Business Briefing 19/12

Bajaj Chetak: T’was Too Good to Last; and ‘Mutual funds are feeling the tremors of change’

The once mighty middle-class symbol of personal transport in India, the now unfashionable Bajaj scooter that helped the company become one India’s richest, died last week. Its parents made the announcement at a press conference without any visible signs of regret. “If we are to be a motorcycle specialist, we cannot make scooters,” said Rajiv Bajaj, now the chief caretaker, stressing the importance of moving ahead. Inspired by the Italian Vespa Sprint, the first of a generation was born in 1972 and christened Chetak after Rajput warrior Maharana Pratap’s steed. While Chetak become an icon, it had several stellar siblings such as the M80 and Bajaj Super. Its lone surviving progeny, Kristal, probably a female and currently comatose, will be given an official burial coming March. That the waiting period for a Chetak was once more than a few years is now a  part of India’s pre-liberalisation folklore. It’s quite common among revisionist historians to hold the Chetak and its clan as a symbol of everything that was wrong about India before economic liberalisation. Artificially overpriced, unsafe, polluting and ugly are some of the adjectives slapped on the clan now. Mindful of the Indian ethos of not speaking ill of the dead, we wouldn’t like to dwell more on the shortcomings of the Bajaj scooter. Suffice to say that it was an Indian icon, and the ride was good till it lasted. 

Stockmarkets have recovered, but Indians investors are still wary of mutual funds (MFs). AP Kurian, chairman of the Association of Mutual Funds in India (Amfi) speaks about the crisis of confidence:

Q Equity funds are witnessing large outflows. Is there a crisis?

A There’s no crisis. It is a phase of readjustment. Till July, the commissions were directly paid from the investors’ money by the fund to the distributor. If I put Rs 1 lakh in a mutual fund, the entire money will now be invested. Depending on the quality of advice I want and the quality of service I get, I pay the distributor separately. This is a 360º change from what it was for the past 40 years. This has caused a tremor.

Q In the secondary market, there has been total inaction by MFs. Insurers, on the other hand, are sitting on a pile of equity. How do you justify this?

A We used to get gross sales of Rs 7,000-8,000 crore till July. That has halved. People are not buying on a net basis, so equity funds are seeing outflows. Where is the money to invest? Insurance companies are getting into our space whereas we cannot go into theirs.

Q Why aren’t MFs going to smaller towns?

A It’s not easy to penetrate smaller towns. There has to be someone who will talk to investors in, say, Beed. Funds don’t have an army of people. It’s not economical. Someone earning Rs 10,000-15,000 in Beed can invest but somebody has to go to him and explain. Then there are insurance companies who tell him they have a product which will multiply their wealth and also give them insurance! That’s the challenge.

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arindam