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SEBI’s new idea to limit the timeframe for NFOs to 15 days will create even greater problems for the fund industry. But most importantly, it will undermine SEBI’s own agenda of market development by cutting off smaller towns
Market watchdog Securities and Exchange Board of India (SEBI) has reduced the timeframe to complete a new fund offer (NFO) within 15 days—for both open-ended and close-ended schemes—in a move to speed up the allotment process. However, according to industry sources, the move will have a negative impact on asset management companies (AMCs) as the marketing of NFOs is a cumbersome and time-consuming process.
“SEBI does not give permissions to launch NFOs quickly. It’s a time-consuming process where retail marketing is concerned. It takes four-five days to get the stationery (like the NFO form and prospectus) from the AMC. We have to send thousands of mailers to our clients, out of which we get 30-40 responses. Then our sales executives go and meet them personally. We end up with 15-20 clients,” said a distributor.
After SEBI banned entry load on MFs, distributors have started tightening their purse-strings. Many smaller distributors use book post (a cheaper form of postal delivery for books, documents and printed material) to distribute application forms to their clients, which usually takes three to four days to reach their destinations. While fund houses are currently brainstorming on the new rule and are tightlipped over the issue, distributors are not too elated over the move.
“Asset management companies (AMCs) will have less time on their hands and they can’t spend more on advertisements. The impact will be negative. The bulk of the money comes in the last four days (of the offer), “said a distributor.
“It may be a good move by SEBI, but the regulator should give more time to distribute MFs in smaller towns,” said an IFA.
SEBI has also extended the supported by blocked amount (ASBA) facility for MFs wherein the subscription money will only be debited from the bank accounts of investors once the MF units are allotted. The move doesn’t seem to have much relevance as an NFO is never oversubscribed, unlike an initial public offering.
There were reports that the finance ministry might ask state-run banks, which are receiving fresh funds from the government, to exit non-core businesses like insurance
The Indian government on Wednesday said that it has no intention to prevent state-run or public sector banks (PSBs) from entering into non-core businesses like insurance and mutual funds, reports PTI.
"There is no issue at all. We have never asked and there is no thinking in the ministry," financial services secretary R Gopalan said, when asked if the government has issued a circular asking banks to desist from entering into non-core businesses.
There were reports that the finance ministry might ask state-run banks, which are receiving fresh funds from the government, to exit non-core businesses like insurance.
"The banks have to expand in various financial product activities so you cannot prevent them from getting into them," Mr Gopalan said.
There is some space available so there is nothing wrong in entering into those activities, he said.
Mr Gopalan said that the government will take a decision on infusing Rs16,500 crore in capital in public sector banks by the end of next month.
The government is expected to take a view on public sector banks' recapitalisation by April-end.
Last month, the government announced that it would provide Rs16,500 crore financial assistance to the 16 state-owned banks for shoring up their capital base.
UMP is planning to produce around five films for south Indian audiences over the next three years
UTV Motion Pictures Plc is planning to produce films in south Indian languages and is looking for co-production proposals as well, said a top company official.
“We are definitely looking at the southern market as a key growth area. We are not looking at producing a whole host of films, but around five films in the next three years,” said Siddharth Roy Kapur, chief executive, UTV Motion Pictures (UMP).
However, he said that UMP’s focus would remain on Hindi films. “We expect a good potential from the south Indian market and are open to produce films and co-produce them as well,” he added.
Last year, the company co-produced ‘A Wednesday’ with actor Kamal Hassan, by remaking the Hindi film in Tamil and Telugu.
Over the next 12-15 months, UMP will be releasing about 15 films. ‘Rajneeti’, its much talked about film, directed by Prakash Jha, will be released in June 2010.
“We are planning to release 15 movies in the next 12-15 months, including ‘Delhi Belly’, a comedy co-produced with Aamir Khan Productions and also one with producer-director Vishal Bhardwaj,” said Mr Kapur.
Commenting on the impact of last year’s tussle between producers and multiplex operators, Mr Kapur said, “The strike between the two parties lead to bunching up of movies which got released together when the multiplexes opened. But now since there are fewer movies being released, each movie will get a better chance at the box office.”
In order to generate more revenues, UMP is using different release dates for various platforms such as theatres, direct-to-home (DTH) telecasts and home video. "We do a DTH release in four weeks after the theatrical release. Then we release the home video between six to eight weeks, followed by a satellite release in three months. We are working on shortening these timeframes as we move further," Mr Kapur added.
Last month, UMP tied up with Apple to release ‘Delhi 6’, one of its Hindi films, on Apple’s iTunes online library which allows users to download the movie for $9.99.
UMP, a unit of UTV Software Communications Ltd, is also working on cost rationalisation by keeping talent costs down, maintaining production efficiencies and by relying on home production.