More competition isn't a threat, it will grow the market: Birla MF chief

In a Q&A, A Balasubramanian, MD & CEO of the fund house, talks about the pricing of its IPO and welcomes the entry of fintechs in the MF space

Aditya Birla Sun Life Asset Management Company will launch its initial public offering (IPO) next week. A Balasubramanian, MD & CEO of the fund house says its over two-decade old presence puts it in an advantageous position. In an interview with Chirag Madia, he says entry of fintech players in the MF space will help grow the market. Edited  excerpts:

How have you arrived at the IPO pricing? How does it compare to listed peers?

We have gone by the feedback we got during the road shows we conducted across the country and the globe. It also reflects our growth expectations. The pricing is done keeping in mind investors’ interest. No matter what the IPO price is, it will get adjusted after the listing, depending on how the market looks at us compared to the competition.

The regulator’s focus has been on cost rationalisation. Do you think it will impact profitability?

While there has been a reduction in the overall cost structure as well as the expense structure. We have been building equity on one side and adding more customers along with a strong book of systematic investment plans (SIPs). The advantage we have is that we are gaining scale without an increase in additional costs. Therefore, operating leverage helps in improving overall profitability and revenues.

Would you look at inorganic growth to gain market share?

At this point there is no such plan. We, as a fund house, have a track record of acquiring fund houses. We have acquired Apple MF followed by Alliance MF and ING MF over the last few years. In the future, if any opportunity exists depending upon the comfort, valuations, board and shareholder approval, we will remain open to the idea. Having said that, predominantly we remain focused on organic growth.

How do you plan to tackle competition from the new fin tech players?

More players coming in will help the industry grow in size, both in terms of customer acquisition and expanding reach. We, as a fund house, are one of the most established players, with 23 years of track record--something that will put give us an edge. I don’t think it’s a threat, we will continue to grow our size and assets.

There has been increased investor interest in passive products. What is your strategy on that front?

Globally, exchange traded funds (ETFs) can charge some costs, so we can’t say it’s a completely low-cost product. It can even be a profitable product. We believe active and passive will co-exist and remain complementary from the customer's point of view. Therefore, creating a presence in both asset classes is extremely important. At the end of the day from the investor’s viewpoint, portfolio construction is more important than looking passive versus active.

The market share of the fund house has remained in the range of 8-10 per cent. How do you plan to improve it?

During the past 10 years, our market share has improved from 5 per cent to 9.1 per cent. Our focus would be to deepen our presence in B30 (beyond-30 cities) and expand our customer base across all markets. The focus will remain on expanding our branch network as well as the distribution network. Creating wealth for the customers through SIPs to meet their various goals will also be the key focus. The overall pie will continue to expand. We believe that now having built a scale and size our moto will remain in increasing the customer base. Our approach will be more granular in both products as well as the ownership of customers.