Any great business has some or
the other kind of sustainable competitive advantage that allows the business to
earn return on invested capital that is above the industry average. One of the
so called entry barriers is the initial amount required to start the business.
If the amount is quite high, not everyone can enter the industry and the incumbents
have a good run. The question is should the government/regulator impose such
high capital requirements and dissuade passionate and highly bright individuals
from the entering the industry? One of the questions going around in the Indian
Mutual Fund industry is whether the minimum net worth required to set up an AMC
(currently INR 100 million) should be increased or stay at current levels.
Renowned value investor Mr. Parag
Parikh has written a fantastic article articulating his thoughts on the same.
You can view the article here
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