Mutual Fund corner: LIC Mutual Fund aims to enter big boys' club in next 5 years

LIC Mutual Fund, having missed the growth bus in the past three decades of operations, is on a catch-up bid and has set a target of crossing the Rs 1-lakh-crore-AUM-mark in the next five years.

The past few years have seen the 43-player mutual fund industry growing at an exponential pace both in terms of Assets under management (AUM) and number of folios.

The AUM jumped 14 per cent on-year in June 2022 to Rs 37.74 lakh crore, while the number of folios grew to an all-time high of 13.55 crore, according to the latest Amfi data.

Biggest player SBI Mutual Fund cemented its position with 23.7 per cent growth in AUM at Rs 6.47 lakh crore in the month under review, followed by ICICI Prudential MF at Rs 4.65 lakh crore, pushing the long-time market leader HDFC AMC to the third slot at Rs 4.15 lakh crore.

Kotak MF moved to the fourth place with Rs 2.82 lakh crore AUM, pushing Aditya Birla Sun Life MF to the fifth slot with Rs 2.81 lakh crore.

Of the 43 players, the top 10 manage as much as Rs 33.4 lakh crore of the industry-wide AUM of Rs 37.74 lakh crore as of June.

However, LIC Mutual Fund, all through its 33-plus-years of operations, first as a joint venture with Nomura of Japan, was never in the reckoning in terms of AUM despite being the subsidiary of LIC -- the nation's largest financial powerhouse.

But the present management is changing that and has unveiled a five-year growth plan wherein by FY27, it wants to be in the Rs 1 lakh-crore-AUM bracket.

"We've chalked out a five-year growth plan. We should be growing by 3.5-4x or at least take our AUM past the Rs 1-lakh-crore-mark by FY27 from where we are now.

"To begin with, we expect to grow at least 70 per cent this fiscal to touch Rs 30,000 crore AUM, aided by new fund launches and also partly aided by the forthcoming merger of the IDBI AMC with us," TS Ramakrishnan, managing director and chief executive, told PTI in an interview.

The head honcho, however, admitted that growing the AUM 3.5x to 4x is a tall order.

He further said the five-year growth plan also involves taking the fund house public with a primary share sale after the fifth year or so. "But more needs to be done on this front as it is still on the drawing board only," he said.

For the current fiscal, the fund house is expecting to grow aggressively with three new fund launches -- the first one already launched last month -- and to gain from the merger of IDBI Mutual Fund which should be completed over the next three-four months post-regulatory approvals.

The optimism is based on the still strong fund inflows which should help garner around Rs 10,000 crore from new funds and another Rs 3,000 crore from the merger of IDBI AMC, for which it has all the approvals, except Sebi's.

"IDBI AMC has 20 funds, of which 10 will be retained, while the rest will be merged with our existing schemes as Sebi does not allow multiple schemes in the same segment. The merger will also get us 3 lakh more retail customers, boosting our low retail base of 5.5 lakh now," Nityanand Prabhu, the executive director and business head, said.

LIC AMC, which has been stuck with fixed income schemes for long, has filed for three new schemes in the debt equity and money market spaces and has 26 schemes running now.

Prabhu said, the current AUM of Rs 17,500 crore is led by over Rs 10,000 crore in debt funds, Rs 5,000 crore in equity funds, which doubled in the past five years and constitutes almost 30 per cent of the total now; and Rs 2,700 crore in exchange-traded funds, of which around Rs 1,000 crore is in G-secs and state debt.

The objective is to take the fund mix 50:50 when it comes to equity and debt funds, and Ramakrishnan and Prabhu admitted that they missed the bus for many years having got stuck with the fixed income schemes and have been rated as underperforming.

But since the past few years the company has moved on well especially after entering the equity space, and hope to make it bigger from the present around 30 per cent AUM share to 50 per cent over the next few years, they added.