Life Insurance Corporation (LIC), the nation’s largest financial institution, has ruled out taking its mutual fund subsidiary LIC Nomura Mutual Fund public. “We have no plans to list our mutual fund arm LIC Nomura MF, since the business has not grown the way we wanted. It is yet to be scaled up and I don’t think, we can get a good valuation at the current level,” LIC Chairman Surya Kumar Roy told PTI in an interview.
LIC Mutual Fund was set up in April 1989 and LIC, the single largest domestic investor in the market managing assets over Rs 17 trillion, holds a 45 percent stake in the venture.
In January 2011, it roped in Japanese financial powerhouse Nomura which holds a 35 percent stake at present. The remaining 20 per cent stake in LIC’s mutual fund business, is held by LIC’s home finance arm LIC Housing Finance.
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Blaming the withdrawal of entry load for the poor state of the mutual fund industry, Roy said that the domestic mutual fund industry is still in a “crisis”. “Unless you incentivise agents and brokers, there is no reason for them to sell a product. However, that is not
happening now,” Roy said. It may be noted that in August 2009, the then Securities and Exchange Board of India (SEBI) chairman C B Bhave had abolished entry loads for mutual funds agents.
Though present SEBI Chairman U K Sinha partially incentivised mutual funds agents in July 2011 by allowing mutual fund houses to pay agents from their fund expenses, the ripple effect of the crisis due to abolition of entry loads, continues to haunt the mutual fund industry, he said. “The biggest problem facing the mutual fund industry is that retail investors keep away. It is still a corporate-driven industry. Unless retail investors come into the market, you cannot really say there is real depth in the market,” Roy, who took charge on July 1, 2013, for a five-year term, said.
He said the mutual fund industry continues to grapple with challenges and is searching for a growth trigger. He said LIC Nomura MF’s assets under management have come down to a low of Rs 10,000 crore from a high of over Rs 70,000 crore in its heydays.
This is despite the record overall assets under management of the industry crossing Rs 10 trillion in May on the back of a stock market rally. Asked whether the new government plans to take LIC itself public, Roy said that he has no idea. “Being LIC’s owner, it is upto the government to decide at what level and how its ownership has to be maintained,” he
LIC plans to invest more than Rs 3 trillion this fiscal, mostly in government bonds, while Rs 55,000 crore would be invested in the equities market this fiscal, he said.