ICICI Prudential Pension Funds To Expand In More Cities, Tie Up With Fintech Firms

ICICI Prudential Pension Funds Management Company, which turned profitable last fiscal, has said it will ramp up operations geographically as well as in terms of headcount and tie up with fintech players for wider and faster sales of products.
     
The company began operations in 2009 as a fully-owned subsidiary of the life insurer ICICI Prudential and had booked a maiden profit of Rs 5 crore last fiscal on Rs 12.5 core of revenue and an asset under management (AUM) of Rs 11,614 crore, up almost 54 per cent from Rs 7,558 crore in the previous fiscal. 
     
Its AUM has grown to over Rs 13,243 crore as of September 2022 and has 4.5 lakh customers.
     
The Rs 8.2-lakh crore pension fund industry, excluding the Atal Pension Yojana funds, is still vastly controlled by government agencies. 
     
Over Rs 6 lakh crore of the total pension fund is managed by the EPFO and Rs 90,000 crore, up from Rs 47,000 crore in FY20, from over 16.5 lakh customers are managed by the three private fund managers led by HDFC and SBI and ICICI arms, while the rest are with large private fund managers. 
     
The private sector has been growing at a CAGR of over 50 per cent for the past few years.
     
Four more companies—Axis AMC, Max Life, Tata AMC and DSP AMC—have secured licences from the regulator PFRDA (Pension Fund Regulatory and Development Authority).
     
"For the first time, we made a small profit of Rs 5 crore last year on a revenue of Rs 12.5 crore. On the back of this as well as the increased fee structure -- which has gone up from the initial 0.03 per cent to 0.09 per cent, we are ramping up our business plans," Sumit Mohindra, chief executive of ICICI Prudential Pension Funds Management Company, told PTI.
     
However, he added that this year the company will not be able to book profit as it is investing more in people as well as in expansion.
     
The expansion will see the company moving over and above its present concentration in the eight largest metros, Mohindra said, adding that sales expansion will be driven more by tying up with fintech players, having met already with "very good success" in its first such tie-up with the Bengaluru-based Pension Box.
     
"We're planning to tap the fintech space more aggressively for distribution and are in talks with multiple partners and hope to conclude formal tie-ups soon," Mohindra said.
     
"We'll also be growing the retail side faster through bank correspondents, and also other financial agents," he said, adding currently 50 per cent of sales come from the parent bank.
     
On the better remuneration by way of increased fees, Mohindra said till a few years ago, "our fee was very minimal, which works more or like the income tax slabs. Initially it was fixed at  0.03 per cent but it has been scaled up to 0.09 per cent".
     
While for the first Rs 10,000 crore of AUM, a fund manager will get 0.09 per cent in fees from each customer, for the next Rs 10,001–50,000 crore the fee will be lower at 0.06 per cent; for Rs 50,001–1,50,000 crore, it will be just 0.05 per cent and at an AUM of above Rs 1,50,000 crore, the manager gets 0.03 per cent in fee, he explained and said with this fee structure fund managers can be profitable.
     
Mohindra said he leads a team of 40 people now and is hiring this fiscal as it plans to go deeper into other cities. But he did not say how many more will be hired, saying this is not a people-intensive sector and also focus is more on distribution through other channels.