Think BIG: Advisor Perspectives

From 5 crs to 100 cr AuM in just 2 years

Kunj Bihari Gupta, Nainath Advisory, Jaipur

In a nutshell

Nainath Advisory has always been known as a leading commodities broker in Rajasthan. They did have a funds distribution business, but it was at best an ancillary business until K B Gupta crafted a BIG change in strategy. Armed with a highly focused plan aimed at a specific target segment, he has moved his MF AuM from just Rs. 5 crores a couple of years ago to around Rs. 100 crores now, and has drawn up plans to double this to Rs. 200 crores in the next 3 years. Read on as he explains how he made this BIG move in the last 2 years.

We are one of the most active commodity brokers in Rajasthan, with memberships in NCDEX and MCX between my brother and I. We have over the years grown our commodity broking business by expanding our client base as well as commodities we trade in. By 2007, our average daily turnover in commodities exchanges was around Rs. 60-70 crores.

Introduction to liquid funds - with our own margin money

At that stage, Reliance MF spoke with us and shared an insight we hadn't thought about. Due to our substantial turnover, our margins in the exchanges were always around Rs. 5-6 crores. Reliance MF gave us a suggestion to move this margin money into liquid funds and park that with the exchanges. We hadn't considered liquid funds at all until then. This simple strategy earned us an additional Rs. 3-4 lakhs per month.

This opened my eyes to a new business opportunity. We cleared the AMFI exam, took up an ARN, and started advising our commodity broking clients to consider liquid funds as a superior cash management vehicle. We started recommending SIPs to retail clients, we ventured into direct equity, demat services - essentially created a fuller bouquet of services for clients. But honestly, mutual funds were still an ancillary business for us until 3 years ago. Three years ago, our MF AuM was around Rs. 5 crores.

BIG change in strategy 2 years ago

Around 2 years ago, I decided to make a BIG push on our mutual fund business. I personally started conducting IAPs regularly, to expand our retail effort. Simultaneously, I chalked out a completely different strategy for the HNI segment. While retail for us continues to be based out of Jaipur, I decided to focus on HNIs from smaller towns around Jaipur.

I started approaching successful businessmen in towns like Bikaner, SriGanganagar, Jodhpur, Ajmer, Pali. There are many HNIs in these towns, but not much of financial advisory support. These businessmen had surpluses in their businesses, in their personal accounts, in charitable trusts, hospitals etc. All of this money was in fixed deposits. I went with a focused plan. My only pitch to them was to shift money from FDs to accrual funds, stay invested for 3 years, and avail healthy post tax returns - far better than FDs. I gave written proposals explaining the concept and the benefits. This strategy started yielding good results - I started getting investments of 2-5 crores in accrual funds from each of these clients.

Then I moved into the next segment - traders. I found that grain merchants in big mandis in these towns usually parked Rs.20-25 lakhs in their current accounts. Very rarely would their balance go below Rs. 20 lakhs - and that too for a very short period. I got a bank to agree to give them an overdraft against securities at 9.15%, and using this as a backup arrangement, convinced them to move their current account balances into liquid funds, with the liquid funds being offered as collateral for the overdraft facility. This arrangement is working very well for them - they earn much better returns on their idle balances, and in the odd event of needing funds for a few days, they always have an OD facility to rely on. The interest paid on this minimal use of the OD is tiny compared with the annual earnings from liquid funds.

I continue to conduct regular IAPs for merchants, to educate them about better cash management ideas using liquid funds and a standby OD.

Retail effort gaining traction

We have also stepped up our retail efforts in Jaipur, with regular IAPs. We recently started a new activity which we call the "Free KYC registration" camp. The emphasis is on "free" which is always a big draw for retail investors. In the last camp we recently conducted, we opened 50 KYCs within 2 hours, and at the same time, convinced 30 of these investors to simultaneously start their mutual fund journey with an investment in liquid funds.

Highly focused strategy

Our strategy is very simple and highly focused:

Proposition:

(1) Convert idle current and savings balances into liquid funds

(2) Convert FDs into accrual funds

Customer segment:

(1) Retail in Jaipur

(2) HNI from small towns around Jaipur, which are under-served by advisors

In 2 years since we began a serious push in the mutual funds space, our AuM has gone up from 5 crores to around Rs. 100 crores now. The split is around 70% debt, 5% liquid and 25% equity. Our SIP book has now grown to Rs. 35 lakhs, and we plan to step this up significantly. I am confident we can double this to Rs. 200 crores in the next 3 years, by simply executing our strategy well.

Creating happy investors

More than just the growth in business, what is most satisfying is that all our clients are happy - our advice has helped them earn more from their hard earned money. Helping clients invest in liquid and debt funds is a BIG win for both - investor and advisor. There is a BIG opportunity in serving HNIs in smaller towns, by offering simple liquid and debt funds. We need to make that effort to reach out to them, educate them using IAPs and stick to simple low risk strategies to enhance returns on their savings.

Content is created by Wealth Forum and must not be construed as an opinion by Reliance Mutual Fund.

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