• Tue. Feb 27th, 2024

How Bajaj Finserv plans to sell MFs to the group’s 10 crore customers

How Bajaj Finserv plans to sell MFs to the group’s 10 crore customers

MUMBAI: Bajaj AMC, Bajaj Finserv’s mutual fund business and India’s 41st fund house, will soon launch seven new fund offerings (NFOs) across equity, debt and hybrid segments. Bajaj Finserv hopes to leverage its 10 crore customer base to drive its mutual fund business.

MUMBAI: Bajaj AMC, Bajaj Finserv’s mutual fund business and India’s 41st fund house, will soon launch seven new fund offerings (NFOs) across equity, debt and hybrid segments. Bajaj Finserv hopes to leverage its 10 crore customer base to drive its mutual fund business.

Nimesh Chandan, who was a fund manager at Canara Robeco AMC, has been appointed as CIO. The chief executive is Ganesh Mohan, the group’s head of strategy and a former BCG partner.

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Nimesh Chandan, who was a fund manager at Canara Robeco AMC, has been appointed as CIO. The chief executive is Ganesh Mohan, the group’s head of strategy and a former BCG partner.

Edited excerpts from Mint’s interview with Sanjeev Bajaj and Ganesh Mohan, chairman and managing director of Bajaj Finserv.

Why are you starting Bajaj AMC?

Sanjeev Bajaj: Our journey started in 2007. As the Indian middle class knew us, we decided to focus on them. They had already bought our scooters, motorcycles and electrical equipment. We started with the first stage of a person’s life cycle – getting a loan. And so we started expanding Bajaj Finance. So we said, well, because one earns a lot of money, they will buy a house, they will buy a two-wheeler or a four-wheeler. Hence comes asset protection and life protection – general and life insurance. Accordingly, we started setting up individual businesses. We first applied for mutual fund license in 2011. But that was when the Securities and Exchange Board of India (SEBI) dramatically changed its first regulations for mutual funds and slashed commissions. We decided to wait until those things were resolved.

We built our digital distribution. We allow the customer to start experiencing our products. The biggest challenge for any new fintech and insurtech is customer acquisition costs. We pay to carry the customer one time. We will never pay after that. For the first time, startups are not paying acquisition costs. For us, it’s our investment in digital, in 150,000 stores, to create a strong sales team.

Second, we realized that a large number of suppliers are common across different products and services. So now we have a lot of suppliers who already know what makes us different and unique. Our focus is always on the right product with transparency. For example, even with 0% financing our documentation tells us what our IRR is because the manufacturer is paying us.

And the third is the whole culture we’ve built around empowering, innovating and rewarding our teams so they feel like owners in building their business. The simple thing of being in Pune and not in Mumbai was a very conscious call 10 years ago, we didn’t want to be in the hustle and bustle of Mumbai.

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What sets Bajaj AMC apart?

Ganesh Mohan: There are three sources of alpha. One is information. But today we all get the same information, so it’s not much of an advantage. The second edge is analysis. Can you process that information using better tools or models? Here again, some juice is still present, but it is largely squeezed out. This brings us to the third and biggest benefit that we believe will be a key driver for the future, which is the behavioral edge. Can we continue to improve our decisions in less time with the right kind of checklists, templates, nudges, and tools screeners? That’s what we’re going for.

You need 5 years to establish a track record, shouldn’t you launch earlier?

Ganesh Mohan: We have built experience of investment management in our group businesses like insurance. And our fund managers individually have vast industry experience.

What differentiates your products?

Ganesh Mohan: We only launch products where we see a certain scope for alpha. For example, we don’t launch a large cap fund where you hug the index for 75-80% of your portfolio.

Supplier margins shrink and cost ratios fall. Isn’t this a challenge?

Ganesh Mohan: In any industry, as it matures, margins shrink. To compensate for this, the industry has higher volumes. We think distributors will be able to offset any commission shrinkage by increasing volume.

Can borrowers sell mutual funds?

Sanjeev Bajaj: Today, we offer multiple mutual funds on the Bajaj Finance app. It is permissible as a lending institution. It is not allowed in insurance by the insurance regulator which does not allow an insurance company to sell any other product to its customers. For the past 10-15 years we have been introducing other financial products to customers of a product with their consent within the framework of the law. The ability to be visible and present yourself is a huge advantage.

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