In a move that is set to benefit retail investors in smaller towns, several asset management companies (AMC) --- firms that offer mutual funds to investors --- are planning to expand their branches into smaller cities and towns like Rohtak in Haryana, Meerut in Uttar Pradesh, Alwar in Rajasthan, Vellore in Tamil Nadu and Kolhapur in Maharashtra.
The physical presence of branch offices will give investors there direct access to fund houses, both in terms of investments and also for their general customer related issues.
Branch expansion is important for an industry that’s gained critical mass, with total assets under management (AUM) of over Rs 5,73,000 crore. The top three AMCs --- Reliance Capital Asset Management (RCAM), Prudential ICICI and UTI --- are leading the branch expansion foray over the next 12 months.
With AUM of more than Rs 1,00,000 crore and India’s largest AMC, RCAM is looking to more than double its number of branches over the next one year. "We have 124 branches as of now and are planning to open 200 new branches over the next one year," said Vikrant Gugnani, CEO, RCAM. "We will also increase our representatives in newer locations."
Prudential ICICI AMC, the second largest mutual fund with AUM of Rs 57,575 crore, has gone up from 85 branches to 270 branches during 2007-08. "The biggest bottleneck to mutual funds’ popularity is reach and penetration," said Vikram Kaushal, head retail sales & distribution, Prudential ICICI. "In the past one year we have expanded our reach by 300 per cent and intend to continue with our rapid expansion."
With an initial public offering (IPO) looming, the country’s third largest AMC (with AUM of over Rs 52,600 crore), UTI is looking at similar expansion.
"We have 84 offices and within a year we will plan to take it to 200 either by way of opening new branches or by converting the representatives’ offices into our own branch," said Debashish Mohanty, head of marketing, UTI.
"As financial literacy grows and more investors become aware about mutual funds, the touch-points should be there for them," he added. "Also we’ve noticed that we have been able to increase our market share at places where we have opened our branch."
A fact that Gugnani of RCAM agrees with. Increasing the number of branches, he said is because, "as you go to the semi urban and rural areas there is a desire with the investor to see something physical to have confidence.
"Beyond the Big 3, even mid- and small-sized fund houses are planning to increase the number of branches they have.
Sundaram BNP Paribas AMC, that currently has 50 branches plans to increase it to 75, in a year’s time.
"We also plan to expand our distributor’s network and are looking to cover over 100 locations," said Sunil Subramanian, executive director, sales & marketing, Sundaram BNP Paribas AMC.