Considering ETF and Index funds to offer variety to customers, says Nippon India Mutual Fund's Saugata Chatterjee

Considering ETF and Index funds to offer variety to customers, says Nippon India Mutual Fund's Saugata Chatterjee

Jescilia Karayamparambil RN BhaskarUpdated: Saturday, August 28, 2021, 10:31 AM IST

The opportunity was right, the timing was also perfect for Nippon India, when it launched its Multi-Asset Fund and re-energised the market. After hitting its low in April 2020, the company is now ready to achieve new highs. In an interview, Saugata Chatterjee, Co-Chief Business Officer, Nippon India Mutual Fund tells FPJ's Jescilia K and RN Bhaskar about the ups and downs of the company over the last few years.

Edited excerpts:

Tell us about Nippon India’s journey.

Having worked for almost 16 years with Nippon India Mutual Fund, I have been able to witness the transformation of the company — from a small-sized Asset Management company (AMC) to one of the top five AMCs in the country. Nippon India AMC has grown across all asset classes.

Nippon Life Insurance, one of the largest insurance companies in Japan, entered the Indian market in 2012 — to make the company what it is today.

In 2012, the company started as a partnership with the largest Japanese insurer, Nippon.

Indians always had a connection with Japanese culture. Hence, the partnership worked out well. The Japanese too started understanding Indian culture.

In 2015-2016, the partnership started strengthening further after Nippon took an ownership stake of 51 per cent in the company. Every employee was happy when Nippon Life became the dominant owner.

In 2019, Nippon Life decided that the insurer will take primary ownership of the company. In October 2019, Nippon Life took up a 75 per cent stake. It was during that time, we realised that the journey was fulfilling and the bond was strong.

We were able to bring in a lot of understanding of Japanese culture within our business. Now that we are a Japanese company, we have to meaningfully exhibit that in the marketplace.

We also had expats working with us during this journey. This helped us to strengthen our bond with Nippon Life Insurance further. Thus, when Nippon Life Insurance became our parent company the transition was smoother than expected.

We are the first AMC to get listed in 2017. This was yet another milestone.

How has the business grown?

The growth journey had a lot of ups and downs. Till 2018, we had a strong growth rate. Post that, there were a few impediments. However, there were some areas where we were growing and had a strong position.

In 2020, COVID struck. It was the lowest point of our growth. During that period, our AUM dipped to Rs 1.7 lakh crore. But the positive part was in the past one and half years, we built a company that was changing. We had changed quite a bit.

Nippon Life introduced a lot of risk management frameworks. We had started implementing that meaningfully in our company. We have been communicating these changes to our stakeholders as well.

The strength of the Nippon India brand and the changeover of name happened in October 2019. This gave us the determination to go ahead and start looking at growth.

From a low of Rs 1.7 lakh crore, we are now averaging around Rs 2.55 lakh crore. We were able to do a business of around Rs 85-90 crore during the pandemic. We had more than 600 large HNI families and large Corporates participating meaningfully in this growth. This growth was on the back of our brand strengthening due to changes in processes and management. Nippon Life came with the best global practices that enabled growth for the company.

There is a lot to talk about, especially about the last two years. Meanwhile, we have recovered quite a bit.

What makes you different from other MFs?

This business is all about building trust. Nippon Life Insurance, a 135-year-old company, brings in trust among the investors. They are a globally trusted brand. It is the same trust that Nippon India will like to carry in times to come. It is a differentiator for us.

Another strength of Nippon India AMC is its employees. Like the banking sector, the MF sector’s strength comes from its employees. If we have a similar group or team managing the wealth of the investors or managing distributors, the belief system and the strength multiplies.

The third element is the geographical spread. We operate out of 300 locations in the country. Our distributors go to the hinterland and educate our potential retail investors. We have almost 25,000 distributors excluding banks and other distributors. Of these 30 per cent have migrated to digital platforms.

Another point is the process that drives our investment decisions. We believe in research. We are a knowledge-centric company. We have one of the largest analyst teams. We track more than 500 companies. We also conduct internal research and depend on third-party research to find conclusions on some companies.

Almost Rs 2 lakh crore is in fixed income. The team is small but we manage to be very active in the bond market. We have a strong ETF team which we built after the acquisition of Goldman Sachs’ business. If you aggregate our business as a full-fledged asset management company, investors can today take any product.

The last leg is the digital strength that we have built as a differentiator in the last four years. Thus, we stand out among investors.

Where is the company positioned in terms of the rate of returns?

We usually advise our investors to invest long-term to adjust returns. In the case of equity, we are looking at long-term investments and better risk-adjusted returns.

On the fixed-income side, investors look at protecting their capital and getting appreciation on capital — based on which the investor invests.

We have a very clear thought process about investments.

Equity-based funds:

All returns are Compounded Annualized (CAGR). Data considered for non-direct (Regular) plan growth option

All returns are Compounded Annualized (CAGR). Data considered for non-direct (Regular) plan growth option | Source:- Data as of July 31, 2021 .  

How active is the Japanese team in Nippon India business?

Even after Nippon Life Insurance took ownership, the entire team continued to be the same. That is the strength that the company continued to build on.

For Nippon Life Insurance, the management team and the rest of the team were the core reason the company increased the holding in Nippon India.

Nippon India always had expats working with us and now this number has increased further. Nippon Life Insurance has assigned a senior team to work on risk management and various factors that impact the long-term perspective of customers.

Tell us about the latest fund Flexi Cap. Any new funds planned?

In the last so many years, we have been able to come with funds as per the SEBI categorisation. So, after SEBI came up with the categorisation, we came up with this fund. It concluded on August 9. The fund witnessed investments of Rs 2860 crore of assets from 2.5 lakh investors. The strength of our distribution was demonstrated in the new fund offer that concluded recently.

We do not plan to launch any new product in the future. Unless of course, there is a compelling idea to make the investor experience that product line.

In the case of the international side through ETF and Index funds, we would like to have more such offerings in place. So, the customers can have much better access to these options.

When did things take off after the first COVID-induced lockdown?

April 2020 was the lowest point. It started catching up after that. However, the trigger happened in August-September 2020. This was because last year we launched a new fund offer (NFO) called Multi-Asset Fund.

During the COVID crisis, when everything was gloom and doom, we decided to come up with a new fund to re-energise the market. Thus, we launched the Multi-Asset Fund. It gave exposure to global markets, commodities, equity and debt. It re-energised the distributor network and the market.

It was a 100 per cent digital NFO that was launched. This gave a trigger to the entire system at that time. One trigger was in October and then again we witnessed another trigger in March. We witnessed a lot of funds in fixed income funds coming in. Funds from corporates, HNIs, etc started to flow in. That led to a good rise in our AUM.

How is Nippon India positioned in tier II and III cities?

Tier II and III cities are very close to our hearts. It is Bharat from where new money and investors are emerging.

We give a lot of emphasis on investors' education there. The great concept of SIP is the first step that any investor takes in tier II and tier III cities. Thus, we create more awareness about this product among the investors in these cities.

We have a lot of affiliations with banks and jointly work with them in these places. Tier II and tier III cities are a blue ocean for us. India has very strong opportunities in these locations. In the future, there will be more unwinding of fixed assets into liquid assets. That is an opportunity that we are looking for.

In addition, digital adoption is very high in these markets. We started operations in 110 locations in the last three years, which are catering to 110 new districts of India. All these districts are covered digitally. These are one-man locations for us. Customers are onboarded digitally.

For the last NFO that concluded, we had 15,000 partners working with us digitally and getting investors from across the country. Digital adoption by investors and distribution levels is increasing as well.


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