Guess Who’s Looking To Buy Essel Mutual Fund?
Jul 22, 2019

Author: Rounaq Neroy

(Image source: Image by rawpixel from Pixabay)

Essel Mutual Fund is up for grabs, and guess who's likely to bag it.

According to media reports, Mr Sachin Bansal, the former promoter of an e-commerce website - Flipkart, is in the race to acquire Essel Mutual Fund.

By selling his entire 5.5% stake in Flipkart to Walmart, Mr Bansal racked up approximately USD 1 billion. And after investing USD 100 million in a ride-hailing app Ola, Rs 250 crore each in Altico Capital India and Indostar Capital, both NBFCs, in February this year, Mr Bansal is now keen on entering the mutual fund space through the acquisition of Essel Mutual Fund.
 

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(Image source: pixabay.com)


Currently, he is in advance talks with the leadership and executive management of the Essel Mutual Fund. This news comes at an interesting time when the going is getting tough for many players in the Indian mutual fund industry and some have even exited the space.

Given the penetration of mutual funds is still very low in India compared to insurance, and a predominant portion of the AUM coming only from Maharashtra and Delhi (see graphs below), Mr Bansal looks optimistic about the industry's prospects.

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Data as of June 2019
(Source: www.amfiindia.com)


​He wants to add value to the existing mutual fund business by upgrading the technological capabilities of the fund house.

If the deal goes through as envisaged and Mr Bansal takes over Essel Mutual Fund, he may try to take the ease of investing to a new level by leveraging his e-commerce experience in digital transformation.

But the feasibility of this model remains to be seen, particularly since the IFAs still play a role in the growth of the Indian mutual industry (The total AUM as June 2019 is Rs 25.81 trillion), and when investors still look up to an investment adviser or IFA for advice on mutual fund schemes despite a number of robo-investing platforms in existence.

The fact is a number of investors aren't still aware of how to invest in mutual funds and how to choose the best ones for their financial portfolio.

Plus, asset management requires a different set of skills to manage people's money successfully.

Why Essel group is selling out mutual fund business?

Essel Group is passing through a phase of financial difficulties. As you might be aware, Essel Group promoters have asked for time until September 30, 2019, to raise money and honour the group's debt obligations. Thus, the group is not only restructuring its businesses but also selling out non-core businesses to raise funds.

[Read: Is Your Investment In Debt Mutual Fund At Risk?]

Until recently SREI Group was negotiating with the Essel Group to acquire Essel Mutual Fund. However, the deal did not materialise due to the disagreements on valuations.

What should existing investors in Essel Mutual Fund schemes do?

Not all schemes from the stable of Essel Mutual Fund are doing well.

Among the equity-oriented schemes, Essel Large & Midcap Fund has delivered mediocrely on the risk and return parameters, vis-a-vis peers.

Even Essel Large Cap Equity Fund has displayed inconsistency and trailed many of its peers on parameters such as quantitative performance, i.e. returns, performance across market cycles, risk ratios, portfolio characteristics, etc.

Similarly, the Essel Long Term Advantage Fund--an ELSS scheme--too has exhibited an unappealing show compared to its category peers and benchmark.

Among the debt-oriented funds, both Essel Short Term Fund and Essel Ultra Short Term Fund have failed to adequately compensate their investors when compared to the other peers in the respective sub-categories.

The only debt scheme that has demonstrated superior performance and adequately compensated its investors in the past is Essel Liquid Fund. It is emerging as a decent scheme in the liquid fund's category.

[Read: The Best Liquid Funds For 2019]

So, before you decide whether to 'buy', 'hold' and/or 'sell' a scheme/s of Essel Mutual Fund; review the performance backed by thorough and unbiased research.

Very broadly, the performance of schemes offered by Essel Mutual Fund has been nothing to write home about so far.

Now it remains to be seen if the new buyer--be it Mr Sachin Bansal or anybody else --takes any major steps to improve the quality of the fund management, whereby it proves to be a rewarding experience for investors' in the respective schemes offered by the fund house.

Plus, with technological capabilities and experience, what can be done to make investing in mutual funds easy and prudently, remains to be seen.



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