This is going to be a series of posts
Post I - Financial Savings in India and MF as an instrument
My views on financialization as a theme are captured here with some basic market sizing -
FINANCIALISATION: TSUNAMI expected in AMC & Insurance?
Data Set 1 - Combining data from RBI & AMFI
| Household (Gross) | Within Household Financial Savings | Mutual Funds | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year | Financial Savings | Physical Savings | Deposits | Insurance | PF | Markets | Deposits with SCB’s | YoY % | Deposits from Corporate | Year | MF AUM | Change YoY | % YOY | Net Mobilization | MTM Impact | Net Mobilization as % of Inc Financial Savings | Net Mobilization as % of Incremental Deposits | MF AUM % of Deposits |
| 2005 | 3,13,260 | 3,44,327 | 1,75,128 | 67,986 | 55,794 | 8,113 | 17,00,198 | 2005 | 1,49,650 | 2,788 | 8.80% | |||||||
| 2006 | 3,27,956 | 4,35,729 | 2,66,238 | 83,494 | 61,950 | 33,857 | 21,09,048 | 24.05% | 1,42,612 | 2006 | 2,31,862 | 82,212 | 54.94% | 52,482 | 29,730 | 16.00% | 19.71% | 10.99% |
| 2007 | 4,38,331 | 4,30,657 | 4,33,866 | 1,14,851 | 72,503 | 50,847 | 26,11,933 | 23.84% | 69,019 | 2007 | 3,26,292 | 94,430 | 40.73% | 94,062 | 368 | 21.46% | 21.68% | 12.49% |
| 2008 | 5,80,210 | 5,38,137 | 3,90,294 | 1,69,848 | 71,544 | 74,308 | 31,96,939 | 22.40% | 1,94,712 | 2008 | 5,05,152 | 1,78,860 | 54.82% | 1,58,677 | 20,183 | 27.35% | 40.66% | 15.80% |
| 2009 | 5,71,026 | 7,59,846 | 4,32,575 | 1,52,861 | 73,398 | -2,333 | 38,34,109 | 19.93% | 2,04,595 | 2009 | 4,17,300 | -87,852 | -17.39% | -24,208 | -63,644 | -4.24% | -5.60% | 10.88% |
| 2010 | 7,74,753 | 8,56,046 | 4,16,657 | 2,59,821 | 1,29,849 | 44,841 | 44,92,825 | 17.18% | 2,42,059 | 2010 | 6,13,979 | 1,96,679 | 47.13% | 78,347 | 1,18,332 | 10.11% | 18.80% | 13.67% |
| 2011 | 7,73,859 | 10,26,315 | 5,53,398 | 2,10,102 | 1,41,139 | 1,729 | 52,07,969 | 15.92% | 1,61,746 | 2011 | 5,92,250 | -21,729 | -3.54% | -48,600 | 26,871 | -6.28% | -8.78% | 11.37% |
| 2012 | 9,32,729 | 13,89,322 | 5,35,991 | 1,95,673 | 95,680 | 16,522 | 59,09,082 | 13.46% | 1,65,122 | 2012 | 5,87,217 | -5,033 | -0.85% | -45,413 | 40,380 | -4.87% | -8.47% | 9.94% |
| 2013 | 10,64,041 | 14,65,013 | 6,02,921 | 1,79,949 | 1,56,479 | 17,027 | 67,50,453 | 14.24% | 2,38,450 | 2013 | 7,01,443 | 1,14,226 | 19.45% | 78,862 | 35,364 | 7.41% | 13.08% | 10.39% |
| 2014 | 11,90,770 | 14,16,428 | 6,62,120 | 2,04,469 | 1,77,841 | 18,930 | 77,05,560 | 14.15% | 2,92,987 | 2014 | 8,25,240 | 1,23,797 | 17.65% | 54,579 | 69,218 | 4.58% | 8.24% | 10.71% |
| 2015 | 12,57,247 | 15,13,127 | 6,08,187 | 2,99,322 | 1,90,883 | 20,364 | 85,33,285 | 10.74% | 2,19,538 | 2015 | 10,82,757 | 2,57,517 | 31.21% | 1,02,880 | 1,54,637 | 8.18% | 16.92% | 12.69% |
| 2016 | 15,20,727 | 12,72,105 | 6,41,609 | 2,69,960 | 2,91,742 | 44,893 | 93,27,289 | 9.30% | 1,52,395 | 2016 | 12,32,824 | 1,50,067 | 13.86% | 1,31,758 | 18,309 | 8.66% | 20.54% | 13.22% |
| 2017 | 14,04,847 | 13,98,462 | 9,66,935 | 3,49,198 | 3,02,010 | 36,265 | 107,57,656 | 15.34% | 4,63,432 | 2017 | 17,54,619 | 5,21,795 | 42.33% | 3,43,418 | 1,78,377 | 24.45% | 35.52% | 16.31% |
| 2018 | 18,80,874 | 4,96,273 | 3,27,233 | 3,49,654 | 1,50,948 | 114,26,049 | 6.21% | 1,72,120 | 2018 | 21,36,036 | 3,81,417 | 21.74% | 2,72,225 | 1,09,192 | 14.47% | 54.85% | 18.69% |
Inferences -
Growth rate in deposits with banks has been 16% over the period depending on the starting and ending points, deposits have spiked after demon. One can calculate the rolling return, it is between a range of 13-17% with median being 15%
MF AUM over the same period has seen a growth of 22%. Intuitively one can see that MF AUM growth has typically been between the range of 1.2 - 1.8 times of the deposit growth rate, with the average number being 1.5X. This also makes logical sense given that the equity AUM grows at 1.6 times the deposit return over the same period
One can also triangulate this from other data points in the economy like growth in money supply, deposit rates and the real GDP growth rate.
Key message - Financial savings can be expected to grow between 12-16% over the medium to long term. There will obviously be interim spikes and dips but the average growth rate appears to be in that range.
Hence MF AUM can be expected to increase at 1.2-1.5 times the baseline financial savings rate over the next 7-10 years. This kind of sets the baseline expectation for the further posts to come
Data Set 2 - MF Industry AUM and market share
| Category AUM | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | Growth (%) |
|---|---|---|---|---|---|---|---|---|---|---|
| Liquid | 80,354 | 93,392 | 1,33,280 | 1,62,562 | 1,99,404 | 3,14,086 | 3,35,525 | 29% | ||
| Debt | 2,94,503 | 4,04,059 | 4,67,665 | 5,31,565 | 5,83,495 | 7,60,566 | 7,99,425 | 15% | ||
| Equity (exc ELSS) | 1,58,433 | 1,49,777 | 1,65,560 | 3,05,669 | 3,44,707 | 4,82,138 | 6,69,207 | 35% | ||
| Equity - ELSS | 23,644 | 22,731 | 25,547 | 39,470 | 41,696 | 61,403 | 80,583 | 29% | ||
| Hybrid | 16,261 | 16,307 | 16,793 | 26,368 | 39,146 | 84,763 | 1,72,151 | 60% | ||
| ETF | 11,493 | 13,124 | 13,204 | 14,715 | 22,409 | 49,916 | 77,694 | 43% | ||
| FoF | 2,530 | 2,053 | 3,191 | 2,408 | 1,967 | 1,747 | 1,451 | -7% | ||
| Total | 5,87,218 | 7,01,443 | 8,25,240 | 10,82,757 | 12,32,824 | 17,54,619 | 21,36,036 | 25% |
| Market Share (%) | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 |
|---|---|---|---|---|---|---|---|---|---|
| ABSL | 10% | 11% | 10% | 11% | 11% | 11% | 11% | 11% | 12% |
| Axis | 1% | 1% | 2% | 2% | 2% | 2% | 3% | 3% | 4% |
| DSP | 4% | 5% | 5% | 5% | 4% | 4% | 3% | 4% | 4% |
| FT | 5% | 6% | 6% | 6% | 6% | 7% | 5% | 5% | 5% |
| HDFC | 14% | 15% | 15% | 15% | 14% | 15% | 14% | 14% | 14% |
| ICICI Pru | 13% | 12% | 12% | 13% | 13% | 14% | 14% | 14% | 14% |
| IDFC | 4% | 4% | 4% | 5% | 5% | 5% | 4% | 3% | 3% |
| Kotak | 6% | 5% | 4% | 5% | 4% | 4% | 5% | 5% | 6% |
| RMF | 18% | 17% | 13% | 13% | 13% | 13% | 13% | 12% | 11% |
| SBI | 6% | 7% | 7% | 8% | 8% | 7% | 9% | 9% | 10% |
| Tata | 4% | 4% | 3% | 3% | 3% | 2% | 3% | 2% | 2% |
| UTI | 13% | 11% | 10% | 10% | 9% | 9% | 9% | 8% | 7% |
| Total | 98% | 99% | 92% | 94% | 90% | 92% | 93% | 90% | 93% |
Source: AMFI data
Inferences
HDFC AMC, ICICI Pru AMC, ABSL AMC, RMF AMC and SBI AMC more or less define the market as the Top 5. All of them have grown AUM between 15-20% per annum since 2012 till date
HDFC and ICICI AMC’s appear to clearly derive some benefit from having a parent that is into the banking business and owns a captive wealth management arm. This is a massive advantage to have, one can see the spike in AUM’s of Axis and SBI AMC’s after their parents started focusing on the wealth management franchise.
I think RMF AUM dipped following a cap on how much parent or associated company can park in own MF, if you discount this dip in 2012, since then AUM growth has been healthy at 17% though it is not exactly industryleading
Key Message - Big getting bigger and preserving market share is likely to continue. Smaller players will find it very tough to scale and overtake any of the Top 5 any time soon. All these Top 5 players can be expected to grow AUM at the industry rate over the medium term. There can always be differences in their product mix but all of them appear to be well placed to benefit from the MF tailwind, assuming there is one