LIC Mutual Fund (LICMF) has been going through a revamp lately. This change comes as an opportunity for LICMF and his new management. The Chief Marketing Officer Rajesh Patwardhan talks about these opportunities and challenges lying ahead.
Edited Excerpts from an interview
Since your joining in February, a lot has changed. Could you share your vision for the company?
In the last six months with LIC, my intention was to take the brand across verticals. Due to some reasons in the past, LIC could not encash itself. In India, SBI and LIC are synonymous with banking and insurance, respectively. SBI moved up but LIC Mutual fund could not move up. Now, it is our turn to be bullish. I believe that Mr. Sathye placed me in this organisation at the right time. In my career spanning up to 29 years, I dedicated my first seven years to the pharma sector and over two decades was with financial industry. Prior to joining LIC, I was with Deutsche Asset Management (India) Private Ltd, heading sales for banks and national distributors vertical for pan India. In my 11 years there, I was able to take Rs 800 cr of assets under management (AUM) to as high as Rs 24, 000 cr.
What targets have you set in terms of AUM?
When I joined LICMF, its AUM stood at Rs 10, 000 cr. Today as we speak, we stand at Rs 17,000 cr. By the end of this financial year, we are targeting Rs 28, 000 cr. Our chairman has set a target for LICMF in terms of position. He wants us to become No. 3 from the present No. 17 position. This means that we should be broadly about one and half lakh crore. This is an ambitious target which can be achieved in organic and inorganic ways.
What are the various activities you have initiated?
Firstly, I started off by focusing more on our liquid/liquid plus, simply because 50-55 per cent of large asset management companies (AMC) have their money in liquid/liquid plus; and the composition of their AUM go into 60-65 per cent. The market recognises AUM and not the spread of the AUM. If I have to scale up faster, then I have to build up these funds. LIC is not just strong in retail but also in corporate. Due to the investment from the parent company, LIC Mutual Fund has got corporate money rolling into our liquid/liquid plus.
The second activity was restructuring the organisation which resulted in more focus on accountability. Along with these changes, we had to move the equity funds upwards. For that, I created an alternate channel which would cater to my shareholders like LIC, GIC and others, were we will drive huge SIP (Systematic Investment Plan) numbers. This was more or less using my own internal strength with my group companies. In next three-four years, this alternate channel would be the largest channel for LIC Mutual Fund. This would be contributing the largest in terms of SIP numbers. I was able to reach out to all of my bank partners and national distributors. The channelling and tie-ups with banks are critical as banks are spread out and this would help increase reach. We are also focusing on independent financial advisors (IFAs) and the upgradation of knowledge content of our team. There are various activities conducted to enhance the knowledge skill sets of the team.
Is LIC Mutual Fund developing any new products?
We have a great tool called APP (Auto Premium Payment). This is for anyone with multiple insurance policies. If premium payments are not done on time and it gets lapsed. So, I ask people to take part in our liquid plus plans and get 7-8 % based on the economy. The insurer will have to deposit the total premium payments into liquid plus account, gives us the policy numbers, amount, date of the premium to be paid and we will take the money from there. This is a revenue enhancing tool and you enjoy the dual benefits – revenue from liquid plus account and timely payment of policies. We are not creating any new products now, but focusing on popularising and improving the existing once.
What are your organic and inorganic targets?
In terms of organic, it would be to reach the third position. While, organically we hope to grow by 50-60 per cent, we also look at inorganic route for speedy growth. The company will only look at acquisitions only if the valuation is right, until then the better option is to grow organically.
There has been a growing demand for long and flexi-caps, but there has been fall in mid and small caps. What is your take on that?
In last six months, small-caps and mid-caps have gone to obnoxious value. There has to be a method for this bizarre pattern. This obnoxiousness is not seen in earning growth. The bottom line is that the equity market is six months ahead of time. This is not a sustainable story. Only some mid-caps can survive this. The mid-cap has moved very fast. Large-caps will start showing earning growth soon. There are some juice left in mid-caps but they are not growing faster as they are poised to grow. Soon, mid and flexi will come in for correction and large-caps will be the big earners as they have not taken part in this soar.
What is your take on SEBI’s view on payment through wallets?
The problem here would be execution. For mutual funds, the regulation should be in place before starting such an initiative. E-KYC will be a beneficial tool and I am looking forward to that.
Do you have plans go digital?
It is great time-saver. In next ten years, it will be become huge in our business. In two-three months time, there will be section on our website where asset allocation model will be created based on portfolio type. Based on the progress, we will expand it to mobile for our distributors and direct clients.
At LIC, we believe in going through our agents and that is our standing pillar. So, we will do that in digital as well.