Our primary focus is small markets, mainly villages: Mahindra MF CEO

There are over 300,000 villages where Mahindra Finance and its subsidiaries lend money, said Mahindra MF CEO

Mahindra Mutual Fund, the latest entrant in the 42-player MF industry, has set an objective to take mutual funds to rural areas.  In an interview with Jash Kriplani, Ashutosh Bishnoi, Managing Director and Chief Executive Officer, Mahindra MF, shares various challenges and opportunities as his firm explores uncharted territory. Edited excerpts:

 

What made the Mahindra group enter the mutual fund business?

 

We looked at the asset management business way back in 2008, but put it off as we wanted to stay focused on the non-banking financial company (NBFC) space, which was fast-growing. In 2011, we evaluated the banking licence opportunity, but didn’t go for it as we didn’t find it lucrative. So, we said that we should look at something with low capital at risk and high fiduciary comfort. That is when we looked at the asset management business. The MF business also helps to extend relationship with customers beyond their financing requirements.

 

What will be the growth plans for the next three to five years?

 

The primary focus will be to go to small markets, mainly villages. There are over 300,000 villages where Mahindra Finance and its subsidiaries lend money. This business is being carried on from almost 25 years. When you have created such a unique network, there is no reason to move away from it. You have a ready customer base and franchise network in markets where even some of the large banks don’t operate.

 

How do you communicate with people in the hinterland who may not be well-versed with the idea of MFs?

 

About two years back, we were at the launch event of our mutual fund business in Varanasi. I was making a presentation. I realised that I was not getting through to the audience and midway I switched to Hindi. After that, we made a rule that all presentations will be made in Hindi. Except in South, where people prefer English, we make all investor presentations in Hindi. The lesson I learnt is that if you want the MF business to grow, you will have to speak their language. That is also the reason why we have named most of our schemes in Hindi or in a mix of Hindi-English.

 

Are you open to inorganic growth?

 

We are open to everything. However, here is the challenge. We are following a particular strategy and it is not easy to find assets that would be a good strategic fit. Our strategy, as mentioned, is to go to smaller towns. We looked at a couple of fund houses that were put on the block, but found them too institutional-focused, which is just the opposite of our mandate.

 

How are you placed in the direct-regular debate?

 

The biggest challenge we face in the small markets is lack of distributors. I, for one, don’t believe that the direct plan is the perfect solution. Nobody in the world invests money without having a piece of discussion. It is human nature. Direct plans are meant for a very different set of people. These investors come from metros like Mumbai and Delhi. They track markets on a daily basis and have invested several times. While we will be happy to have them as well, but we are not necessarily looking at these investors. We are going behind those people who have a genuine issue in accessing mutual fund products.

 

How do you deal with the lack of distributors in your target market?

 

We are trying to encourage people at Mahindra Finance’s branches to take the responsibility of selling mutual funds, if they can. We are also trying to scout for distributors in the small markets and hope to work with them.