In the second
part of a two-part interview, V Shankar, Director, CAMS defines the roadmap for
his company.
Today the MF industry is in
a consolidation phase. How does it affect your business?
The
MF industry has been witnessing reduced investor interest for the last two
years. Since CAMS depends so heavily on the MF R&TA business, it has significantly
impacted our revenue and profitability. However, we are using the opportunity
to revisit our processes to improve efficiency and customer responsiveness.
The mutual fund industry has
witnessed erosion in folios. Does that affect your earnings?
As
mentioned earlier, CAMS’ dependency on the MF business is high. Due to reduced
investor interest, transactions volumes and therefore the MF accounts and assets
have come down. This has impacted CAMS’ earnings adversely.
Is it a challenge to
constantly change your systems to meet regulatory rules? How many times have
you tweaked your systems to comply with the changing regulatory framework? Is
the cost of compliance high?
Considering
the fact that MF is retail intensive with a very large section of investors not
having access to quality financial advice, it is imperative for the regulator
to play an active investor protection role. We therefore do not look at
regulatory changes as a burden (whether in terms of efforts or cost). Being an
integral part of the MF ecosystem, it is in our interest to have a robust
compliance infrastructure which will ensure sustainable revenue stream.
How many people does CAMS
employ?
CAMS
employs directly and through its partners in excess of 3,000 employees.
How much stake do HDFC and
Advent International currently hold in CAMS?
The
HDFC group holds around 31% and Advent has 30% stake in CAMS.
What are some of the new
services and technologies you have introduced which has helped your clients and
investors?
We
enhanced our service scope to include call centres, Web hosting and electronic
payment services to our MF clients. This has enabled MFs to improve the quality
and time taken to service the investor requirements. Cycle time to close a call
or register an SIP has come down significantly. We also reach out to investors
on the rights, responsibilities and privileges of investors through CAMS
Viveka, an investor education series in the print media. We have co-invested
with Karvy in creating Finnet, a platform for intermediaries. It is doing very
well.
R&T guys work behind the
door. It is often the fund houses which are in the limelight. Do you think that
R&Ts should also win some recognition for their work? Has CAMS won any
awards for excellence in R&T work?
Though
R&TAs are the investor/distributor facing arms of the fund houses, they are
not recognised in any public forum. What sustains us is the smile that we see
on the investor face when we satisfy his needs and appreciation mails that we
receive from our clients. Yes, there should be recognition for the work done by
R&TAs.
How many investors transact through
your website?
We
get around 1.2 to 1.4 crore hits on our website every month. Transactions can be
put through our website and also through the Finnet platform. Together we do
around 2 to 2.5 lakh transactions a month. Distributors and Investors use
camsonline.com for nearly 1.5 million electronic reports/statements every
month.
How do you decide where to
set up a CAMS branch office? Does the investor population play any role? Have
you shut any branches in the recent past?
Till
about a year back, we have been investing in setting up front office
infrastructure with the premise that availability and access will lead to
category growth. This means that the front office will not be financially
viable for the first few years at least. R&TAs have been the face of the MF
industry in most of the towns in India. While a typically large AMC might have
presence in 80 or so locations, we have presence in around 200 locations.
In
parallel, CAMS set up an electronic platform called Finnet which provides the
IFAs and through them the investors, an opportunity to participate in MFs even if
the AMCs (or CAMS) do not have a physical presence in that town. Around 1,500
distributors use the platform now. With Finnet gaining acceptance with the distribution
community, we feel that physical infrastructure may not be as critical as it
was earlier. We have closed a few branches where the local distributors are
comfortable with Finnet and the volumes do not justify the physical branch.
How many branches does CAMS
currently have? The regulator is telling mutual funds to penetrate smaller
towns. How can R&Ts play a role in expanding the reach of mutual funds in
India?
CAMS
has about 200 front offices now. Most of the centres are in Tier-II and Tier-III
towns. As we discussed earlier, these front offices are ‘look-ahead’
investments made with a view to grow the MF industry, though on a standalone
basis, they are financially unviable.
We
are investing substantially in our electronic platform to provide additional
features and facilities. We are also investing in popularising the platform so
that distributors in far-flung cities, like Srinagar and North-Eastern cities,
can also participate in MFs with same day NAV. In our view, this would go a
long way in providing cost-effective reach to the industry.
CAMS was recently allowed to
be an electronic repository for insurance companies. How do you see this
opportunity?
CAMS
Repository Services Limited, a subsidiary of CAMS, has been given in-principle
approval for setting up an insurance repository. As the name suggests, the repository
will hold the insurance policies in electronic format providing enormous
convenience and safety to the policyholder while reducing the cost for
manufacturers. Considering the fact that the insurance industry is several
times larger than the MF industry, we feel that the opportunity could be large,
if executed well.
Is the R&T business
risky considering the fact that any slippages in handling investor data can be
held against you by your clients and the regulators?
It
is absolutely true that the R&T business is as much about risk management
as about processing. Excellence in risk management from long years of
experience is what leads to business excellence, be it the R&T business or
being an acrobat in a circus.
The
R&T business is a mature business with well-evolved business practices and
processes. We have used technology to not only improve efficiency, but also to
reduce risks. CAMS has a robust risk identification and mitigation process
which enables it to deliver high quality services without compromising on
controls.
In which other areas and
businesses are you contemplating a foray?
CAMS’
core strengths are its pan-India presence, proven process/quality orientation
in transaction processing and delivering business outcomes, ability to scale up
and down and handle volume fluctuations. Leveraging these capabilities, our
focus would be on providing services to financial sector players in banking, insurance
etc. We will not enter any space which would put us in conflict with the
stakeholders whom we serve—investors, manufacturers and distributors.
What is your roadmap for
CAMS for the next two years?
Our
focus would be to improve the adoption of our electronic platform so that we
are able to serve the regulatory vision and contribute to the growth of the MF
industry by providing reach in a cost-effective manner. We will invest
substantially for this initiative.
We
have in our own way contributed to investor education by holding a large number
of education events in Tier-II and Tier-III cities in the last three years. One
unique feature about these events is that they are held in local languages. We
also contribute to the investor awareness series on MFs through Hindu Business Line on a fortnightly basis. We will sustain this
initiative going forward.
Other big area of focus would be insurance repository. We will invest on popularising the concept and also the technology to deliver value to the policyholder and the insurance companies.
