WF: 2009 has been a difficult year for the distribution fraternity even as market posted a sharp recovery and MF industry AuMs scaled a new high of Rs. 8 lakh crores. How have you positioned your business since the entry load ban in Aug 09?

Ajay Agarwal: We are retaining our customers even though the margins have reduced substantially. Our thrust is now to increase volumes by marketing through less expensive means such as e-mails, website etc. We are also increasing our sub-brokers network and acquiring clients of those IFAs who have stopped working due to the new price regime.

We are inviting smaller distributors & IFAs to associate with us. With Banks charging their customers for Investment advice, we are also roping in these investors without any charge and are getting good response. We are also reaching out to smaller investors through investment in Mutual Funds on the Stock exchange platform.

WF: What proportion of your revenues in the last quarter (Oct-Dec 09) came from mutual funds? What was the peak contribution of mutual funds to your overall revenues? Which are the products that today contribute the highest towards your overall revenues?

Ajay Agarwal: Earlier, Mutual Funds contributed 70% of our revenues but because of our secondary market revenues increasing, the percentage has come down to 50% lately even though the volumes in Mutual funds have been maintained.

WF: What are the biggest challenges in getting investors to buy equity funds? What can be done to reverse the net outflows trend that equity funds have been witnessing in the past few months?

Ajay Agarwal: It is of vital importance that Mutual Funds now maintain consistent performance through a well diversified portfolio in order to lure customers. The removal of Entry Load can now be used as a marketing tool by informing investors that their entire sum is being invested now. Many investors had missed the opportunity to invest during the market fall last year. They are waiting on the sidelines and we expect large inflows when the markets correct.

WF: Why are NFOs not attracting large retail participation - are investors wary of markets or are distributors focussing on alternative products?

Ajay Agarwal: NFOs particularly with global exposure into equities & with specific themes have been poor performers lately. Moreover, duplication of similar existing schemes with a different name as NFOs must be avoided. We have now reached a stage of consolidation where things should be made simpler which do not mislead the investors. Customers are now wary of the markets. Distributors like us are also focusing on safer investment products and advising investors to park their funds temporarily into these products.

WF: There are reports of a number of small distributors and IFAs getting out of MF distribution due to the new pricing environment. Do you see this impacting retail penetration of MFs? Do you think the stock exchange platforms can now substitute small IFAs and ensure similar or even better reach?

Ajay Agarwal: Yes, retail penetration has been severely affected due to the new price regime.

Smaller distributors/IFAs/Sub-Brokers are now unable to cope up with the expenses involved in expanding their reach further into the retail segment. They are therefore concentrating on other products eg. Life Insurance, Company Fixed Deposits etc. A number of smaller distributors/IFAs are being absorbed by larger distributors.

Trading on the Stock Exchange for Mutual Funds would be helpful in retail penetration but only to a certain extent as presently there are anomalies which we have taken up with the concerned authorities & hope they will get sorted out soon. Hence, in the long term the Stock Exchange platform will positively be helpful in reaching out to the retail segment at lower costs.

WF: Some observers believe that flows from Tier II and Tier III cities have more or less vanished and that business is getting concentrated back into larger cities. Is that a trend you see in your business? How adversely has market penetration initiatives been impacted over 2009 and what can be done to enhance penetration into smaller towns in 2010?

Ajay Agarwal: Market penetration into retail has been adversely affected since August 2009. It is unviable & non-remunerative to penetrate into retail under the present circumstances. However, with the passage of time, innovative means of marketing will develop which will be less expensive & we feel the penetration will once again be renewed.

WF: Will you be using the stock exchange platforms for your MF business?

Ajay Agarwal: Yes- we have already started trading on Mutual funds on our NSE & BSE platforms. In fact, we were one of the first one's in Eastern India to implement this.

WF: Do you see the move to ban distributor NOCs as a positive or a negative development?

Ajay Agarwal: A very positive move! Now if an investor is unhappy with his existing distributor, he can easily switch to a distributor of his choice without the earlier distributor's consent.

It would also mean that the existing distributor will strive for best service to his clients in order to retain them.

WF: What do you see as the key trends in 2010 for the distribution business?

Ajay Agarwal: Transparency of products is a must. The distributor should apply all marketing channels i.e. direct marketing through trained personnel, IFAs/sub-agents, Telemarketing, Investment through the Stock exchange platform & indirect means such as e-mails, information through websites, SMS etc.etc. They should also use advanced technology eg. 'Fundsnet' by CAMS etc.

WF: What are your plans for 2010 in terms of product portfolio, new services, client segments etc?

Ajay Agarwal: In order to be a successful distributor, one should have all types of investment products i.e. Mutual Funds, Equities, PMS, Insurance, Bonds/NCDs, GOI Securities, Fixed Deposits, IPOs, Post Office schemes etc. in their basket to cater to all client segments.

Innovative technology should be used for full satisfaction of the client. Regular portfolio updates & various other information should be available to the clients at their fingertips.

The marketing team should be geared to constantly review his customer's portfolio & advise him if any reshuffling needs to be done depending on marketing conditions & the client's profile. The distributor should also provide value added services like Financial Planning, Tax Planning etc.

WF: In terms of equity AuM, at present, roughly 40% is contributed by banks, 20% by national distributors and 40% by IFAs and regional distributors. In 3 years time, how do you see this pie changing and what can drive this change?

Ajay Agarwal: Banks could command a share of 45% while National Distributors may have 25% share of the pie. The balance 30% would be for Regional distributors & IFAs. I am expecting such a change due to the new price regime.

WF: What would be your key messages to your AMC partners as you begin a new year?

Ajay Agarwal: The key message is to maintain good performance of the schemes. Transparency of the products alongwith proper communication is also important. Service support is also a must.