Digital MF platforms look to diversify to drive growth

Digital mutual fund (MF) platforms are looking to diversify their business with private equity (PE) funding in a bid to create a sustainable revenue model before funding the next leg of growth.

“Over the past two years, PE flows were strong. Now, PES want to see some revenues from platforms offering direct plans online. Some of the players have also started to diversify in services such as stock broking and insurance,” said Vijay Kuppa, co-founder of Orowealth.

“The rush of establishing new MF platforms has slowed down, with players looking for a monetisation play in this segment,” said Nithin Kamath, cofounder of brokerage Zerodha, which runs the MF platform Coin.

Besides MF products, Paytm Money has started to offer National Pension System (NPS) products on its platform. In December last year, Paytm Money had also received approval from the Securities and Exchange Board of India (Sebi) for stock broking.

Bengaluru-based investment platform Groww has also started to offer investment in stocks on its platform.

Players operating in this space say that platforms that have proven their business models are likely to be able to access funding to take their growth cycle forward.

“We are looking at diversifying as clients are showing interest in other products such as direct equities. We are also working on allowing clients to access direct international equities through our platform. Good businesses will continue to attract funding,” said Harsh Jain, cofounder of Groww.

Industry observers say that platforms will have to offer propositions with strong differentiators.

“Platforms will have to go beyond their user interface to differentiate themselves and solve a real customer problem in creating alpha-generation portfolios. Through a combination of machine learning and artificial intelligence, such platforms would need to look at offering services that help in managing investor portfolios,” said Srikanth Meenakshi, founding partner and head, platform and technologies for primeinvestor.in.

Further, industry participants say that slowdown in MF flows can also have an impact on the segment and prolonged pressures can lead to consolidation.

In June, flows to equity schemes had seen a dip of 96 per cent from the previous month. This was the worst month for the industry in terms of flows to equity schemes in over four years.

Digital platform providers say that they are not seeing any material client exits on their platform to be worried about.

“Direct plans have continued to gain traction among millennials, who are holding onto their investments amid the volatility and are also seeing gains from the recent market upmove,” Jain added.