‘There is huge potential for MFs outside top 20 cities’

Ashutosh Bishnoi, CEO and MD of Mahindra Asset Management Company

Mahindra Asset Management Company (MAMCPL) is the investment manager to Mahindra Mutual Fund and a wholly-owned subsidiary of Mahindra Finance, which has over 4.8 million customers and has an AUM (Assets under management) of over $6 billion.

Launched in July 2016, the company aims to be the asset manager for the largest number of people from semi-urban and rural India in the next 10 years. Ashutosh Bishnoi, CEO and MD of Mahindra Asset Management Company tells Uma Kannan of DH that as an industry if we go to small towns and villages then one can create a business of Rs 100 lakh crore by 2025. Excerpts:

 

How is your new mid cap fund-
Mahindra Unnati Emerging Business Yojana- performing?

It’s been five months now since the launch, and it is doing well. In fact, we saw the consumption cycle turning. If you take the environment today, you will see that everybody who is in consumption space has reported very good earnings and the others have not. The midcap definition has changed now and they are not small by any standards.

The minimum size is around Rs 9,000 crore, and the top most is almost Rs 30,000 crore. So many of the 150 companies that we classify them as large capital because we always said that the top 200 companies were large capital, but suddenly their dispensation has changed in which only top 100 companies are large. So 101 to 250, according to me, there are still 100 large capital companies.

 

Can you give us some example?

Going by the definition of midcap, Colgate was one, so, it takes a little bit of reorientation of mind. For us the consumption space has performed, and so we are doing well.

Our fund is generally in the top 5 or 7 in the midcap space. But we will really know after everybody has realigned according to the new product reclassification, and that is likely to happen by the end of this month. So that’s the space which is performing now and the equity, we think, is a space that will continue to perform.

For many months now, equity market is volatile. Your views on the market?

We are at a level which is only 5% down than its peak in January but, it’s not feeling good because it’s not continuously going up. It will remain a bit like this, according to us, for a year or so.

May be little over a year for the following reasons- when global yields are on the rise, the international flow reduces, yet we have a lot of domestic flow coming in, so that will keep trying to push it up, but selectively. Today, what has the market done? The market has differentiated between performers and non-performers very sharply. 

 

How is debt market doing now? 

The opportunity is now coming up on the debt side. It’s a question of risk versus reward. In equity you take a big risk, you get a decent reward, anywhere between 18% and 20% a year. Even in debt, it is possible to make, depending on the product you go for, anywhere between 12% and 16% per annum.

 

What is the split between equity
and debt?

As an industry, if you take all retail money in the mutual fund business, the split between equity and debt is about 60% debt and the rest equity.

This is a 25-year-old industry and we have come through a long time when debt has performed very well and equity has not. So whenever equity doesn’t perform well, people go to debt. So far the game was limited to top 10 cities, now we are trying to take it into smaller cities and try to explain to them why they should invest in debt.

 

Are you present in smaller towns
as well?

We are in smaller towns, but not in huge numbers. Today we have our own offices in 54 locations, which is not typical of a new AMC (Asset Management Company). Typically, new AMCs start with 5 or 7 locations. We have a mandate to go to smaller cities and we get money from 400 cities, that again is not typical.

Big AMCs do that, most of the people we meet when we go to the smaller places are only the very large AMCs. They are there, but no new or small AMCs go there.

 

What is Mutual Fund industry’s AUM at present and what is Mahindra’s?

The industry’s AUM is above Rs 23 lakh crore and our AUM is around Rs 4,000 crore. Our target is, in 10 years our company should be the asset manager for the largest number of people from semi-urban and rural India.

 

There are 42 active fund houses and how are you looking at your
competitors?

If MF’s AUM going to hit Rs 100 lakh crore then there is enough room for everybody. Market cap follows GDP. We are today about $2.6 trillion GDP. Exactly where the total market cap is but sometimes the market cap will run ahead, if the economy is in a sharp rise, more like US, their economy is doing well for the last 3 years, and there, the market cap is almost 150% of the GDP. GDP is about $22 trillion and market cap is almost $30 trillion. If economy does poorly then market cap will fall below the GDP, but over a long period of time, they will be very much in tandem. 

 

Are you planning to expand to other locations?

From 54 locations we might reach up to 75-80. We have around 150 employees, of which, 110 are in sales, and remaining are in fund management operations, compliance etc. We believe there’s a huge potential for mutual fund outside the top 20 cities, and we are going to go after it.

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