 "Kalpen Parekh")
IDFC Mutual Fund, India’s eighth-largest fund house, is betting big on its parent company’s transition into a bank. Kalpen Parekh, chief executive of the fund house, says the change will help the company become a household name and a stronger retail brand, which will propel growth. In an interview with Chandan Kishore Kant, he outlines his thrust on the digital medium to increase reach and be among the top five companies in the sector. Edited excerpts:
How is the situation post-May 16?
Among investors, the appetite for risk taking has improved significantly, on hopes of a growth revival and a focus on execution by the new government. Investors are more hopeful than earlier and this is reflected in their choice of investment. The number of transactions has increased twofold, favouring equities. It’s a turning point and the trend should continue. But still, it is high networth-individual money coming in. Many retail investors are encouraged to invest, but there isn’t a big wave. If there is a real change, the next 5-10 years will be a really good opportunity to build long-term investments.
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Several experts had foreseen this. How were you placed to reap the benefits?
We have never timed markets or events. Our attempt has been to create an investment culture, a missing link in India. Typically, money comes in when big events take place. But what is important is money should come in always, with a 10-30-year investment horizon, irrespective of events. Disciplined investing is not easy. We partnered Amole Gupte to make a film around money— One Idiot. It talks in the language of youth; it tells them what money means and how to plan for events, in terms of money. The idea is to catch them young, at the right time, when they are about to earn their first salary. Early awareness helps people capture the full cycle of 20-30 years, to benefit from compounding.
How will IDFC’s transition into a bank help you? Are you eyeing a top-five position?
We have built a credible investment platform, labelled products with track records and built a distribution engine to be a relevant player in the mutual fund sector. We have ambitions to be a scale player and will be happy to reach the top league by creating successful investors as our key focus. The investments in the past 10 years, along with IDFC’s transition into a bank, will obviously help us become a household name and a stronger retail brand.
Do you plan to increase your presence in India?
We are present in as centres that contribute to about 95 per cent of the sector’s sales. We are present in 40 cities. Beyond this, any meaningful opportunities have not opened up. Rather, we are investing a lot in creating digital presence; this gives us virtual reach. It does not matter whether I have a branch or not. Once I am creating enablers for investors and advisors, to transact online, one can transact from any part of the country.
Don’t you think this way, you will be limited only to bigger cities?
What’s the point in merely having a shop with a hoarding? How does it help? Customers do not walk into offices; they connect with distributors. One needs to look at the decision-making process of customers, as well as the purchasing decision point. If you see platforms such as Flipkart, Myntra or Jabong, their sales exceed those of branded retail chains. We might not have a branch but we have access to many of these centres. I see transactions from 108 cities. We are trying to ascertain the best and most productive route to reach consumers and advisors. The physical route alone might not be the only way to look at it.
Is the digital way of reaching investors a major thrust for you?
Yes. It will be. It is a critical part of our growth. We have already taken a few initiatives and our website is the first step. We are scaling up presence and connect through social media. We are evaluating different models to see how to make customers invest without keeping market cycles in mind and how to make them invest for long terms. We are working on mobile apps for transactions, which will be ready soon.
IDFC has been similar to an institutional brand. Doesn’t it impact your consumer connect processes, primarily retail?
IDFC is a very strong institutional brand, with parentage and pedigree in the infrastructure domain and the institutional market. Through the past couple of years, we have started building our consumer brand and are in that journey. We have to work hard and in the right manner. We are building our consumer brand and have a long way to go. We have a long and strong track record; we have funds which have delivered.
Why do you not take an inorganic route to grow, owing to consolidation in the sector?
We are open to it. So far, we have not seen any meaningful opportunities. The sector has witnessed selective transactions; but these should fit into our own schemes of things. And, valuations should be reasonable. In the past couple of years, we have seen exuberant pricing. Six per cent valuation is something we haven’t participated in.
