The Indian Mutual Fund industry is expected to continue propelling forward. The anticipated growth will be underwritten by supportive industry dynamics and longterm structural drivers, including financialisation of household savings, increasing market penetration of Mutual Fund products, favourable population and urbanisation trends. At 6.7%, Mutual Funds currently constitute only a small portion of the gross household financial assets*, with the figure likely to be lower in B30 cities.
AMCs generally incur additional distribution costs to onboard retail customers. This again requires higher spending on infrastructure and marketing capabilities. As a result, AMCs with a strong existing presence in B30 markets are better positioned to penetrate these markets and enjoy a better play on operating leverage. At 23%, we have a higher proportion of our Monthly Average AUM (MAAUM) attributable to B30 cities as compared to industry. We have a strong foothold in these cities with a high share, with our BDA network being in existence for nearly 3 decades. Furthermore, our broad distribution network in B30 cities provides us economies of scale, particularly in distribution, marketing, and backoffice activities, bringing in cost efficiencies. Since the B30 customers are generally stickier in nature, they offer comparatively higher profit margins.
*As of September 2020. Source: RBI Bulletin
Overall, the B30 cities currently contribute to a lower share for the industry as compared to the T30 cities. This further goes on to indicate that there is a lot of untapped potential in these cities. Although the figure may not be as high, on a positive note, the share has been increasing Y-o-Y since 2014-15. The shift has been led by individual investors, who have historically been inclined towards equity funds.
At UTI AMC, we believe we are well-positioned to capitalise on the favourable industry dynamics, including the under penetration of MF products, owing to our established presence. We are in the right space to attract new clients and positions through our broad-spread distribution network, wherein we can reach a wider spectrum of individual investors. Our broad client base also provides us with a number of opportunities, including crossselling of different funds. Out of the current network of 163 UFCs, 106 are based out of B30 cities, further testifying our focus towards them.
As per regulatory norms set by the Regulator, a certain proportion of the total AUM needs to be parked aside towards spreading financial awareness and investor education, in order to drive the industry forward. We believe this step is in the right direction. Being the pioneers of this industry, we take pride in having conducted investor education and awareness programmes in the smaller towns of India, well before it was made mandatory. We believe that this is imperative to make the investor from a small centre more confident to invest in mutual funds. In order to effectively communicate with potential investors across the country, we have been concentrating on investor education in local languages to create higher awareness about mutual funds.
|Inputs||Outcomes||Capitals Impacted||Stakeholders Impacted|
106 No. of UFCs in
276 BDAs and CAs in B30 cities
56,600 No. of MFDs
23% Share of our MAAUM of
8.9% Folio growth in B30 cities
Higher share of MAAUM in B30 cities as compared to the industry
Social & Relationship
Going forward, our established presence in B30 cities positions us well to capitalise on future growth in those underpenetrated markets. However, expanding further into these markets may require substantial investments in marketing and distribution, which could impact our profit margins. As a result, we have been adopting an approach to leverage the network of our long-standing MFDs, Banks and Distributors as well as through Digital presence. This will help bring in the right balance between online interfacing and in-person interaction, eventually lowering the cost of customer acquisition, compliance and other processes. And will help us reach more remote areas without incurring substantial costs.