Hemendra Kothari interview: ‘Parted ways with BlackRock as I did not want to be in the minority’

The growth has just started. There will be slight up and down. When markets are going down, flows will also slow down. But I think in the next two years, it will be higher than the last two years, comparatively. The growth will be there, though it might be slower. In India, mutual fund industry has not got much penetration. It’s just beginning. People are still used to investment in bank deposits, gold or even simple cash. I think we have to take people to think long term (5 years and over). While investing in the long run, people have got lot of money in the business.

Why did you part ways with BlackRock?

BlackRock was keen to integrate their business as they don’t have any other joint venture globally.  When they came to me few months back, they asked me to integrate the business. But I said I may not like to dilute the stake and they wanted absolute majority. I did not want to be minority … I was very clear from day one. So discussion went on and they tried to convince me that would be a great thing but I was not convinced. The parting of ways was on a friendly note. I said I don’t want to sell and they said they want to buy, but neither of us wanted to remain minority. Having a minority stake without having any say is no meaning for me as this is a historical company in India. I have the highest regard for BlackRock and we have not parted with any ill will.

Read | Hemendra Kothari’s DSP buys out giant Blackrock’s stake

How did you get 40 per cent initially?

When Merrill Lynch merged their business in 2007-08 with BlackRock, I had the right to buy 40 per cent stake of Merrill Lynch. When I met BlackRock Chairman Laurence Fink, I was very impressed with him and I thought he would be a good partner. In India we continued to remain the way we were, with systems which we created earlier along with Merrill Lynch. BlackRock strengthened these systems. We still have a good relationship.

Did BlackRock indicate that they will come to India independently?

I don’t think they are going to come in any foreseeable future. But they are looking for investments in infrastructure, private equity or real estate. By and large, the world over, they have not gone into retail business, except in the UK. Their interest remains investment in infrastructure and private equity side of the business which they may continue.

Why do you think many foreign fund houses have quit Indian asset management companies (AMCs) in the last five years?

I think reasons for them exiting India are very different. Those days, fund management was very slow, size was small. That could be a reason for them to exit. They thought that the industry is not going to grow. There were various restrictions and concerns from the compliance point of view within India and the US. But today, the constraints are comparatively less. They (foreign fund houses) may want to come back to India now. But the question remains whether they have the appetite to go into the retail business and talk to retail investors and Indian institutional investors. Sometimes they think it’s too tedious in India and amounts are too small. They are known to work with institutions… like BlackRock is known to work with large institutions like sovereign money, pension funds and insurance companies.

Do you think the bullish sentiment in the stock market will remain?

I am very happy if it (market) remains bullish. But sometimes it might have some impact due to external factors … political factors, geopolitical reason, trade wars reasons, foreign selling could affect us. When the industry grows, economy also grows. Luckily, the MF industry has grown and in the last year, lot of money has gone out also but Indian investors were buying and they were proved right. I think the market is reasonably priced.

What are your plans for the company after the buy-out?

We will be family owned but professionally managed. That is our objective. We want to expand, digitalise and increase our online presence. We want to bring in new products. We can take decisions faster.