This might be due to market fall…
This is Mr. Chauhan from the concall last month.
My understanding is that Star MF is increasing it’s market share for the MF industry as a whole (as distinct from just the NSE / AMFI platforms).
I do hope its organic growth and volume is moving from other platform to StarMF. The entire industry saw de growth but starMF picked up… I expect starMF to reach 1 Cr trxns per month by end of this year… They have been growing about 5% m-o-m. This market fall could halt it as well… lets hope for the best.
The real growth started after starMF offered additional serviced to IFAs… Now IFAs can their AUM and all clients PF using starMF website.
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what could be the size of this Start MF market ?
Also, How folks here think about INX ? Its really hard to open a exchange and make people shift to you, Its almost impossible.
So, far i am seeing only some new bonds are getting listed in the exchange and these are not very traded products.
BSE - is hopeful of moving Forex trading into it -
An exchange in India is preparing to launch a suite of Indian rupee derivatives, four months after the country’s central bank relaxed the rules on onshore trading of currency derivatives settled in foreign currencies. The move has been met with scepticism from market participants, who expect the majority of Indian rupee derivatives activity to remain offshore. The India International Exchange is, nevertheless, hoping for a rapid rise in rupee derivatives trading on the exchange once new
That too i am very skeptical as there is no incentive / reason again for people to move from one exchange where they have been trading to INX.
I have a feeling that it may remain money losing entity of BSE life long, Would love to know about view of others here.
Didn’t we discuss this question here many times about INX when you raised the question last time ?
you posted this
either derivatives or USD/INR logic remains the same. If a new bourse cannot take away market share from an old exchange… how NSE which was not even existing before 1991 has 90 % market share now ?
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bcoz internet, servers etc happened in 1991, BSE wasn’t prepared.
This is still true as of now, BSE has to wait build up the market place so strong that even when they start charging people can’t leave it to something new.
Exchange businesses have amazing lockin ( network effect kind of) moat and until that network is big enough BSE has to lose money in business as NSE is not charging as well.
If you see same thing happened with BSE start - it took them 7 years to start charging and NSE is still giving it for free.
Now having said all that, Indian international exchange going to be successful or not in future is a bigger question market for me today and thats why the question.
I still don’t get your argument… at one point you argue that market share can’t be taken from an established exchange. On the other hand you don’t acknowledge that BSE INX is the dominant exchange which has 75 % market share.
in currency markets 2014 BSE had zero market share… now it commands 40-50 % market share.
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I did some number crunching on StarMF as it showed phenomenal growth in the last three months…
A) How did they number of orders grew… I clustered them using months and separate panel for each year…
B) does the growth comes only because market got cheaper and the customer bought more units or the real value ( turnover ) of the order goes up…
C) Another nagging question is that since the market fell, may be SIP holders are taking the money out and redemptions are going up pushing the number of orders higher…
Plot of Total/subscription/Total orders
here are my conclusions:
A) independent of market conditions number of orders are going up. Next thing to do would be to correlate it mutual inflows to see how much traction starMF has achieved.
B) The growth is indeed real. The turnover is also going up… not because many units are being bought because market fell.
C) There are no redemptions due to weaker market conditions as subscription to total orders ratio remains similar about 80% subscription and 20% redemptions…
I will try to look for mutual fund data and get back.
Discl: As disclosed I have large chunk invested in BSE. My views could be heavily biased.
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Okay, let me put some things into prospective.
These are the data i have read from different sources ( plz correct me if i am wrong)
The online direct buying of mutual funds market is about just 3% of total market, in that 3% BSE has 60-70% market share.
PayTM is not built over BSEStar, Zerodha Coin is built over it ( probably the biggest revenue driver)
Conservative view -
Today revenue is about 26 Cr from it lets say this market will grow to 30% in 5 years (10x from 3%), Then total revenue from it should be about 260Cr from MFstar in 5 year and lets say doubt to 60% in next 5 years then it should fetch around 500 odd Crs in revenue after 10 years.
Very optimistic view -
Lets suppose everyone shifts to COIN direct to buy MFs ( 60% marketshare by 2025) , revenue should grow from 26Cr to 520Cr in 5 years.
Lets say the M.F market itself double in 5 years.
then very are looking around 1000Cr revenue business potentially from MFStar by 5-10 years.
I have no hope from another business, their other income should continue to fetch Gsec level of return which is now about 6% (after tax) - Which is their only source of income excluding expenses (operationally company is loss making) .
So, revenue after 10 years - 6% of Rs 2000Cr = Rs 120 Cr + 1000 Cr (from M.F star)
Net Profit going to be around - (25% tax rate) = Rs 840 Cr.
Lets say going to be valued around 10x earnings = 8400Cr., Todays Mcap = 1400 Cr
Almost 6x returns promise is there, provided MFstar become Rs 1000 Cr business by 5-10 years time frame.
I have taken lots of assumptions and i wrote this real quick but this is possible, I think after UPI , BSEStar is the real Fintech innovation happened in India.
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More number crunching using Mutual Fund data. The plots here are self explanatory… Im little tired after formatting the data… So please ask if its not clear… im tying to be brief…
A) Summary of Total orders of starMF… This is number of orders per year… 2020 is just for 2 1/2 months.
B) Summary of Total turnover in Cr of StarMF…
C) This is total turnover of Mutual Fund industry ( equity + debt both also subscriptions and redumpltions)
D) Now this is the crucial data point… Market share of starMF is derived using starMF turnover/MF industry Turnover… I couldn’t get number of transactions of MF industry… so I just compares using value in Cr…
As one can see starMF is increasing its market share slowly… For 2020 for the months of January and February the market share is 3.9 % and 4.7 % respectively…
One can easily see the trend using monthly data… As one can see last 6 months or so… the market share is easily touching 5%. So there is enough head room to grow… Even if the market share doesn’t go higher ( very unlikely ) potential for mutual fund growth is enormous… Volume growth will certainly be assured off.
One can analyse the equity and debt funds separately… Maybe I do that in the next post… I hope this was useful.
Discl: As disclosed I have large chunk invested in BSE. My views could be heavily biased.
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Hi Raj,
You are doing a wonderful job putting out this data here, I would like to understand from where this growth is coming from ? like from which platform ?
I don’t understand what are other avenues for buying M.F online and what is the incentive for buyers to move to the Platform using StartMF ?
One very famous platform i know of is Zerodha Coin which i personally use.
Who are the 95% of the market ?
Is there a threat from PayTm ?
Why can’t others do what PayTm did ?
These are the some questions bothering me.
What i feel based upon my limited knowledge is, More inform buyer of M.F skips the middleman (distributer ) and buys directly online - Which is not necessarily BSEStar but others are also there.
Due to growth in Zerodha Coin, i believe most of the growth is coming for BSEStar ( but i don’t have data for that), If its limited by Zerodha then this market can be taken away by new broker with new incentive ( i means it’s not a solid growth with lots of moat).
From Ken Article - https://the-ken.com/story/bajaj-razorpay-zerodha-carry-fintech-torch/
Zerodha ramped up its mutual fund distribution to 200,000 investors from 70,000 last year and managed Rs 2,700 crore ($378 million) worth of assets.
Online platforms account for only about 3% of all mutual fund investments in the country, but all the newly-funded ones are plugging into BSE StAR. The transactions through StAR nearly doubled to 36 million transactions in 2019. Companies like Scripbox, Zerodha and new entrants into the wealth management space like payments company PhonePe—which also lets users buy mutual funds—have been able to scale easily using StAR.
“It is like the UPI of Mutual Funds,” says Kamath.
Ganesh Ram, business head of BSE StAR said the platform eventually wants to become a marketplace for selling all financial products. From corporate fixed deposits to gold and bonds to other financial service providers. This would mean any fintech can easily scale riding on StAR – much like how UPI is driving payments.
Thanks,
Amit
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The success of starMF lies behind a technical advantage. starMF provides API for free to build apps ( like groww) and other applications… As I mentioned in one of the post above IFAs love starMF because it allows them to manage their AUM for free and all at one place…
Regarding how does other crowd buys MF, I dont know… I can dig in to MF association webpage… but if you come across any let me know… I can automate the scrapping…
Also its not easy to suddenly start a new venture as a completion too starMF… mainly because MF industry is fragmented… one has to run to each fund house to get connection and arrange them into one platform… Remember many MF houses were not even agreeing to StarMF even until last year… Its not a moat as such… but agreed higher profits or revenues could attract competition.
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I am asking all that bcoz i want to have rough idea about how much realistic market share BSEStar can have lets say after 10 years.
Can it be 30% ? If yes then this stock is nobraner at todays valuation but i find it very hard to believe that we will have more informed M.F buyers 30% , who will directly invest. There will always be a distributor. I find it hard to come to conclusion here about how far MFStar can grow.
Mr. Ashish Kumar Chauhan asking for pay raise.
- Wages and salaries are the biggest problem with BSE at the moment. 25.63% last qtr as per screener.
- They are not the market leader and infact their market share is being eroded every qtr.
- 11.13% have voted against his wage increase. That seems to be mostly retail small time investors.
- At a time when promoters of biggies like Jk tyre and Mahindra group are sacrificing their own salaries to help companies overcome COVID-19 crisis at company level and national level, This is not a good step in the right direction.
- What is the achievement at BSE requiring pay raise? Isnt the company posting an operational loss as per last qtr?
Just my two cents.
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It would be very helpful if you could share these data on excel files.
Volume of whole MF industry went up by 23 % and that was captured by starMF as well. I dont know if financial year has anything to do with it. I will get back with the analysis comparing inflow in this quarter to see if there is any market capture by starMF in the coming days.
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OPM% took a huge hit in Quarter ending Dec 2019.
It being the latest quarter I wonder for long will this pain continue.
StarMF is the crown jewel of BSE.