Slowdown strikes SIP-enriched MF industry: Indiabulls AMC cuts jobs

Indiabulls Asset Management has asked many of its sales executives to quit and cut salaries of several senior managers as it struggles to overcome a sharp fall in its assets under management, multiple people aware of the development said.

“They have decided to move to a more dormant way of business which does not need a sales force,” said a person directly aware of the development. “As a result, almost all of the salespeople have been asked to go, which numbers about 50 people.”

People remaining with the asset management arm of troubled financial services group Indiabulls are mostly from operations, human resources and fund management departments, the person said.

Indiabulls AMC has also reduced some senior management salaries by half as its assets under management (AUM) has come down drastically since the start of the year, people close to the development said.

The company, though, denied any job or salary cuts. “This is incorrect and another round of rumour mongering. No person has been asked to leave or any salary being cut,” a company spokesperson said in an email response to ET.

Chief executive of a rival fund house chose to link the job cuts to Indiabulls Group’s failure to acquire the Lakshmi Vilas Bank.

“The AMC business could have grown with a strong distribution coming in through a bank acquisition,” the person told ET on condition of anonymity. “With a banking license now ruled out and the promoter focus on the flagship company, it is unlikely they will put resources in the AMC business. Hence it makes sense to operate with a lean team and cut costs.”

The Reserve Bank of India had early this month rejected the proposed merger between Indiabulls Housing Finance and Lakshmi Vilas Bank.

Indiabulls AMC’s average AUM slipped to Rs 2,237 crore during the July- September quarter from Rs 8,007 crore a year earlier. The company now ranks at No 32 in terms of assets under management in the 42-member Indian mutual fund industry.

A large chunk of its AUM is invested into debt instruments which has lower margins as compared to equity assets.

A year ago, the group roped in Raghav Iyengar, who headed the retail and institutional sales business at ICICI Prudential MF, as CEO of Indiabulls AMC to run the mutual fund business.

Corporate and institutional investors, however, started moving their money to larger asset management companies after payment defaults by IL&FS Group companies in September last year, which indicated a liquidity crisis among non-banking financial companies. IL&FS defaults was followed by a default by mortgage financier DHFL.

The turmoil in the financial markets over the last one year has lead to DHFL Pramerica Mutual Fund selling to US based Prudential Financial (PGIM) and the Anil Ambani controlled Reliance Group selling out to its partner Nippon Life Asset Management.

The Indian MF industry has been one of the fastest growing with AUM growing two-and-half fold in five years to ₹24.51 trillion as of September 30 from ₹9.59 trillion as on September 30, 2014.

Indiabulls, which had been in the real estate business, is in the process of exiting the property development sector that has been undergoing a prolonged slump to focus on financial services.