The Rs.28,000 crore Aditya Birla group could not have chosen a better man than S.K. Mitra to head its financial services business. And in the nearly nine years (since June 1994) that Mr. Mitra has been with India's third largest business house, he has transformed the group's infant financial services business into a highly profitable powerhouse. The Rs.28,000 crore Aditya Birla group could not have chosen a better man than S.K. Mitra to head its financial services business. And in the nearly nine years (since June 1994) that Mr. Mitra has been with India's third largest business house, he has transformed the group's infant financial services business into a highly profitable powerhouse

• How do you assess the current environment in the Indian Mutual funds industry? S.K.Mitra: The environment has improved after the last budget term capital gains tax but thankfully the government has not implemented it. The dividend tax initiatives are also favorable for the industry though the increase in service tax might prove a burden. There is great potential but for international political development such as war in Iraq. The platform for take off now exists and the major MF players in the country are well-poised to take advantage of the situation. Investors are also now aware of the potential of mutual funds to give better returns- in fact, debt funds give better returns than bank returns. Therefore, but for abnormal situation like a war, the Indian mutual fund industry is set for huge growth.

• How was growth over the last two years and how do you see growth over the next two year period? If growth is expected to be healthy, what are the factors that will drive this growth?

  S.K.Mitra: The industry has witnessed an encouraging growth. What is heartening is that this growth was achieved despite major restructuring in some of the dominant players and volatility in the market. Private sector MF players performed well last year, registering 30 to 50 per cent growths in their AUMs on an average. I expect this trend to continue this fiscal as well as over the next two three year period. The economic climate is conducive for growth and mutual funds today have better infrastructure and innovative Product ranges to cater to various client needs. An important point I want to highlight here is that the share of mutual fund as a part of Household saving is still abysmally low and in future, this can only go up. Beside mutual fund have shown that with proper planning and regular profit booking by investors, healthy returns can be obtained in both equity and debt funds. Investors too, have shed their earlier inhibitions about mutual funds and are now increasingly investing in MFs. All these factors convince me that the mutual fund industry is poised for tremendous growth in the coming years

 

• How has the entry of foreign players impacted the Indian MF Industry? S.K.Mitra: I believe their entry has positively impacted our MF industry. They have helped usher in greater professionalisation in the Industry and made our players more focused. Customer service levels have been considerably enhanced in recent years and product innovation too is now of the highest order. All aspects of the industry have undergone a transformation for the better following the entry of foreign players. However, I would not give them all the credits for this.

 

• How is the Indian MF industry placed vis-à-vis its foreign developed countries. We do not lag being on any of the mentioned factors. The only difference is that abroad, players can invest freely in overseas markets whereas we can't. Indian MF players are, therefore, virtually one market funds. Our skill and technology are good for the domestic market; we have to home our skills further if we have to match foreign players in investing overseas.

 

• Do you feel that much still needs to be done to enhance transparency level within the Indian MF industry.

  S.K.Mitra: We are fairly adequate on the investment and disclosure fronts. However, on the sale promotion front, there is still some distance to go. How one sells a particular MF product, whether he provides all relevant information to investors whether promises made are kept etc. are important aspect and this is where we need to have grater ethics and transparency. Investor's interests are paramount and should be protected at all costs.

  Which sectors, according to you, will fare well this fiscal? S.K.Mitra: Infrastructure related sectors such as steel should fare well If the government keeps its promises . Secondly, if there is no war, then sectors such as hospitality, tourism and leisure will perk up; presently they are languishing. Another sector I am positive on is healthcare. IT too should give good returns.

• Debt funds had gained in importance in the last two years . Will this trend continue or do you see equity funds regaining their earlier flavor?

  S.K.Mitra: One thing is certain- debts funds will not replicate their performance of the last two years but they will definitely give steady returns. Investors will have to scale down their expectations from debts funds. Equity funds are slowly regaining ground but as I mentioned before, much will depend on international political events.