Bajaj Capital in spread mode, mulls new plans

Bajaj Capital Ltd (BCL) is set to expand its presence from 90 locations in the country and is planning to introduce a number of new products, including a mutual fund.

"As of now we are serving around six lakh investors and we aim to bring in a total of one million investors within our service network in the next couple of years," BCL managing director Rajiv Bajaj said.

On the prospects of the mutual fund industry in India, Bajaj said the industry was likely to grow at the rate of 40-50 per cent over the next few years.

He also said that a recent survey has indicated that by 2016 the total fund managed by mutual funds was likely to touch Rs 16,00,000 crore from a low of around Rs 1,25,000 lakh crore at present.

Bajaj also pointed out that there was immense scope for development of the mutual fund industry in India as only about two per cent of the country's total savings was coming to the industry.

Banks had a combined deposit of Rs 16,00,000 crore as compared with mutual funds, post office and other investments' combined total of Rs 3,00,000 crore, he said.

In contrast, in the US the amount invested through mutual funds was 1.5 times deposits in banks, he said, adding that the low rate of investment through the mutual fund route in India was due to limited education about it among the investors.

Arguing in favour of investment in equities through mutual funds, Bajaj said in India equity commands a premium of seven and eight over risk-free returns.

"If now risk-free return is taken as 5.34 per cent (yield on 10-year benchmark government of India security), equity should continue to provide 13-14 per cent returns going forward."

He said even the proposed government legislation on pension funds has made a case for inclusion of equity as an investment option for pension funds.

"This was because over the long-term only a portfolio comprising an equity component can provide the kind of returns that would make the pension fund system attractive enough for contributors," Bajaj said.