Sudhir Valia-backed ITI group forays into mutual fund business

The Sudhir Valia-backed ITI group on Monday launched its mutual fund (MF) business, marking its entry into the Rs 23-trillion MF industry. 

Commenting on the promoters’ commitment to the MF business, George Heber Joseph, chief executive officer (CEO) of ITI MF, said that promoters are fully behind the MF foray with a long-term vision for the business.  

Valia and Sun Pharma’s links had earlier come under scrutiny following a Macquaire note alleging corporate governance lapses in the pharma major and reports of whistle-blower complaints against the drugmaker. 

The launch of ITI MF comes at a time when the MF industry has gone through a slew of regulatory changes. ITI MF sees the changes as an opportunity.  

“Scrapping of upfront commission and slab-wise commissions would help in leveling the playing field for small and new fund houses such as ours,” Joseph said. 

The fund house’s strategy would include leveraging the ITI group's three million customer base, which are well-aware of the ITI brand. “We would direct these clients to distributors and advisers to understand our investment philosophy,” Joseph said.

The fund house seeks to differentiate itself in the 41-player MF industry by focusing on quality in both its equity and debt portfolios. 

Commenting on the troubles faced by other fund houses in their debt exposures, Joseph said that problems come up when fund managers lose focus on the basics.

“We would be launching debt products such as short- and medium-term plans, but our focus would be safety and high-quality. At some point, we could even launch fixed maturity plans (FMPs), but the focus would remain on quality,” Joseph said. 

The investor sentiments on debt funds got hit recently following the Infrastructure Leasing & Financial Services crisis and exposures to promoter funding through loan against shares in FMPs and other schemes. 

“We don’t believe in taking undue credit risks. Banks are better equipped to deal with such risks as they have the cost of funding concept. If such credit calls backfire, MFs also don’t have large-enough balance-sheets to absorb the impact,” Joseph added.  

The fund house aims to break even in the next five years by garnering Rs 10,000 crore of equity assets. The focus would be to build a sizeable retail asset base. 

In the top-30 cities, the fund house is looking to closely work with the distributors. ITI MF is setting up few offices in these locations to create its presence. In beyond the top-30 cities, which are known as B-30 locations, the fund house will focus on getting investors through digital acquisition.  

The fund house will be launching its liquid fund on April 24 and multi-cap fund on April 25. Before August, the fund house could launch couple of more schemes such as arbitrage and an equity-linked saving scheme.

“We don’t plan to spread our product basket too wide. Unless there is a clear investor need, we will not launch a new scheme. For instance, we don’t see a clear case for large and mid-cap fund and may stay away from it,” Joseph said.