When the SEBI Chairman decides to make an exception to his practice of not attending AMC specific events to grace this occasion, it must be a special one indeed. When the entire industry opened 55 branches in B-15 cities in the last 18 months, and one AMC opens 51 on a single day, would you call that special? Would you call it path-breaking? Incredible as it may sound, but that's exactly what SBI MF did on Monday, 27 Jan 2014, when it simultaneously opened 51 branches - all in B-15 cities - spread across 23 states and 1 Union Territory. We bring you the biggest story of B-15 expansion seen yet in the industry. We also asked D P Singh to share with us the story behind this big bang initiative - and what emerges is that this historic event is part of an overarching mission that the fund house has taken upon itself. As D P Singh puts it, SBI MF's mission is simple : don't follow markets - create them.

First, the headline news

SBI Mutual Fund announced the opening of a record number of 51 branches at one go, in the Beyond top 15 cities spread across 23 states and one Union Territory in the country. Shri U.K. Sinha, Chairman, Securities & Exchange Board of India (SEBI), in the presence of Smt. Arundhati Bhattacharya, Chairman, State Bank of India Group, Shri Dinesh Khara, MD & CEO, SBI Mutual Fund and other senior dignitaries within SBI Group, announced the formal inauguration of the 51 branches of SBI Mutual Fund located in beyond 15 centers. With the opening of the 51 branches, SBI Mutual Fund would now be No 1 in terms of the number of branches (139) in B15 locations.

Mr. U.K.Sinha, Chairman, SEBI, made it a point to mention that while he never usually attends AMC specific events, he made an exception for this one, as the cause is very dear to his heart. He remarked that while the entire industry has opened 55 branches put together over the last 18 months, SBI MF has taken a big step forward with opening 51 branches on a single day. He was especially glad to see more far flung places like Tripura and Port Blair in the new branch list. It is initiatives of this magnitude that can meaningfully enhance the industry's reach, he observed.

Speaking on the occasion, Smt. Arundhati Bhattacharya, Chairman, State Bank of India Group said, "There cannot be a more opportune time to make yet another attempt in reaching out to savers in Beyond Top 15 cities, as Indians, who are under-invested in equity asset, would be immensely benefited by the growth of the Indian economy. Historically, Mutual Funds as a financial asset class has proved to be a gainful wealth creation avenue for retail investors. I am sure the new investors, especially the youth, in B15 cities would opt to invest in Equity and Debt market through Mutual Funds.''

Shri Dinesh Khara, MD & CEO, SBI Mutual Fund said "Our focus has always been in reaching out to the savers and increasing assets in Tier II, III towns and offering them, the best of products and services, considering their investment needs. The opening of new branches is a part of our concerted strategy to increase awareness and penetration of Mutual Funds as an investment asset class in Tier II and Tier III towns, also known as B15 cities. B15 includes a large number of knowledgeable investor base, for whom mutual funds can be a good investment option, right from saving tax to helping them achieve long term life stage goals. We intend to reach out to investors in these towns, who have appetite to look beyond traditional investment option."

These 51 branches are situated in B15 towns of Andhra Pradesh, Jharkand, Bihar, Rajasthan, Uttar Pradesh, Gujarat, Jammu & Kashmir, Kerala, Karnataka, Madhya Pradesh, Chattisgarh, Maharashtra, Goa, Orissa, Haryana, Punjab, Tamil Nadu, Tripura, Assam, Nagaland, Manipur, Arunachal Pradesh, Bengal and Andaman & Nicobar.

And now, the story that led to this news

This event, though huge in its own right, is not a one-off exercise for SBI MF. It is part of a larger mission that SBI MF has taken upon itself, says D P Singh, Executive Director and CMO, SBI MF. And the mission is very simple : don't follow the market - create it. Read on as D P Singh explains the thinking behind this huge B-15 expansion drive of this industry major.

WF: Opening 51 new B-15 branches on a single day: this must surely be an industry first! We've only seen this kind of expansion among PSU banks. What is the thinking behind this huge expansion initiative?

D P Singh: We have observed that in many cities and towns across the country, there are sizeable investible surpluses, if you measure small savings and bank deposits as a yardstick, but presence of mutual funds as an option is not available. Many of these towns have seen inflows. We keep seeing figures that suggest that MFs are hardly 10% of the total bank deposit base. But, this number is very misleading. If you take away the big cities, take away corporate deposits with banks and corporate investments with mutual funds, retail mutual fund investments in smaller cities is as low as 1-2% of the total saving surplus base of these cities.

We therefore decided that our B-15 penetration strategy should not be based on the mutual fund pie and an expected share of that pie. Rather, we looked at the overall savings pie in smaller cities and towns. Our effort is to create a space for mutual funds.

This thought process led to this big bang expansion drive of opening up branches in 51, B-15 centres in one go.

This is a very focused effort from SBI Mutual Fund to reach out to every single retail saver in the country and encourage them to consider mutual funds for their savings and investment needs.

WF: Can you give us a sense of some of these markets that you are now reaching out to, where there is little or no MF industry presence?

D P Singh: These 51 centres include some where there is some MF industry presence, but where SBI MF does not have a presence, as well as centres where industry is not present at all. This expansion drive is taking us into towns like Leh, Port Blair, Imphal - places where the mutual fund industry is barely present or not at all present.

With this expansion we shall be present into 6 out of 7 North-Eastern states. Only Mizoram in North-East is not covered in first round - that too will be covered shortly. So, the idea is to really reach out to every Indian citizen who saves money and invests it, and make mutual funds accessible to each one of them.

WF: What is the business opportunity you see from these new centers? By when do you see them breaking even?

D P Singh: Our motto at SBI MF is simple : don't follow the market, create it. We are conscious that in many towns where we are setting up our new branches, we will have to make serious and continued efforts to create a market for mutual funds. Over the period of time, others will follow, when the market starts showing signs of growing. That's fine for us. See, the moment we start looking for a quick break even, we will land up playing a market share game and will try to offer exotic and high revenue generating products -we will land up evaluating the size of the present MF market and your likely share of that pie. That approach will not help the cause of market expansion. Somebody has to take the lead in creating new markets. That somebody has to treat this effort as a long term investment, rather than an initiative with a quick break even. However, we are hopeful of breaking even in two years' time.

We at SBI MF are happy playing that role, and hope that other leading fund houses will also make similar efforts to create new markets. Together, we can help in providing every Indian saver a convenient access to mutual funds. Business opportunity is huge.

WF : Are there plans to also help create and expand distribution in these new centres?

D P Singh. Yes of course. We are committed to expand the distribution network. We will work closely with existing distributors who can provide services in these centers as well as we will try to create a big number of new category of distributors at in these centers.We will also work closely with banks and national distributors in these towns.

One of the leading national distributors in fact is so encouraged by our expansion initiative that they are in discussions to open their own branches in some of the centres we are now going to, and where they too are absent. So, in a way, these kinds of partnerships can help build the eco-system for the mutual funds business in these towns. Of course, we will also work closely with SBI's branch network in these centres to help popularize mutual funds.

WF: What are your plans under the district adoption program initiated by AMFI? How many districts have you adopted and in which states are these?

D P Singh: We have been given 9 districts by AMFI. We have already started our initiatives in these areas. Our first effort is to create platforms for imparting financial literacy in these centres. We have already organized a few investor education programs in these districts. Now, with the current expansion plan, our physical presence in these centres will give a further boost to our efforts.

WF: When approaching first time investors in B-15 towns, what should be the initial products that you would advise distributors to talk about?

D P Singh: We need to encourage first time investors to have positive experience of Mutual Funds. Our communication with distributors is very clear on this point. We must first get new investors into very low risk products like liquid/Ultra Short Term funds, FMPs and SIPs only. For this, our target audience in every city and town is the tax paying savers of that town.

We need to showcase the convenience, tax efficiency and returns of liquid funds and FMPs to these tax payers. Only after that, we can really talk about a full asset allocation and other products that have varying degrees of risk in them.

We do not favor offering one go equity investments to first time investors. Once new investors gain confidence through liquid funds and FMPs, you can get them into hybrids and then into diversified equity funds and large cap funds. We would not like to promote sector funds and mid cap funds to these investors. The effort must be to keep things simple and ensure that new investors have a good first experience with mutual funds.

WF: What are your product and distribution plans for the year ahead?

D P Singh: We want to be relevant for every type of investor. In our view, there is a huge opportunity ahead for us in the industry to offer vanilla products to retail savers across the country. Simplicity is the mantra at SBI Mutual Fund, and it will remain that way.

At the same time, we do see attractive opportunities to offer AIFs to more experienced investors and we are taking steps to be a relevant choice for such investors as well. While our efforts will be to offer products for every investor category, our DNA will remain very retail focused.

WF : Congratulations on this huge B-15 initiative. It is efforts like this from industry majors that will help meaningfully grow the MF pie and achieve the kind of retail penetration we all believe the industry should achieve.

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