The Hindu Business Line : Mutual funds vying to boost IPO collections

PER-application amounts, mobilisation targets, passouts - terms such as these are quickly fortifying their positions in the lexicon of even ordinary investors, thanks to the enormous efforts that are being put in by distributors of mutual funds for boosting IPO collections.

If the passout offered by a national-level intermediary (details of which are available with Business Line) is any indication, SBI Mid Cap and HDFC Premier Multi-Cap will be at the centre of attraction over the next few days. The two schemes will close their initial offers later this month.

The distributor in question, which has advised its marketing executives to ensure that extras are not provided unless "some very big business" is at stake, is ready to offer one per cent for any mobilisation up to Rs 10 lakh from a single sub-broker for SBI Mid Cap. The rate will be hiked to 1.25 per cent for collections above this limit. The per-application rate across all brokers is fixed at Rs 50.

For HDFC MF, however, the rate is different, with 1.5 per cent for any mobilisation up to Rs 5 lakh from a single sub-broker. It is 1.75 per cent for Rs 5-15 lakh range and two per cent for more than Rs 15 lakh. The per-application figure in this case is Rs 75.

MF distribution circles also point towards another trend that is emerging quickly: Stiffer collection targets are being set by distribution outfits for their various regional offices.

"As competition among fund houses has intensified, so has the race for higher IPO figures," said a senior source at a well-known distribution firm requesting anonymity.

Even the relatively smaller players in the business are adding to the trend, it is pointed out. Depending on its regional strengths, a distributor may typically fix a target of, say, Rs 10 crore for its Mumbai office, followed by Rs 2.5 crore for its Bangalore branch.

A lot of emphasis is laid on achieving these targets, which ultimately lead to an increase in the total assets drummed up by the intermediary concerned. However, switches from other schemes are not always encouraged as the absolute figure does not increase correspondingly - hence trail commissions paid to the distributor are affected as a result.

The result of all this is reflected partly in the amounts that are being mobilised by IPOs of funds. Initial offers that have collected significant amounts include Franklin Templeton MF's Flexi Cap Fund and Tata MF's Infrastructure Sector Fund.

Reliance MF's Equity Opportunities Fund, which closed on March 7, will also attract a very large amount when the final tally is made known, sources claimed.

Distribution firms point out that a number of players in their fraternity are going in for some serious value addition as part of their expansion drive. "Some of us are looking at re-branding and a bigger regional exposure, while others are trying to make their presence felt through new branches and more customer meets. Distribution firms are also adding to their HR strengths and there is a greater degree of churning within the industry," a source noted.

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Mutual funds vying to boost IPO collections