The domestic mutual fund industry is struggling to attract investors to ensure better penetration. L&T Mutual Fund, after taking over DBS Chola too, is facing challenges. Within a short span of its existence, the fund house has seen exit of senior executives. The new acting CEO of the fund house, Ashutosh Bishnoi, says he has definite plans to retain talent. In an interaction with Business Standard, he outlines his strategy going forward. Excerpts:
Given that there are 40 players in the market and the penetration level in the retail segment is below five per cent, what would be your fund’s strategy to gain market share?
L&T Mutual Fund has some 800 points of presence across India and most of these are in Tier-II and Tier-III cities. The expertise to create a sustainable market in these towns and remote areas is still lacking in the industry. That would be our priority. We will hire the best of expertise.
It has been two years since L&T took over DBS Chola. How has the fund progressed? What is the value addition L&T has done so far?
Our assets have grown by approximately 100 per cent (March 2010-June 2011) on an average. On a small base, this by itself is no source of great satisfaction, but we see it as a step in the right direction. It is another matter that for the mutual fund industry as a whole there was an overall decline of about 0.5 per cent during the same period. Also, we have added many branches to this business to enable it to pursue the penetration strategy we believe in. From 20 branches, we have now grown to 58 branches across the country.
The people churn at L&T is high. Is there a strategy in place to contain this? Will there be a few more senior appointments in the coming days?
At L&T Mutual Fund, we have added over 150 people in last 15 months. They are settling down. Though, there have been some exits at the senio level, we have definitive plans for the long term to retain talent.
Have you drawn up any expansion road map? Can we see some inorganic growth activity too?
The mutual fund business now is scale-oriented and profits are likely to rise with scale. We are open to inorganic growth, but we will wait for right opportunity. Looking at the number of players in the industry, we can expect some consolidation happening.
What are the products we will get to see from L&T MF? How would it differentiate you from other already established AMCs? Is there a breakeven target you have set? How soon you think it could be achieved?
Our approach is to have wide-ranging products that we think is most likely to succeed. So this could comprise a few more domestic mutual fund schemes, several portfolio management offers, a new offshore product mix and, perhaps, even a whole new product segment in the passive/quantitative area. Clearly, more equity-related assets will drive us closer to break even. At about Rs 7,500 crore of equity assets, the breakeven will look closer to achieve.
Is the fund flow in L&T higher from the institutional and corporate or retail segment? Can you break up the two segments?
According to the industry average, we have a similar trend where a major pie is invested by corporate followed by retail. But going forward, we are confident to increase the retail share in our assets.
Has the recent scenario and market meltdown shown an impact in your spend in promotional activities? L&T has launched an NFO too. What will its USP to attract investors be?
The right time to build a business is when the markets are trading at lower levels. Investors give you a patient hearing. The noise level in the marketing space is also lower. It is easier to get through the clutter. According to us, this could be an opportune time to invest in this fund, wherein if you look at debt market, Gilt yields have shown a continuous rising trend since December 2008. The environment appears to be turning favourable for a medium- to long-term bond portfolio, as yields on debt instruments seem to be at reasonable levels. Also, going forward, the possible peaking of interest rate increase by RBI could provide avenues to lock in investments. The interest rates are not expected to remain high on a sustained basis, therefore, investments at current levels would provide an opportunity when the cycle reverses and at the same higher yields at the present rate levels.