Commission RevenuesThe financial year ended March 31, 2019 was not exactly a great year for mutual fund investors, especially in the equity side. As many as 142 out of the 471 equity funds posted NAV losses and 223 schemes did not even manage to deliver savings bank account returns (4% per annum). You can argue that 1-year return is not the right way to assess performance, but facts are facts.

Mutual fund distributors did not have that bad a year, though. The country’s top 1,000-odd fund distributors, including banks, brokerages, wealth firms, and IFAs, earned Rs 7,938 crore in FY19, a tad less than the Rs Rs 8,533 crore earned in FY18. The overall drop in commissions can be explained by a sharp decline in money earned by the top 10 distributors, especially banks. Read on to know more.

Top grossers

The top-10 MF distributors account for nearly half of all the commission disclosed. So, in effect 10 entities account for almost 50% of commissions received by 1,037 entities, an analysis of the FY19 AMFI data shows. The figure was quite similar in FY18.

NJ IndiaInvest Pvt Ltd retained the tag of the biggest MF distributor in terms of commissions earned. The Gujarat based organisation, which has even applied to start mutual fund operations, was paid Rs 807.67 crore gross commission in FY19, a slight 2.66% rise over FY18. NJ IndiaInvest has MF investors assets worth Rs 62,946 crore at the end of FY19.

Axis Bank climbed up to 2nd place in FY19 from 4th in FY18 on the commissions’ chart. It was paid gross commission of Rs 555.63, a rise of 3.33% over Rs 537.71 crore. The bank has mutual fund assets worth over Rs 52,000 crore.

Unfortunately, all the other banks in the top-10 club showed a dip in gross commissions earned. HDFC Bank earned Rs 496.67, a drop of 22.56% compared to FY18. State Bank of India was paid Rs 487.58 crore, a drop of 12.60% year on year. ICICI Bank Limited was paid Rs 355.26 crore, a 24.46% plunge. Kotak Mahindra Bank Limited was paid Rs 255.01 crore as gross commissions in FY19, a dip of 7.03% compared to FY18. Citibank N.A logged the sharpest decline among the top-10 as its Rs 181.85 gross commission was nearly 27% lowers than in FY18.

Other non-bank players in the top-10 were ICICI Securities Limited Rs 318.85 crore, flat compared to FY18; Prudent Corporate Advisory Services Ltd Rs 234.72 crore (7.76% rise), and IIFL Wealth Management Limited Rs 176.11 crore (flat compared to FY18).

Top-earning MF distributors

Name of the ARN Holder Gross Amount paid in FY19 Rs Cr Change over FY18 % Average Assets under Management for
FY 2018-19 Rs Cr
NJ IndiaInvest Pvt Ltd 807.67 2.66 62,946.56
Axis Bank Limited 555.63 3.33 52,923.05
HDFC Bank Limited 496.67 -22.56 72,943.89
State Bank of India 487.58 -12.60 64,280.05
ICICI Bank Limited 355.26 -24.46 41,803.25
ICICI Securities Limited 318.85 0.74 34,510.33
Kotak Mahindra Bank Limited 255.01 -7.03 37,554.80
Prudent Corporate Advisory Services Ltd 234.72 7.76 19,033.34
Citibank N.A 181.85 -26.96 28,664.29
IIFL Wealth Management Limited 176.11 0.64 30,568.18

Concentration of distribution

The top-10 distributors of FY19 and their commission earning in FY18 show an important point. Almost 60% of the FY19 drop in overall commissions paid by mutual fund industry can be attributed to the top-10 distributors alone. Despite having so many MF distribution entities, the MF distribution business is extremely narrow with only a handful of players taking most of the commission pay-out. While the top-10 distributors account for nearly half of the total commission, the top-20 account for 60% and over 70% when you take into account the top-50 distributors.

The extent of money earned by the top MF distributors is a reflection of how the MF industry also operates. The top-10 AMCs (asset management companies), including HDFC MF, ICICI Pru MF, SBI MF, ABSL MF etc., hold over 80% of investor assets.

Author
Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on kumarsroy@rupeeiq.com