The sixth-largest mutual fund (MF) distributor in commission terms -- Prudent Corporate Advisory -- has acquired the mutual fund business of Karvy Stock Broking (KSB).
“Acquisition of Karvy’s MF folios will help strengthen our presence in the retail financial product distribution space. Prudent has been successful in growing the MF distributor (MFD) network from 8,378 as on March 31, 2018, to 17,583 as on May 31, 2021. We welcome MFDs and investors of Karvy to the Prudent family,” said Shirish Patel, chief executive officer at Prudent Corporate Advisory.
According to Crisil data, there are 1.11 lakh AMFI Registration Number (ARN) holders registered with AMFI as on March 31, 2021, while the number of ARNs empanelled with Prudent stood at 17,583, which is 15.84 percent of the industry.
KSB distributed mutual funds, through its sub-broker network. These sub-brokers would work under the banner of KSB and sell MFs as well as other financial products.
For KSB, the commissions from mutual fund distribution were to the tune of Rs 60 crore in financial year 2020-2021. Prudent had commissions of Rs 264 crore in financial year 2020-2021.
Prudent Corporate Advisory also plans to launch its IPO, which would make it the first national distributor of mutual funds to get listed on the stock exchanges.
The company has filed its draft red herring prospectus with SEBI in August 2021.
The Karvy stockbroking scandal
KSB was barred by SEBI for taking any new clients in November 2019, on allegations that it had borrowed funds against its clients’ equity investments.
Also watch: Explained | How Karvy went from broking to broke
It was revealed that securities worth Rs 2,300 crore belonging to over 95,000 clients, were pledged with various banks and non-bank financial companies as collateral.
The country’s two leading stock exchanges -- NSE and BSE -- cancelled the broking membership of KSB last year in November.Both NSE and BSE declared the broking firm as a defaulter for not complying with the regulations of the exchanges.