UTI Mutual Fund is in talks with various payments banks and small finance banks (SFBs) licensees for tie-ups for greater use of the banking network as an important distribution channel. While the fund house aggressively wants to increase its business from banking channels, it has also reorganised the sales structure in this space.
Although the company has tie-ups with almost all the public, private and foreign banks for distribution of products, banks’ contribution to its assets under management (AUMs) is currently below the industry average.
“We have been little slow in the process of growing mutual fund distribution through the banking channel as our fund house is always led by the IFA (independent financial advisors) channel. But, we certainly want to grow our presence in the banking space far more significantly in coming years,” Suraj Kaeley, group president, UTI Mutual Fund, told FE.
Around 20% of the company’s non-corporate business now comes from the banking channel, while about 30% of the mutual fund industry’s AUMs come from this channel. “We are keenly talking to many of the payments banks and small finance banks, and hopefully, we would be able to get some tie-ups in this space,” Kaeley said in an interview.
According to him, once the on-boarding KYC process becomes simplified, payments banks and small finance banks can be a very significant channel to acquire new customers. Fund houses are actively working with markets regulator Sebi for simplifying the KYC process for a prospective investor to start investing in mutual funds.
The company has already reorganised its sales structure in the banking space. “For all the key accounts, we have national account managers and they are working closely with central teams of these banks, which are responsible for selling mutual funds in their respective branches. So, that alignment we have put in place and that has already started giving us good results,” Kaeley said.
UTI MF will remain focused on all categories of asset classes which are growing at decent rates, but it wants to explore the systematic investment plans (SIPs) and hybrid products segments very aggressively in coming years.
Kaeley said in SIPs and hybrid products of his company generally have an edge over the market. “We have a very large presence in SIP and we want to build that fairly significantly over the next year. A lot of activity is also happening in balanced range of products. This segment will become one of the fastest growing segments in coming months.”
Currently, the mutual fund company has six hybrid products and it is planning to strengthen this area by bringing in new products and repositioning some of the funds as per investors’ demand. Its AUMs in pure the hybrid segment stood at around R10,000 crore and it could grow at about 25% year-on-year.
On systematic investment plans, Kaeley said currently the company is getting SIP inflows worth R200 crore a month, a growth of about 30% compared to the year-ago period. It has introduced new features to the schemes to attract retail investors.
For the domestic mutual fund industry, monthly SIP inflows hover around R2,600-2,700 crore. In terms of growth rate, SIP schemes are growing faster in B15 cities — the ones beyond the top 15 cities — compared to metros and major cities.
UTI MF closed last fiscal with AUMs of more than Rs 1 lakh crore. The company earlier grew at a rate of 15% year-on-year in terms of AUMs, and expects this growth rate would continue for the current financial year as well.
The fund house is bullish on its business growth in B15 cities, as it has been the market leader in those smaller towns. “Over decades, we have built that presence in those towns. We have business development associates in more than 425 districts in India. Business development associates have helped us develop distribution presence there,” Kaeley said.
B15 towns contribute over 35% to the company’s business from equity and balanced products. In case of the industry, on an average, 18-19% of the business comes from these products. The industry’s AUMs growth in B15 towns have been about 15% per annum, but thanks to its solid base in those towns, UTI MF hopes to grow more than 15% in coming years.