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Blistering Growth

An also-ran fund house till 2003, Tata Mutual has become the fastest growing mutual fund house for 2004-05

Brand Tata is thriving in the mutual fund industry as well. The phenomenal success of Tata Infrastructure Fund recently indicates that Tata Mutual Fund is on its way to play a major role in days to come.

Asset Growth

Even two years back, it was inconceivable to think that Tata Mutual Fund would emerge as the seventh biggest player in the Indian mutual fund industry with an asset base of over Rs 6,784 crore. At least, history was not on its side. Since its inception in June 1995, Tata AMC's growth was sluggish. Even till March 2003, it had a little over a thousand crore in assets and 19 AMCs were ahead of it. However, things have changed really fast since then.

In April 2003, Tata Mutual Fund hit the expressway. Its assets jumped nearly fivefold in 2003 and crossed the Rs 6,000-crore-mark in August last year. Then came two successful IPOs. Tata Infrastructure (Rs 772 crore) and Tata Dividend Yield (Rs 417 crore) strengthened the AMC and the assets swelled to over Rs 7,365 crore in February 2005. Older equity funds like Tata Equity Opportunities and Tata Pure Equity too contributed to the AMC's rapid growth story.

However, the real push came from the AMC's liquid funds. They grew at a phenomenal pace--from a meagre Rs 280 crore in March 2003 to over Rs 3,900 crore, they now account for more than half the assets of Tata Mutual Fund. A Rs 125 crore fund in March 2003, Tata Liquid alone contributes Rs 2,317 crore to this figure.

Both the new issues and the growth in liquid funds has resulted in Tata AMC becoming the fastest growing fund house in 2004-05. Total assets under increased by over Rs 2700 crore or almost 70 per cent.

Strength of Brand

Besides some good performances in the recent past, a solid brand image has helped the fund house immensely. Tata Mutual Fund CEO Ved Prakash Chaturvedi agrees: "Our biggest advantage is that we have a strong retail brand and we are increasingly focusing on the retail segment."

He adds that, "The brand has stood for trust and integrity over generations. Almost every household having an interest in mutual funds recognises the Tata brand. Our strategic focus is to provide long-term consistent fund returns, quality service wherever we are present, consistent communication and a wide range of products which goes to reinforce our core brand properties of trust and care."

The fund house says it services almost 6 lakh investors from 2 lakh earlier. For the mutual fund industry, getting more retail investors into the fold has become a necessity. Chaturvedi believes that the industry will not be able to grow only with the large ticket investors and retail investors would write the 'great Indian mutual fund story'. Here, the Tata brand name can help in attracting investors.

Products & Performance

Tata Mutual Fund has an array of performing mutual fund products. On the equity side, it has some solid old offerings like Tata Pure Equity and Tata Select Equity. Both funds have put up a top-half performance and delivered over 40 per cent return in the trailing three-year period ending April 7, 2005. Its oldest equity fund, Tata Growth has a commendable performance record with a trailing five-year return of 26.42 per cent as on April 7, 2005. This fund is in the top-quartile of the diversified equity funds' universe and enjoys a five star rating from Value Research at present.

Tata's newer funds too are promising. Launched in March 2003, Tata Equity Opportunities has gained in stature. In 2004, the fund put up a top quartile performance and is ahead of its average peers so far this year as well. Though it's too early to say anything about Tata Dividend Yield and Tata Infrastructure funds, they definitely offer a different flavour. Also, close-end fund Tata Ind Navratna became open-ended from March 31, 2004.

The fund house has recently concluded the IPO of Tata Service Industries Fund, which too has done well. On the ELSS side, Tata Tax Saving Fund is a decent offering. Tata Balanced, an equity-oriented hybrid fund, too has a worthy track record. Its monthly income plan, Tata MIP, is one of the best funds in the category.

On the debt side, though, Tata Mutual Fund lacks firepower. Its three income funds have been below average performers. Tata Income, the oldest medium term debt fund of the AMC, is still to prove its worth--in the last five calendar years, it has underperformed the category in four years and managed marginally better returns in one year. Tata Income Plus is also struggling after a top-quartile performance in 2003. The AMC manages its floating rate and cash funds efficiently. Tata Liquid is one of the cheapest ultra short-term funds available. If anything, Tata Mutual Fund lacks some sectoral offerings. Though in Tata Service Industries and Tata Infrastructure funds, it has products that look more like sector funds.

The Way Ahead

Tata Mutual Fund is on course to become one of the top-most mutual funds of the country. A rapid asset growth in the past two years, some recent success in IPOs and good performances of older funds have all come together to provide Tata Mutual a position of strength.