expenditure.

Asset Watch

• Inflation pressure may not subside soon, increasing possibility of further hikes in 2022-23

• MF industry’s overall AUM as of March 31 rose 20% to Rs 37.6 trillion

• Flows through systematic transactions continue to be resilient. HDFC AMC saw flows adding up to Rs 12,970 crore in 2021-22 (FY22)

• HDFC AMC has a market share in individual AUM at 12.5% and about 5.8 million unique investors at the close of the year

• Company’s net worth increased 15.78% to Rs 5,530.04 crore in FY22.