Nippon Life added around 13 lakh folios in the ETF category in Q1FY22: Prateek Jain, CFO

Prateek Jain, Chief Financial Officer, Nippon India Mutual Fund, talks about Q1FY22 numbers, strategy to increase market share, AUM, Franklin Templeton MF’s episode among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Tell us the highlights of this quarter and where do you see the best performance coming your way and will it be sustainable now?

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A: As far as the result of the quarter is concerned, our profit has increased 16% quarter-on-quarter at Rs 170 crore as against Rs 150 crore on the standalone basis. In terms of consolidated basis, the company has earned Rs 182 crore as compared to Rs 156 crore. The expenses have declined 2% on both quarter-on-quarter and year-on-year basis. Revenue has increased by 30% to Rs 280 crore.

Q: Where maximum growth is visible and is it sustainable and what has been your strategy to increase the market share?

A: Our assets are on the fixed income side. At the time, when the industry has been negative by Rs 1,500 crore in the quarter, our assets have increased by around Rs 4,300 crore, thanks to liquidity. If we have a look at the liquid assets, the total industry has grown by Rs 8,000 crore and our asset has grown by Rs 3,700 crore, which means a growth of almost 44% in the market share in the fixed income category. Similarly, our asset has also increased to around Rs 40,000 crore in the ETF category. In terms of the folios, folios of around 14 lakh new investors have been opened this year on a year-on-year basis.

Q: How much AUM are you targeting in this financial year and what would be your strategy to achieve it? Also, what kind of trend are you seeing when you see investor addition? 

A: As I said earlier that last year we added 14 lakh investors. In our ETF folio, roughly around 13 lakh more folios were added in this quarter while around 13 people were added last year. You have seen that new NFOs and IPOs are coming, so more and more investment is happening in these new IPOs. DEMAT accounts have crossed the mark of 7-crore and if seen in comparison to that then there are around 2.50 crore unique mutual investors. So, I think the new investors who have joined in retail and their DEMAT accounts have been opened have got awareness about equity investments and mutual fund investment. I think that post COVID when the markets opened up and people went back to their works, the Robin Hood trading pattern of investment will gradually invest as a systematic investment in the mutual fund and I feel that there will be a huge increase in the mutual fund investors. If seen in the current perspective, we added 14 lakh investors last year and have added around 6 lakh investors in the first quarter and expect that the process of this addition of investors will continue across the year. We have 280 branches and 58% of our transactions are happening in the digital space. So, we are completely ready via both digital and physical modes to add these new investors.

Q: Following the current market situation because the retail participation is increasing will you increase your focus on equities? Also, what kind of investment plans do you have and as a company will you invest more in digital?

A: Investor first has been our focus since the beginning. Sustainable profitable growth has been the second area of focus. In investor first, we have been providing innovative and accessible investment opportunities, maybe it is digital front or physical front because most of the new investors are investing digitally and are investing through partners like PayTM and Kubera among others. But the old investors are investing through our mutual fund distributors. For us, it does not matter that where the investor comes from but it is important for us to provide the right product to the investor according to his investment objective and this is what we advise. Those, who know about it can use the platform to invest but those who are investing for the first time in a mutual fund can choose a mutual fund distributor or advisor for mutual fund investment purposes.

Q: Do you think that the episode we saw with the Franklin Templeton Mutual Fund was a one-off isolated case or we may see more such events in the future given lockdowns has hit cash flows of many businesses?

A: This lockdown and COVID, itself was a six sigma event and given that that in such an atmosphere whatsoever was the cash flow situation – I would not like to comment about Templeton - but after that, the regulator has issued several regulations and guidelines. And, if you have a close look at those then the regulator has made sure that such incidents do not happen again. As far as, our fund house view is concerned, our directors have decided that we will not invest any of the fixed income category the investments below the AA category. So, if we will have a look at present then around 91-92% of our old investments were in and above AA and maybe around 8% was below AA. But today I can say that 99%+ of our investments other than the credit fund – whose purpose is to invest in credit risk – rest of the funds around 99% of our investments are in more than AA-plus kind of securities.