Vetri Subramaniam, MD & CEO, UTI Mutual Fund, tells Kushan Shah that the rise in primary market issuances is not bad for the secondary market. He also believes that the growth in the systematic investment plans (SIPs) will slow down in the next couple of years. Excerpts:
Do you see the slew of big IPOs putting pressure on liquidity in the secondary market?
I don’t have a particular view on the IPOs, but I do not see primary market inflows putting pressure on the secondary market. Some IPOs appear large because we compare them with those in the past, but relative to the size of the economy, they are not that big.
Capital markets exist to ensure that investors with available funds can invest in businesses and enable them to scale. If the primary market is not active, the market will eventually stop growing, which would also create problems for the secondary market. Both primary and secondary markets have a reason to exist.
Do you find the high participation of mutual funds in IPOs concerning?
All the large companies we invest in today were once listed through IPOs. If these companies had not received capital then, they may not have become as successful as they are today. It is a symbiotic relationship.
Primary market inflows today will help entrepreneurs build businesses, which can support the economy and earnings growth in the future. There is a perception that strong primary market activity is bad for the secondary market, but I do not agree with that. Our fund house invests in an IPO based on its merits rather than following any generic rule.
Do you think the pace of growth in the SIP book seen in recent years is sustainable?
The mutual fund industry has seen fantastic growth in its SIP book over the last four to five years. We may not see a similar pace of growth over the next one to two years.
As an industry, we cannot restrict ourselves to existing investors or only those who file income-tax returns. We need to focus on a much broader potential investor base.
What is the fund house’s strategy to accelerate growth?
We are pulling multiple levers for growth. Our share of SIPs and overall flows is lower than what we are capable of managing, both from an investment and distribution perspective. We are therefore aggressively focusing on investor education to increase our share of SIP assets.
We are also partnering with fintech platforms to expand the reach of investments beyond sophisticated investors with disposable savings to people who are not yet in the habit of saving. We already have an extensive distribution network and digital presence. It is now about execution.