Ashutosh Bishnoi is the Managing Director and CEO of Mahindra Asset Management Company Private Limited, India's youngest mutual fund house.
There are already more than 40 mutual fund companies in India. In such a crowded space why did Mahindra decide to start a new fund company now?
The need for the Mahindra Group to enter the investment products business comes from the needs of our customers that we see unaddressed. If you analyse the current mutual fund business in India you will find that roughly 85 per cent of the assets managed by all domestic mutual funds are contributed by the top 15 cities. All of the rest of India contributes only 15 to 16 per cent of the assets.
Now at Mahindra, as you may be aware, we have always catered to numerous smaller cities and rural areas, whether it is through our automotive products or our substantial financial sector business. The idea is to take the mutual fund products to smaller markets where financial brands and products are few, though the need for financial solutions is as prominent in peoples’ lives as in any urban or metropolitan market.
Where household investments are concerned, smaller towns are dealing with a new problem since the past few years viz. their traditional investment assets such as land and gold have become very expensive. People are now confused about where to invest their surpluses. I think we can offer them satisfactory solutions.
What is going to be your strategy to reach such investors?
Quite clearly, the first and foremost requirement is to create products that address the unique needs of investors or savers from smaller towns or villages. In doing so, which we have to remember that these are usually not financially literate customers and in planning their investments they mostly focus on their life’s liabilities and goals; as against city investors who choose investments based on the returns and profits. Our idea is not only to make simpler, goal-oriented products but also to brand them in a way that people can understand them easily.
We’ve made a beginning with a tax savings equity linked savings scheme (or ELSS under section 80C of Income Tax Act) called the Mahindra Mutual Fund Kar Bachat Yojana. This is possibly the first ever mutual fund product in India to be branded in a non- English language. Contrary to popular belief there are many tax payers in small towns of India who came forward and readily subscribed to this scheme during its New Fund Offer (NFO) period in August-Sep last year. In fact, we got investors from about 120 locations.
There are other fund schemes that we are planning to bring to the market that will also have a sharp focus on specific goals. Our next scheme for which we are about to close the NFO period is called the Mahindra Mutual Fund Dhan Sanchay Yojana. This fund is being positioned for those who wish to accumulate their savings in a plan where the goal is to grow somewhat better than inflation, albeit with the risk of reduction in value due to the equity component in its portfolio.
How do you plan to reach all these investors in so many towns and cities and villages? Is Mahindra Finance going to play any role in that?
That is our next big challenge. Mutual Funds, as you know can only be sold by those who are certified to sell funds. Finding such persons or organisations is easy enough in the top 35-40 cities, but beyond that there are very few trained people. The good news is that we are finding a lot of young people who are coming forward with plans to become an investment advisor, but the process of getting them trained needs time. Yes, we are also working on training people within the Mahindra Finance workforce and equipping them with a mutual fund certification, but let’s remember that they are not yet trained to market mutual funds. That’s our next goal.
In the meanwhile, we believe that if we explain the products simply or arouse investors’ curiosity, the advisor community will find it easier to market the products and more of them will come forward to join the force.
Can you explain that with an example?
Let’s take the example of our tax saving ELSS fund. We now know that there are going to be many more people joining the ranks of taxpayers in India due to the government’s efforts to widen the tax base. So we are preparing our advisor force to address this need using the Mahindra Mutual Fund Kar Bachat Yojana.
We are about to launch a campaign to educate investors and advisors on the benefits of paying taxes. This is called ‘Taxes Achche Hain’’. This is bound to evoke curiosity and interest in the subject.
Our main plank is: “Paying taxes is good news for you because it means you had good income or good profits. Besides, it is good for the country if you pay taxes. However, even better news is that you can save on taxes if you invest in this Yojana.”
What is your long term target? What level of Assets Under Management would you want to reach? And in how much time?
Our goal is not in asset volume terms. Our goal is to reach lakhs of investors from the next few hundred cities beyond the top 15 cities. It is an ambitious plan, but we think that if as a country India has to generate its own capital, lakhs of homes will have to contribute to that build up.
Today, only 3 to 4 per cent of Indian households invest in Mutual Funds. Even then the total amount they have invested is in the region of approximately 8 to9 lakh crores. Now, if like other emerging markets, this number of households climbs to 30 per cent, then can you imagine the quantum of domestic capital the country could have access to?
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