Indian financial services sector provides significant opportunities for firms involved in the distribution of products but the intermediaries face heavy headwinds due to regulatory changes, according to panellists gathered to share views with a packed house at the VCCircle Financial Services Summit in Mumbai on Wednesday.
The panellists discussed issues that favour and affect investors on their investment decision in the Indian financial services business and touched upon the regulatory environment, importance of intermediation and opportunities to be explored in a tough market.
Moderating the opening session Sachin Chopra, managing director of Everstone Capital,
said that the financial services space opens up a lot opportunity for raising capital because of the norms to maintain capital adequacy ratio at all time. “There is a secular trend for investments here unlike other sectors,” he noted.
With the tough business environment and tight monetary condition, most of the leading financial services companies are witnessing an increase in bad loans, which creates new avenues to explore for asset reconstruction companies and credit bureaus, said Mahesh Chhabria, partner at private equity Actis.
Sudip Bandyopadhyay, managing director & CEO, Destimoney Securities Pvt Ltd, said that the intermediary space is going through a turmoil.
“The regulator wanted to cut out the distributor but that will not work as is in every walk of life there is a distributor and penetration of most of the financial products in India is abysmally low. As a result, sales have come down,” he said.
Why should anyone distribute a product if he/she is not remunerated, he asked referring to curbs imposed on distributors’ margins for mutual funds.
“Yes, misselling is a menace, but we have to be careful in selecting the products. However, we need both brick & mortar presence and online sales for any product distribution because people need something beyond fixed deposits,” he said.
Ashishkumar Chauhan, CEO & MD, Bombay Stock Exchange Ltd, said the country’s oldest bourse is transforming itself. “BSE has started distributing mutual funds and will also distribute fixed deposits. Exchange is becoming a distribution platform.”
Shrenik M Khasgiwala, director, Brand Capital, said that distribution of financial products and services in India is massive structural opportunity. “We are in the process of investing in two more exchanges and we are hungry for more investments,” he said. The ad-for-equity investment arm of media house BCCL has investments in MCX and Delhi Stock Exchange.
(Edited by Joby Puthuparampil Johnson)