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Aim to bring NRI dollars into Indian market, says Aditya Birla AMC’s A Balasubramanian

For A Balasubramanian, managing director and CEO at Aditya Birla Sun Life AMC, the natural progression for the company is to hit the global market by tapping its joint venture with Sun Life. Bala, who is spearheading Aditya Birla AMC’s initial public offering, says that he is aiming to bring NRI money to the Indian market with help from the IFSC GIFT City in Gujarat. In an interview with, the veteran asset manager also talked about why millenials will come back to boring MF investing after the fun ride of direct equity participation and how it felt to make an investment pitch after spending years hearing them. Edited excerpts:

You as an asset manager have participated in numerous IPOs over the years. How does it feel now to be on the other side of the table this time around?
Of course, it is a very interesting change. Now, I am sitting on the other side of the table when I have to talk about our own success story, about the AMC and how we have built it, how we have created shareholder value and managed a large pool of investors. When you have to make a presentation, you will, of course, look at the past stories and how we have built conviction for ourselves and then create the same kind of conviction for the investors to decide on. Investors have got the right to ask all kinds of questions, some of which could be seen as tough. But, how you take those questions and then articulate your strategy is something that has been a great learning for me.

As an investor, you ensured that your investment has value for your clients. Do you feel your IPO will offer the same comfort to investors?
Many long-term investors, who have participated in our anchor book, have given some genuine feedback as to how we should go about the pricing of the issue. Shareholders, in consultation with merchant bankers, have been quite mindful of getting the pricing done in a manner that is fair, reasonable, and also leaves reasonably good money on the table for investors for as and when the potential listing would happen.

You are an Aditya Birla AMC lifer. You have seen it shape the asset management industry over the past 27 years. What is your ambition for the company over the next 10 years?
I must confess that I have been fortunate to be part of the industry, and fortunate to be working with a good set of people within the AMC. Therefore, I would give all the credit to all the people who surround me. We are just scratching the surface given that as an industry we are at only 20 per cent of the banking industry capital and the mutual fund space in the US is more than 100 times of the banking industry.

Second, in the last few years, recognition of mutual funds as an investment vehicle has gone up and people have also understood the power of compounding by investing in mutual funds in a regular manner. My own belief is in the next 10 years and even beyond, we will probably be among the fastest growing industries. I would like to thank The Securities & Exchanges Board of India. As a regulator, Sebi has continued to bring in new reforms in the best interest of the investors and at the same time even for money managers. I would think we have the platform to take off for the next 10-15 years easily.

From Aditya Birla Sun Life AMC’s point of view, we believe that going forward our growth rate will be in line with industry. Though in the past six-seven years we have been growing more than the industry players by a significant margin on our equity asset side and customer folios, there is a space for more players to take their share. We will probably target towards growing with the industry, if not higher than the industry.

The AMC has been the leader when it comes to reaching tier-II and tier-III cities. How are you looking to consolidate that leadership in the coming years and what kind of penetration would you like to achieve?
The distribution part is broken into three-four parts. One, we work closely with the distribution partners to provide greater service in handling customers and it is one of the core areas of focus for us. Second, is increasing our geographical footprint across the country. We continue to drive our presence, where I feel that we need to have physical presence. While doing that, investment in digital technology has now become the new way of life. As a mutual fund, in the last five-six years we are enhancing our capability on digital platforms to provide greater service standards as well as to make product selection process much easier.

Finally, given that data analytics has become key to understanding the customer behaviour and giving the right input at the right time to the customers to help them buy a new product, as a fund house that is what we have been doing quite continuously. It will remain one of the high areas of focus in our expansion. There are many RIAs as well as digital technology platforms that will come, with whom we have to work very closely to ensure our products are present.

Mutual funds have become a sizable industry but there is also a lot of disorientation among investors when it comes to the performance of the average fund. Is there a way that MFs can change this perception?
Frankly speaking, from the investors’ point of view they go by the portfolio approach. They will invest in equity, they will invest in fixed income, and then they look at the total return that they get in the portfolio. I, personally, as an investor don’t invest on the basis of beating the benchmark, or expenses. I make the investment on the basis of what is the portfolio construct and the pattern: how much should be in equity, how much should be in large cap, midcap, multi-cap and so on and so forth. Beating the benchmark is more incidental and of course, that approach beats the benchmark given the fact Indian money managers for the last 27 years have been beating the benchmark except for the last two years, which have been challenging. From investors’ point of view, they are in a sweet spot to benefit from the change that has happened from investing their money for the long term.

For the younger investors, mutual funds have become a boring investment as has been reflected in the rise of direct investing over the past 18 months. Would you consider this increase in direct equity participation a threat or an opportunity for Aditya Birla AMC?
I see it as an opportunity for one simple reason: all of us including me when I began my career at the age of 20-23, definitely tried our luck by investing in stocks directly. But we also saw crashes in the market coming suddenly which was the time when we realised that in the market what goes up, can also crash. There is a risk that you are running by investing directly.

One must understand that the market will go through ups and downs and will not always move only one way. Boring investments take care of your future needs and that is why SIPs may seem as a boring investment. Simple products actually compound your returns over a long period of time. Mutual funds help you build your portfolio for longer term wealth creation. At this point in time, the millennials’ goal is not to create a longer term plan; the goal is to try and test their luck by investing in the market by trading. As they start trading, they will graduate themselves to mutual funds and then they will have a good mix of simple boring mutual fund products and a small portion of investment which they will trade for fun. I personally have gone through this cycle, burnt fingers in the early part of my career when I started to earn.

The IPO is coming at a time when there is a queue outside your door of new players looking to disrupt incumbents like you through the promise of cheaper fees and a more technology-driven style of investing. How do you intend to tackle this?
When Aditya Birla AMC started, there were only three players but today there are about 45 mutual funds. We as Aditya Birla Sun Life AMC, because of our sheer focus on serving a large pool of customers in the country and with our brand strength, have built what we are today. Incumbent players like us have an existing track record and in mutual fund investing, a longer term track record and the commitment play a very important role.

New players coming in will only help in expanding the market. It will also help in expanding our pie. We as a fund house will remain a total solution provider to customers by offering products that have got a mix of both. The learning curve for us also has been faster and as a fund house we will remain agile to change and to continue to remain a committed player for the industry.

With the rise in international investing, do you see it as an opportunity to make Aditya Birla MF a global mutual fund?
Of course, globally asset management companies tend to become international asset management companies. We believe that Aditya Birla Sun Life Mutual Fund is a household brand in India with a large pool of investment still remaining untapped. We as a fund house have been offering an international product opportunity and as we speak, we are going to launch a Nasdaq fund very soon. There are many such innovations that we are bringing in to diversify the portfolio of our customers and invest in the global market as well.

Given the fact that we have Sun Life as a joint venture partner, we do have an aspiration to work with Sun Life to help in growing our reach to NRIs in the global market, to help them invest in India by setting up shop in overseas markets. We have presence in Singapore and Dubai, and we are now trying to build our presence in GIFT City by launching a product that can actually have a dollar-based NAV for investing in India. This is the way we are looking at building our business and naturally the progression for an AMC is to go to the rest of the global market. Probably, that is a thought process that may emerge as time progresses.

You have seen the Sensex go from 1,000 points to 60,000 points in your professional lifetime. Would Sensex at 100,000 be possible in your lifetime?
I do not think it can be ruled out given that we couldn’t predict that 60,000 on the index will come so fast. Therefore, even 100,000 points cannot be ruled out given the fact that most of the time predicting markets is always a futile exercise. The power of compounding has been working beautifully for many years and this is simple mathematics of 12-13 per cent compounding each year.

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