Exclusive: PhonePe Set To Apply For Mutual Funds License; Gets Board Approval To Set Up AMC

Bengaluru-based fintech unicorn PhonePe has received approval from its board to set up a mutual fund business or asset management company (AMC). The Walmart-owned company, which was valued at $5.5 Bn in a partial spin-off from Flipkart last year, is looking for a bigger piece of the investment tech pie and take greater control of the mutual fund product offerings available to its investment customers.

According to the company filings, accessed by Inc42, PhonePe is looking to add to its fintech repertoire by allowing itself to become a sponsor or promoter to a mutual fund, investment trust, or asset manager or incorporate and/or acquire asset management companies. The company is likely to seek the approval of Securities and Exchange Board of India (SEBI) next to launch its AMC business. The company has taken the necessary pre-approval steps by amending its memorandum of association and object clause.

The company also received the board approval to create, issue, float, promote and manage assets, trusts or funds including mutual funds, venture funds, risk funds, real estate funds, education funds, provident funds, gratuity funds, pension funds, superannuation funds, charitable funds among other types of funds. The company will also likely get into fund management on behalf of any person or group of persons, in the private or public sector, as well as advisory and consultancy services for investments and financial services for individuals and corporates.

PhonePe’s entry into the AMC arena follows investment tech unicorn Groww as well as Sachin Bansal’s Navi Technologies. Bengaluru-based Groww bought out the IndiaBulls mutual funds business in May this year, underlining its ambition to expand beyond digital brokerage services. Four-year-old Groww has acquired 13-year-old Indiabulls Asset Management Company Limited (IAMCL), along with its trustee Indiabulls Trustee Company Limited for INR 175 Cr.

In June this year, Sachin Bansal-owned Navi Mutual Fund launched the Navi Nifty 50 Index Fund, its first ever mutual fund (MF) product. Billed as an open-ended equity scheme which will replicate the Nifty50 index, the Navi mutual fund is said to have the lowest cost compared to any other index schemes in the passive funds category.

These new launches came on the heels of SEBI relaxing the norms to allow fintech startups and other entities to enter the MF business. Formerly, companies needed to have five years of experience in the financial services business and demonstrate three years of profitability, and maintain a net worth of INR 50 Cr. However, SEBI waived these norms in December last year to facilitate innovation and enhanced reach to more investors.

“Sponsors that are not fulfilling profitability criteria at the time of making the application shall also be considered eligible to sponsor a mutual fund, subject to having a net worth of not less than INR 100 Cr for the purpose of contribution toward the net-worth of the asset management company (AMC),” SEBI added.

Among payments apps, PhonePe continues to dominate the market despite slipping up slightly in July 2021. The latest data from National Payments Corporation Of India (NPCI) for the month of July shows PhonePe had a minor drop in market share for unified payment interface (UPI) transactions in value and volume, but it continues to lead the market with 47.61% of market share by value and 46.9% by volume of transactions.

PhonePe processed customer transactions worth INR 2.88 Lakh Cr during the month. This is marginally lower than 47.73% transaction value share and 47% volume market reported by PhonePe in June.

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