Asset Management Company Registration

Overview of Asset Management Company

An asset management company (AMC full form), also known as a fund management company or asset management fund, is a company incorporated to manage different forms of funds for retail clients. It invests funds (like stocks, bonds, mutual funds, and property) in other areas to maximize the returns on funds.

Further, asset management companies, also known as asset managers or money managers, ensure diversification of investments in different regions. Asset management company registration is necessary for carrying out the required functions as specified under the regulatory body, the Securities Exchange Board of India.

What is Asset Management in India?

Asset management is the practice of employing asset managers to maintain and trade growth-potential investment portfolios. Simply, it covers a wide range of financial investment services for the exchange of high-net-worth investments within the portfolio.

Further, asset management in India is divided into financial, enterprise, infrastructure, fixed, public, digital, and IT asset management, which enables the organization to manage and keep accounts of every asset.

Benefits of AMC Registration

The applicants enjoy certain benefits when applying for asset management company registration in India. The following are some of the benefits of AMC registration, as provided below:

1. Specialized Services to Association

Asset management companies are authorized to hire a specialized team of experts (including fund managers) to offer financial and extensive investment management services that most investors lack.

2. Well Diversified Portfolio

The asset management company registration in India ensures that portfolio diversification is maintained to mitigate the risks related to the investment market and maximize profit. Simply put, they manage a large number of investment portfolios, including stocks, bonds, commodities, real estate, and alternative investment funds.

3. Maintains Economies of Scale

The asset management company registration reduces expense (cost) and increases the scale of operations by employing large funds to procure quality assets and securities.

4. Easy Access to Investments

The AMCs registered in India have easy access to various investment portfolios not available to retail investors.

Market Size of Asset Management Industry in India

The market size of the Indian asset management industry is nearly USD 865 billion, and it is expected to register a CAGR of 23.78% from 2022 to 2028. Further, the top listed asset management companies in India have witnessed revenue growth of approximately 38%, which ultimately led to the growth of the asset management industry in India.

Types of Asset Management Company

Different types of asset management companies are registered, based on their investment strategies and unique characteristics. The following are some of the different types of asset management companies that the applicants may refer to:

1. Mutual Fund Company

The asset management company is categorized as a mutual fund company, also known as a mutual fund house. They authorize the Registration of Mutual Funds with SEBI and the management of mutual funds by pooling individual investors' money with a diversified portfolio of stocks, bonds, and other securities.

2. Hedge Fund Company

Hedge funds AMCs are the entities authorized to make use of aggressive strategies like derivative trading. Targeting the high net worth of individual and institutional investors by making higher returns is the ultimate aim of the hedge fund companies registered in India.

3. Private Equity Firm

The private equity AMCs are the firms that generally invest in private companies to manage and restructure the value of the shares of private startups or mature companies.

4. Real Estate Investment Trust (REIT)

Real estate investment trusts (REITs) are asset management companies that invest in real estate properties to generate rental income and capital appreciation over time.

5. Exchange-Traded Fund (ETF) Providers

Exchange-traded fund providers are asset management companies that deal with a variety of exchange-traded funds.

6. Pension Fund Managers

Pension fund managers typically manage pension funds with a long-term, low-risk investment strategy. The main objective of pension fund AMCs is to ensure the sufficiency of funds for future pension payments.

7. Insurance Asset Managers

Insurance asset management companies are mainly responsible for the investment and management of the premiums collected from the policyholders.

8. Wealth Management Firms/Sovereign Wealth Funds (SWF)

Wealth management firms, or sovereign wealth funds (SWF), are professionalized investment solutions designed to cater to individuals' high-net-worth, estate, tax, and retirement planning.

Consideration of Crucial Requirements Before Choosing an AMC

The investor must consider certain crucial requirements before choosing an AMC. The following are the essential metrics that an investor must keep in mind before choosing an AMC, as given below:

1. P/E ratio

The applicant must know about the stock's cheap or expensive rates and guide an investor in deciding how much to pay.

2. Price-to-sales

The applicants must divide the company's market capitalization by its annual revenue, providing the price-to-sales.

3. PEG ratio

The company’s P/E ratio is divided by the expected earnings growth rate gives the PEG ratio, which helps to level the field by taking projected growth into account.

4. Debt-to-equity

A company's debt-to-equity ratio is calculated by dividing its total liabilities by its shareholder equity. This ratio compares companies' reliance on debt to fund their operations.

5. Pay-out ratio

The company's payout ratio is calculated as its annual dividend rate divided by its earnings.

6. Beta

The beta is a measurement of how the reactive stock is compared to the overall market. A beta of less than ONE indicates that a stock is less reactive to market swings, while a beta of more than ONE indicates a more volatile stock.

7. Return on equity

The return on equity is calculated by dividing the company’s net income/earnings by its shareholder's equity. The ROE showcases the efficiency of a company in using its shareholder’s equity to generate a profit.

8. Free cash flow

The free cash flow is calculated by the company's cash flow statement, which is subtracted from its capital expenditures. It tells how much money the company generates.

9. Price-to-book

The calculation of price-to-book is done when the company's stock price is divided by its net assets. Tangible goods are goodwill and other intangible assets on the balance sheet, which help investors willing to pay for a company's assets.

How Does an Asset Management Company Work in India?

The asset management companies registered in India follow a working pattern for generating returns for their investors. Consider the following three main stages that secure the standard services for the management of assets in India:

1. Asset Allocation/Criteria

Investment managers need to consider the assets that are available for allocation. The following factors have to be considered during Asset Allocation:

• Type of assets distribution- Equity or Debt Basis
• Evaluation of Market
• Portfolio Research
• Professional Considerations and Practice in Management of Assets.

2. Research and Building Investment Portfolios

Building investment portfolios is crucial for their proper management in the next stage. One of the main considerations is where the investment must be made, whether in high-rated securities or vice versa.

Asset managers must research the market and consider possible downfalls and trends. They must also consider the possible risk factors that pose, according to the market analysis.

3. Performance Monitoring

The last stage of an AMC is the constant evaluation of the portfolio and what is the rate of return on investment the portfolio is providing. These must be given in the form of reports. The asset managers must provide their client performance reports of the assets.

Role SEBI & AMFI in AMC Operations

The Securities Exchange Board of India (SEBI) is the main regulatory body for an Asset Management Company in India. When it comes to supervising, managing, and considering how investment managers work, SEBI is the main authority dealing with asset managers.

SEBI also provides a proper system for complaints and other grievances related to asset managers. Apart from the SEBI, the Association of Mutual Funds of India (AMFI) is the other regulatory authority for Asset Management Company.

Eligibility Criteria for Asset Management Company Registration

The applicants must comply with the AMC eligibility criteria specified by the Securities Exchange Board of India. The eligibility criteria required for the asset management company registration in India are as provided below:

• A registered office space;
• Hold requisite qualifications in the field of law, accountancy, management, or chartered accountants from a professional university;
• Appoint 2 people with at least 5 years of investment or portfolio management experience;
• Minimum net worth of Rs. 100 Cr (Need to maintain the net worth till it has profits for 5 consecutive years)

Documents Required For Asset Management Company

If the investor is a company, then a board resolution/ board meeting must be passed that the company will be investing in the asset/assets. The following are the documents that are required for investing and setting up an asset management company:

• Memorandum of Association (MOA);
• Articles of Association (AOA);
• Scheme of Investment.
• Directors Identification Number (DIN);
• Know Your Client Documents (KYC);
• Proof of Identity- Passport;
• Proof of Address (Aadhar Card);
• PAN Card;
• Driving License;
• Voter’s ID Proof.

What is the Registration Process for AMC?

The applicants must consider the following steps required to complete the process for the asset management company registration, as provided below:

Step 1: Market Research & Legal Structure

The first step requires conducting thorough market research to analyze and decide the legal structure of the investment industry.

Step 2: Filing SEBI Application Form

The next step requires preparing and filing the application form D with SEBI. The applicants are authorized to submit all other necessary documents to the concerned authority. The application and documents must be submitted along with the requisite fees as prescribed by SEBI.

Step 3: Verification & Review by SEBI

The SEBI is authorized to review the applications and documents submitted for asset management company registration in India. Further, SEBI is also authorized to verify and inspect any information or document presented.

Step 4: Grant of Certificate of Registration

SEBI, upon being satisfied with the inspection and verification of the documents submitted and applications made, is authorized to grant a certificate of registration to the applicants.

Post-Registration Requirements for Asset Management Company

The applicants must comply with certain regulatory requirements post-registration of an Asset Management Company. Consider the following post-registration requirements, as provided below:

1. Filing and Reporting

The asset management company must mandatorily file timely financial statements and annual compliance reports to the Securities Exchange Board of India to comply with the status of the managed funds.

2. Internal Controls and Audits

The registered asset management companies must mandatorily comply with regular internal audits and control in consonance with the guidelines issued by the SBEI.

3. Appointment of Asset Managers

An Asset Management Company appoints asset managers authorized to evaluate the investment framework. After evaluating this framework, they do market research and suggest possible investment options. Based on this, they proceed with the investment strategy.

Validity of Certificate of Registration

The certificate of registration granted to an asset management company is only valid for 3 years. The applicant is required to renew the Asset management company license upon its expiry by applying to the Securities Exchange Board of India in consonance with the regulations specified.

What are the Fees and Charges of AMC Registration?

The professional charges required for the (AMC) asset management company registration in India vary from company to company. However, the applicant must pay a non-refundable application fee of Rs. 100,000/—to the Securities Exchange Board of India. Also, the portfolio manager must mandatorily pay a registration fee of Rs 1,000,000/—.

Timeline to get AMC License or Registration

The timeline to get an AMC license in India depends upon the fulfilment of the SEBI-issued guidelines for Asset Management Company registration. Generally, it takes around 5 to 7 business days to get an Asset Management Company license or registration in India.

Why Choose Enterslice?

Are you intending to start an investment management journey by implementing your savings? Then, choose Enterslice to enjoy the efficient services that secure your asset management company registration in India. The applicant has access to the following services if opting for our services:

• Assistance for setting up a business model;
• Ensures timely asset management company registration with SEBI;
• Provides asset management services;
• Provides AMC investment services;
• Assists in choosing the best form for asset management company registration;
• Ensures evaluation of the investment market;
• Ensures compilation of necessary documents;
• Cost-effective Asset Management company registration.