MF industry has grown to Rs 40 trn but it is only beginning: Sanjiv Bajaj

Pune-based Bajaj Finserv MF is set to launch products across equity, debt and hybrid categories this month

Non-banking financial behemoth Bajaj Finserv has become the latest player to enter the Rs 41-trillion mutual fund (MF) space. Officially launching its MF business, Pune-headquartered Bajaj Finserv MF is set to launch products across equity, debt, and hybrid categories this month and is betting on the group’s experience, capabilities, and distribution heft in the financial services space to emerge as a distinguished player. Ahead of the official launch of the MF business, SANJIV BAJAJ, chairman and managing director, Bajaj Finserv, speaks to Abhishek Kumar and Samie Modak on the group’s latest foray. Excerpts:

How excited are you to enter the MF industry?

Our focus for the past 15 years has been to provide financial products and solutions to the average Indian consumer. We started with loans. Now, we also have payments, insurance, and fixed deposits. MF was the only missing part.

Today, we have 100 million customers. With nearly 70 per cent of them, we have explicit approvals to cross-sell products. Of course, the choice is in the hands of customers.

How do you plan to leverage the group's presence and experience in other financial services spaces?

Like each of our other businesses, we will have to be the lowest-cost operator in the MF space. Every rupee we save will benefit customers, employees, and shareholders.

Also, the focus will be on leveraging our learnings and expertise on the technological and data fronts to provide better MF solutions to customers.

Finally, our strong physical presence and distribution network built by Bajaj Finance and Bajaj Allianz will be an advantage for the MF business. 

Have you set any assets under management targets?

It is too early to set a target. The medium-term plan is to build a large business. We will likely have a fair idea of our growth plans after a year. What we know is that about 15,000 distributors have already signed up with us.

Are you open to acquisitions to get an inorganic boost?

We can scale up organically as we have done in our other businesses. To buy something to save a couple of years is not as attractive to us. The key in MFs is to have a differentiated investment strategy.

In an acquisition, you have to acquire the investment philosophy as well or you lose the performance benefits. We evaluated a few deals in the past few years but we were not able to find what we wanted — a similar kind of investment strategy at an acceptable cost.

How much capital has the group committed to the MF business?

It’s about Rs 500 crore, including the Rs 50 networth requirement. We think it will be enough to scale up. If we give ourselves 10 years to scale up, we won’t even need that much. The capital will mostly be used for investments in technology, building teams, expanding the sales team, and enhancing physical presence. There is also a digital platform being built.

The MF industry is dominated by a few large asset management companies (AMCs). How confident are you of breaking into the top league?

This has been the case for almost all our businesses so far. Indian customers are very value-conscious. Value doesn’t mean cheap. In our insurance business, we are not the cheapest. We focus on what the customer values most.

Do you plan to list the AMC?

Bajaj AMC is already a separate company. It is a 100 per cent subsidiary of Bajaj Finserv, but we see no reason to list.

Any plans to get a foreign partner as some domestic AMCs have?

We have always been open to partners who can add value. We are currently managing about Rs 1.6 trillion across companies; we know the distribution and technology, and we have the brand. So there is nothing we see currently that a foreign partner can add. But we will always be open to the idea.

What are the structural drivers you have identified for the MF industry?

There are a couple of significant drivers that should aid the industry’s growth. One is that with everything that is done with the larger economy by the government and even the private sector. Banks have cleaned up the books once again and are ready to lend more. Over the next few years, we should get to much stronger growth than where we are now.

Even where we are now today, the growth rates are very good but we need to get to 8-9 per cent growth in the years to come. The next 10-20 years are going to be India’s golden years.

Per capita income is already at $2,500. We have seen with economies around the world that when they surpass $3,000, a significant amount of the money goes into savings. We are on the cusp of that. Even though the industry has grown to Rs 40 trillion, this is just the start.