IDBI Capital Market Services is readying for new businesses, Mr Sushil Muhnot, MD & CEO, tells Business Line.
What are the new businesses that IDBI Cap may foray into in future?We are now the second largest pension fund manager in India after EPFO. This makes us the right candidate for becoming a fund manager for the new pension schemes for central and state government employees. This opportunity is likely to emerge as the largest in the financial sector as the scheme will get extended to private as well as the unorganised sector.
Another new business, which we have been looking at is commodity broking for which board approval has been received. RBI's consent is awaited.
Is private equity a viable business too?
IDBI Cap proposes to enter the private equity space by utilising its own funds, especially after the recent developments in settlement systems in the debt market. We are looking at second stage investments with a disinvestment horizon of 3 to 5 years. The company, incidentally, will also begin distribution of insurance products after IDBI kicks off its insurance business.
IDBI Cap is expected to be IDBI's launchpad for MFs. Give us the latest development here.Yes, we propose to join IDBI in its proposed asset management company. We are already a large MF distributor. IDBI has substantial experience in debt markets, equity investments, project financing, asset reconstruction and the retail market. It is capable of launching its own MF, particularly when its retail arm as well as IDBI Cap is both in distribution. The next move in this regard will be announced by the IDBI brass shortly.
How is your institutional asset management business set to develop?Our institutional business primarily comprises provident fund and pension fund management wherein we are a pension fund manager, managing over Rs 32,000 crore. Online trading, IDBI Cap's latest initiative, does face challenges. How can the ground realities be changed?Online trading has been growing well in India for the last three years. The annual growth rate is over 100 per cent. As regards penetration of the Net, the story is the same with strong growth rates. Over 10 million people use Internet. The important thing to note here is that the younger population, with higher disposable incomes, is also technology savvy. With the advent of broadband and its aggressive propagation by telecom companies, it is going to be much easier for people in smaller towns to have access to the Net at an economical price.
Online brokers are not severely constrained by security issues, as comprehensive security systems are available with requisite firewalls and intrusion detection systems.
How can the market for online broking expand?It can expand only when broking houses target retail investors. This segment, though vast in number, yields low brokerage income on an individual basis. It is, therefore, not preferred by many private sector brokerage houses. The requirement here is to build trustworthy brands at the smaller town level. A survey reveals that small investors are not able to take advantage of the current rally primarily because of the perceived risk of investing, especially in terms of losing their capital.
This issue can be partly addressed by giving them the best possible updated information.