Mutual Fund industry is expected to grow soon: Anuj Kumar, CEO, CAMS

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Anuj Kumar, Chief Executive Officer, CAMS, talks about September quarter results, Transaction volume and SIP transaction proceed among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Your revenues have declined in the September quarter but there is an improvement in margins and profits. Why it is so?

A: If you have a look at this market then I would like to provide a summary of what has happened in the first half and first quarter. In the first quarter what has happened was that there was a global pandemic and also the markets were volatile, which resulted in certain things

1. The branches we have, the mutual funds branches and the banks, where the selling process normally happens. And, this selling process was quite slow for mutual funds because neither the investors were keen to come out of the house nor the physical space was available where these things are transacted.

2. Loss of confidence was a factor because the market had almost melted completely, that’s why investors wanted to specify a time when they should enter and many didn’t enter due to the fear.

3. There was an income contraction in every sector and businesses were shut due to which they didn’t have money. Similarly, there was a slight income contraction in the private sector.

If you look at all these factors collectively then a recovery started in June and it gave birth to few things and the first thing that has happened is the mutual fund industry has got back to its original assets. This is a big matrix that you are seeing in which the mutual funds’ assets, if equity class is kept separate, then it has reached to the pre-COVID levels, which is a remarkable recovery as it has not happened in other sectors but it has occurred in this sector. Secondly, new investors are coming in the mutual fund sector even in this phase, undoubtedly, the pace has gone down but new investors are coming and joining the market. So, if you have a look on all these factors and our revenue because a part of our revenue is connected to assets and obviously the assets were contracted especially in April and May and have expanded gradually and this is a place where the revenue was hit a bit. The non-asset revenue that we have in the transaction processing, insurance, mutual funds and banking sector was hit because all these sectors were hit and transaction volumes were quite low. If these things are taken together then compared to the last year, we have not achieved that revenue and there is a contraction of 1.50% but in quarter-on-quarter Q2 over Q1 certainly, there is good revenue growth.

Q: On a year-on-year basis the transaction volumes and SIP transaction proceeds were down 3%. Also what is happening in the mutual fund industry because October was the fourth consecutive month where investors have withdrawn from equity mutual fund?

A: Mutual Fund market always grows in the step fashion, which means if you have a look on any five years then growth for 2-3 year period and then there is a settling period of 2-3 years. In the last 3-6 months, inflows have been good in the debt funds, SIP inflows are quite intact but the equity lump investors have looked at the state of the market, which has been quite unidirectional since April, and have booked gains and the outflow is visible due to the gains. But if you have a look at the second phase then the panic which was created earlier in the market and SIP investors used to seize their SIPs but nothing such thing has happened in this phase, which is very remarkable. This means a strong tower of investors is present. If you have a look on debt then there is net growth in debt and debt is at an all-time high as a category. So, I will say that this is a phenomenon of three-four months and the impact of the phenomenon is visible but over the medium to long term, things should improve, which is my and industry’s expectation. The selling process has commenced and digital selling is adding.

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Q: With markets are at a new high. So, do you think that the flows will turn positive or it will take some time? How many new clients have you added, which is an important element of your business?

A: As far as market conditions are concerned, I think, we will have to watch it for three-four months because the trend will take its time in being steady. It is shot-term trend confidence should come back. Secondly, income should be restored in the economy in both business and private sector, which is important. There are multiple client additions in the AIF and PMS businesses. So, green shoots are visible but we can’t term it as full recovery however 100% assets are back but in the next 4-5 months, if things turn steady, then the situation will get better from here.