The Hindu Business Line : ‘It is a matter of time before funds become less urban-centric’

Kolkata, Nov. 4 Investors will get more used to the idea of securing better returns, hopes Mr M.M. Murugappan, Director, DBS Chola Trustees Ltd. “The urban-centric nature of the business cannot just be wished away. However, this will progressively change,” he notes.

Excerpts.

What are the factors that can drive the asset management business further in India?

A number of broad, macro factors will take the asset management industry to the next level. Some of these will relate to retail clients, while others will be solely connected to the institutional segment. It will be important to have a healthy combination of the two.

As for retail, AMCs (asset management companies) will look at it for ensuring greater stability of their business. The volume of retail investment can only go up, not come down. The question is whether the industry is doing enough to have more retail investors under its wing. I think it is working as much as it can to tap the retail market.

The institutional portion, which today accounts for a very significant share of the overall market, will no doubt play an even more critical role in the days ahead. In fact, the Indian growth story will propel this segment to newer heights.

What will determine further evolution of the DBS-Chola joint venture in India? Are new markets being tested?

We at Chola are continuously talking to our partners in terms of using their experience elsewhere in Asia. The strategy to harness their strengths is being discussed. One of the possibilities is to work out funds that will invest in Indian securities, but sold abroad by DBS.

As for the joint venture we have, we continue to manage it progressively. And, yes, new fund offers are being lined up for the domestic market. A couple of them should be rolled out before March next year. These will be equity products. Incidentally, we have introduced an infrastructure fund recently.

With large international players coming into the Indian financial services market, competition will be severe. Can smaller players survive?

Yes, small players will carry on, provided they are able to do a few things correctly. If they do, they may end up with niche operations. Remember, scale will matter because, at the end of the day, this business is about scale. Costs will have be controlled as well. A number of fund houses are today surviving on debt and liquid assets, with equity playing a relatively smaller role. This aspect will have to be looked into as well.

The penetration of mutual funds is still very limited. It is still very urban-centric, considering 80 per cent of the business comes from the top 10 cities. How can it be made more broadbased?

Yes, the urban-centric nature of the business cannot just be wished away. However, this will progressively change. It is a matter of time. You see, the culture (of investing in MFs) will have to set in more firmly. People will have to get used to the idea of seeking better returns, courtesy funds.

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