Bajaj Finserv applies for mutual fund license

Financial services giant, Bajaj Finserv, could be the latest business house to start a mutual fund (MF) business. The status of MF applications disclosed by the Securities and Exchange Board of India (SEBI) shows that Bajaj Finserv had applied for an MF license on September 28, 2020.

Entering a crowded space

The entry of Bajaj Finserv is likely to add to the competitive intensity of the MF industry, which already has 40 fund houses. While a large chunk of the market share (57.85 per cent of investor assets) is controlled by the top five fund houses, a new entrant such as Bajaj Finserv can gradually gain a solid footing given its wide distribution reach.

Bajaj Finance, its sister concern, has presence in 2,392 locations, including 1,357 in rural areas, small towns and villages.

This vast branch network can help the MF business to penetrate geographies beyond the top-30 cities, which are known as B-30 locations in industry parlance.

Bajaj Finserv as a group is also known for providing quality digital services to customers.

Making a sizeable dent in the market share may be difficult in the short term despite the group’s wide reach.

“With MFs, investors tend to prefer known names. This is the reason why new entrants could take time to build market share. However, a domestic player looking at the MF business is a positive sign; it shows fund management makes business sense despite so many changes in the industry,” says Joydeep Sen, an independent MF expert.

An e-mail query sent to Bajaj Finserv regarding the type of funds it hopes to offer didn’t elicit any response.

Back in 2011, Bajaj Finserv had received SEBI’s nod to set-up a mutual fund business, but the MF arm was never launched.

Recently, NJ India Invest and Samco Securities had received in-principle approval from the market regulator for starting the MF business. Applications from Zerodha Broking and Frontline Capital Services are still being reviewed by SEBI.