No corporate fancy for MF investments

MUMBAI: Mutual funds may have started gaining acceptance with a large section of retail investors. But listed companies do not appear to be very excited about this avenue. Data available with ET shows that MFs form a very small proportion of the total investments by these companies. Out of the total investment of Rs 7,14,923 crore, only Rs 33,736 crore or around 4.7%, has found their way into MFs in 2005-06.

Of the total investments, even if we take only financial investments, the figures are around Rs 6,98,676 crore. The rest comprise investments made by these firms in other subsidiaries. If we take the top 30 contributors, the figure is around Rs 26,951.2 crore, which is 80% of the total MF investments. The numbers show that apart from the handful of companies, there has been very little interest shown by others in allocating investments.

Sethuraman Iyer, CIO of SBI MF, says: “Large corporate houses have their own treasuries which take the investment decisions. They do not need to make expenses on investing though MFs. Corporates are potential investors for MF investments, but we feel that every investor is important.” Experts also point out that smaller companies do not have much funds to make financial investments and they would rather use funds for expansion purposes.

Nikhil Johri, MD, ABN Amro Asset Management, says, “The objective of the whole industry is to penetrate to SMEs as it brings stability, whereas large companies are more volatile in their investments. Their need is not just cash management, but investment management.”

But not all agree. “There are various reasons why we have not been able to tap the comparatively smaller corporates, low margin being one of them,” says Rajan Krishnan, business head, Principal PNB AMC.

“But, we are planning to introduce new strategies like focusing on smaller cities where these companies are located. So far, our strategy has been to make sure that large companies are our clients and they increase their allocations. But we also have to increase our client base by approaching the mid and small companies. So far, the smaller branches only focused on retail clients, but we have been asking our current branches to approach corporates aggressively,” he says.

Ravi Sharma, national head-sales and distribution, Birla Sun Life Mutual Fund, says, “Another thing to consider is that the balance sheet figures are understated and March may not be the correct representative of all the months.

There are companies that have active treasuries and do not need to invest through mutual funds. For the rest of the companies, we have identified the opportunity and are asking them to increase their exposure to mutual funds. The major reason is that apart from debt, corporate investments are not for the long term. There is a plenty of opportunities for us to tap these companies.”