Asset management is a business where the winner takes all. You have worked your way up to emerge as a large winner in the industry. How are the dynamics there and what is the comparative landscape?
The industry is extremely competitive. We are being constantly evaluated, sometimes every month, certainly every quarter on investment performance, on flows in the industry etc. But that only keeps us on our toes and there is nothing to complain about the industry being competitive.
Competition sometimes tells you that you may have something to learn from others. We have a healthy respect for competition. It keeps us on our toes and helps us to push the envelope on growing the business. The industry is very transparent in the first place. All numbers are published as monthly or quarterly averages. Fund performances are available for people to see. We have monthly fact sheets where information is available on our holding in terms of the investments under each of our products.
It is a very transparent and competitive industry which is always looked at very closely and commented upon. That is fair. After all, we are in the business of managing investors money.
The way we stand now, are there more levers available to continue that process from here on?
Yes, we should be able to maintain the margins and if possible increase it. We have a profitable product mix which is more biased towards equity assets compared to debt and fixed income or liquid funds. We need to focus on higher margins equity business. That is where the profit, the revenue comes from and the control on the cost is something that is almost part of our DNA. We will continue to manage costs very tightly and that has been something which we have been able to demonstrate when we are either maintaining margins or have been able to improve margins.
This is how things pan out over the next 5-10 years. The industry becomes 10 times from here. Will it be an oligopolistic play or would there be 10-15 players?
I do not think there will be consolidation to the point that business will be consolidated in hands of just two or three. Already top five control 50-52% of the market share. Going forward, I would expect the trend to be somewhere similar because that has not changed in the last four to five years.
I cannot see a strong reason to believe that the trend will change. But over a period of time, the ownership of market shares will become a little bit more dispersed.
Broadly your business model would be to keep increasing the assets under management. The quality of assets will be tilted towards equity because they get the profit and margin percentage would be same. Is that how it is going to be down the line?
Basically the revenue depends on how much of the total business is coming from equity business. The cost is a separate thing that we need to manage and contain on a continuous basis irrespective of the product mix. That is something we have been able to demonstrate consistently.