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?

Hrishikesh Parandekar: Karvy has been making steady progress in building a robust advisory capability for the last 5-6 years. So we see the entry load ban as just another milestone in our effort to position ourselves as an advisory house. Our main plan since August 09 has centered around the launch of a comprehensive advisory solution for our clients - we call it our IZone Plus offering which allows clients to access all of our services, including a free financial health check; advice on stocks, commodities, and MFs; full access to our online research and execution platform; demat and stockbroking accounts; a commodity broking account; and unlimited MF transactions.

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?

Hrishikesh Parandekar: The last 2-3 years have been challenging for all investors. After an euphoric run for a while, the crash has left many investors wary. While the past few months have made investors more optimistic, the extreme volatility of the equity markets continues to be a challenge. That is especially true for equity MF investors, who are naturally not the wealthiest segment. From our standpoint, we are quite bullish on the long term structural India story and its positive implications for Indian equities. We believe that with the right advice and portfolio construction, investors will find a meaningful allocation for equities, and largely through managed products, MFs or otherwise. So to reverse outflows, we are stressing on these points.

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

Hrishikesh Parandekar: As mentioned above, retail investors continue to be wary and cautious. At least from our standpoint as a distributor, we are big believers in using equities as an important part of a client's allocation and will not de-focus from equity MFs merely due to a change in the revenue model.

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?

Hrishikesh Parandekar: While the IFA exits will undoubtedly lead to some temporary blips in retail penetration, we believe that this will corrected very soon. Both by other larger distributors/ wealth advisors stepping in to service clients left behind by the IFA exits as well as the newly launched stock exchange platforms. We have been at the forefront of helping the new platforms to get off the ground and believe that an exchange-intermediated model will lead to a significant increase in penetration of MFs by taking it to places which were unremunerative for distributors to reach in the past.

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?

Hrishikesh Parandekar: We have seen a similar trend in our business for a brief while. But as mentioned above, we believe that over the next few years, the exchange-led model will see penetration in smaller towns come back and increase manifold.

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

Hrishikesh Parandekar: Yes. We had the highest number of trades put through on the very first day of trading and we see a big role for the platform.

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

Hrishikesh Parandekar: While every move has benefits and drawbacks, we think it is generally a positive development. It puts power back in the hands of the client and who he/she chooses to deal with should be entirely the client's prerogative.

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

Hrishikesh Parandekar: We believe that the distribution business has to be enveloped within a broader advisory offering. As explained earlier, we have already moved to such a positioning. Additionally, the distribution business also has to use its reach to introduce other innovations to its clients. Capital-protected structured products, dynamically managed PMS, and similar ideas that were once the domain of the super-rich are now increasingly available at lower minimums and should be added to the menu of any distribution business.

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

Hrishikesh Parandekar: We will continue to drive innovative products and solutions to our clients in the coming year and later. We believe advice is the future and figuring out the right model to deliver appropriate advice at the right price-point with a matched internal cost-to-serve is going to be central to our strategy.

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?

Hrishikesh Parandekar: It is hard to predict how the pie will evolve. It will largely depend on whether our advice proposition comes good and how many players adopt a similar approach. The only thing one can predict with confidence is that brokers, who are non-existent until the recent past, will become meaningful intermediaries in raising equity AuM working through the exchange platforms.

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

Hrishikesh Parandekar: Our message to our AMC partners is evergreen. Innovation and performance is going to be key to their success. And we are willing partners in helping them take high-quality, right-priced, strong-performing products to all our clients.