The Hindu Business Line : `MF industry yet to mop up surplus funds thru IPOs'

THOUGH the mutual fund industry has seen a considerable mop up in recent months, there is enough steam left in the market for the industry to come out with fresh IPOs, according to Mr Vineet Potnis, Chief Marketing Officer, Cholamandalam AMC Ltd.

He feels that though the stock market has seen a substantial rise in the past three years, there is a qualitative difference between the recent market rally and the one witnessed four or five years ago in that the price earning (PE) multiple now it is reasonable compared to the earlier period.

Speaking to newspersons here in connection with the launch of Chola Global Advantage Fund, he said though the stock market capitalisation was more than Rs 15,00,000 crore, the mutual funds through their IPOs recently had mobilised only about Rs 5,000 crore. The proportion of funds flowing into mutual funds through IPOs was still very small and the market has `not saturated'.

Asked whether the valuation of new mutual fund schemes would not be stretched when the IPOs hit the market after the stocks had witnessed a substantial rally, he said, "we don't believe market has peaked'' even at 6500-7000 points level.

One should look at the PE ratio and the earnings of companies were now going up. The price divided by earnings was still small at 12 or 13 times compared to four or five years ago.

Mr Potnis said though the newly floated scheme and the existing Chola MF schemes might have common stocks in their portfolio, the Global Advantage Fund was different in that it would focus exclusively on companies that have a global footprint.

He said the correction the stock market had witnessed was a `temporary phenomenon' and it provided the opportunity for picking value stocks cheap. There was no fundamental change in the economy.

Asked whether any upward revision in US interest rates would result in FII selling in India, he said while there could be some re-allocation, there were a large number of new FIIs coming to India. The monthly inflow might change but the net impact would be positive.

About the small fund size of Chola MF's equity schemes, he said the mop up through equity scheme, the IPOs had witnessed a steady growth and through its previous scheme — Chola Multi-Cap Fund — it mobilised about Rs 100 crore.

Traditionally, Chola MF was not strong on the equity side but from last year onwards, it has been launching new equity schemes and the Assets Under Management (equity schemes) had grown from less than Rs 60 crore in March 2004 to more than Rs 200 crore in March 2005.

Mr Potnis, while saying that the company did not have any specific target for mobilisation through the latest IPO, said the response had been good from the retail investors and he expected the collection to pick up before the IPO closes on May 16.

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