Aditya Birla Sun Life AMC Limited (ABSLAMC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Aditya Birla Sun Life AMC Limited Q3 and 9M FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Meghna Luthra from InCred Equities. Thank you, and over to you, Ms. Luthra.

Thank you, Renju. Good evening, everyone. On behalf of InCred Equities, I welcome all to Aditya Birla Sun Life AMC's third quarter 9 months and FY '26 ended earnings conference call. We have along with us Mr. A Balasubramanian, MD and CEO; and Pradeep Sharma CFO. We are thankful to the management for allowing us this opportunity to host them. I would now like to hand it over to Bala sir for his opening remarks. Over to you, sir.

Thank you, Meghna, and good evening, everyone, and thank you for joining us today. Let me begin by extending a warm wishes for a happy and prosperous new year to everyone. I hope you all had the opportunity to review our earnings presentation, which is accessible on both the stock exchanges and our company website. Let me start by outlining the current economic outlook and providing an update on developments within the mutual industry. As is known, the global economy has entered a phase of recalibration, and despite persistent tariff tensions and policy volatility, growth is stabilizing towards trend levels of approximately 3.2% as estimated. Nations are fundamentally reassessing supply chains and trade partners in response to the disruption and continuing. And meanwhile, inflation continues it moderating trajectory, allowing central bank to pivot their focus towards supporting growth. The conversion signals a shift from crisis management to a strategical adaptation. India continues to outpace the global peers with remarkable consistency of real GDP is on track to expand by robust 1.4% in FY '26. While CP inflation has moderated to a favorable 2.2%, the gold are movement of strong growth added with low inflation continues. And we maintain a positive outlook for FY '27, projecting nominal GDP growth of 9.75%. This optimism is underpinned by several factors, the transmission of monetary and fiscal stimulus, expectation of easing of tariff pressures, robust rural demand supported by strong agriculture output and continued fiscal support for rural India. We anticipate inflation to normalize around 3.75%, well within the RBI comfort zone and preserving space for growth supportive [indiscernible]. Conditions appear favorable for a capital expenditure cycle with the capacity utilization at elevated levels and healthy corporate balance sheet. While global uncertainty remains a key risk, India's fundamental position is strongly for sustained growth momentum. And hopefully, in the budget should also drive the future growth more aggressively. Indian equity markets showed a tale of 2 forces in this quarter, external pressures testing resilience and domestic growth -- domestic strength [indiscernible] in the cushion. There was an intermittent volatility to global uncertainties, FP outflows and profit booking pressures. These downward movements were largely offset by robust domestic institutional participation. Overall, equities concluded the quarter on a firm growth [indiscernible] the structural strength of India's equity ecosystem, despite short-term market fluctuations as we have witnessed in the last few days as well. Continuing with the mutual fund industry update. The mutual industry quarterly average AUM stood at INR 81 lakh crores as of 31st December 2025 compared to INR 68 lakh crores as of 31st December 2024, registering year-on-year growth of about 18%. The industry recorded SIP inflows of approximately INR 31,000 crores for December 2025, reflecting quarter-on-quarter growth of about 6%. The total number of mutual fund portfolios stood at approximately INR 26.97 crores as of December 2025. During the Q3 FY '26, the industry saw [indiscernible] of approximately about INR 37,300 crores across equity and debt funds. The equity selection predominantly during May sector and systematic and [indiscernible] app funds. Individual average AUM for December '25 stood at INR 49.28 lakh crore, contributing about 60.1% of the total AUM, and busi residual and average AUM of INR 14.20 lakh crores account for 18.4% of the total AUM growing by 18% year-on-year. At ABSL AMC performance highlight, our overalll average assets under management inputting alternate assets not stand at INR 4.81 lakh crores, highest ever AUM achievement, growing at 20% year-on-year. Our mutual fund quarterly average AUM has reached INR 4.40 lakh crores, representing 14% year-on-year increase. And within this, our equity mutual fund quarterly average AUM stands at INR 2 lakh crore, growing by 11% year-on-year. As an AMC, we firmly believe that the SIPs continues to remain a cornerstone of our long-term investment in India. Our SIP contribution for December 2025 stood at INR 1,080 crores, supported by INR 40 lakh contribution coming from SIP accounts. In alignment with these visions, we have launched a new SIP-led initiative under investor education program plan for Life. This campaign goes beyond wealth creation. It encourages investors to think long-term, plan for Life milestones and importantly, prepare for retirement through systematic withdrawal plans. Our total number of investors portfolio for December 2025 stood at INR 1.08 crores, witnessing 3% year-on-year growth. We are driving growth by building scale through increased market traction. Our overall fund performance has improved by significantly, leading to better market perception and importantly, stronger flows in towards our core product, that was the momentum gives us the confidence and [indiscernible]. Building on the strong foundation, one of our key priorities continues to be strengthening our core equity offerings, particularly Flexi Cap Fund and Multi Asset Allocation Fund and our Balanced Advantage Fund as well as some of the thematic funds that we have been seeing flows like Conglomerate Fund as well as the Consumption Fund. These are some of the key product focus that reasonably improved flows coming on this segment. Our focus remains on scaling this flagship products through a combination of [indiscernible] SIP inflows, a robust contribution across all distribution channels improved -- on improved fund performance and increased market engagement. Our drive to build scale through enhanced traction coupled with improved overall performance has led to a better market perception and rising flows in core products creating momentum for continued growth. Turning to alternate business, the PMS and AIF Equity segments have demonstrated robust momentum, supported by steadily expanding suite of credit offering. We continue to enhance and refine our solutions to address the evolving sophisticated recruitment of HNIs and family offices and some of the institutional [indiscernible]. Our PMS/AIF advisory assets experienced substantial growth expanding from INR [ 3,853 ] crores a year back to INR 32,000 crores increase in Q3 FY '26, representing 8x increase in size, of course, the winning of ESIC is a mandate accounted for about INR 28,000 crores as of December 31, 2025, while our PMS and AIF AUM, excluding ESIC mandate registered a strong year-on-year growth of 17%, reflecting a robust organic momentum in our core alternate business. And during the quarter, we received ABF allocation letter, appointing as one of the manager for the fixed income mandate. We are now progressing through the recruiter regulatory format [indiscernible] and expect to be on board of the assets in -- maybe the -- before the current quarter ending. On the fixed income credit side, we successfully completed the final closure of our ABSL India Special Opportunities Fund Series on commitment of around INR 500 crores during the quarter and currently have fundraising underway for Series II, ABSL India Special Opportunities Fund II and money managers. We are also preparing to launch ABSL India Select Sector Fund under the AIF category in equity. Our real estate business has built significant momentum and gained considerable traction, driven by strong investor interest and robust deal pipeline. And during the quarter, we launched Aditya Birla Real Estate Credit Opportunities Fund Series II in a category to AIF focused lending to post approval, brownfield [indiscernible] across Tier 1 cities [indiscernible] crores, registering year-on-year growth of approximately about 44%. We also average AUM INR 4,814 crores. We have incorporated our newly owned subsidiary company, Aditya Birla Sun Life AMC International IFSC Limited in GIFT City to expand our GIFT City operations and are currently in the process of securing regulatory approvals and hopefully before the quarter ending, we will be up and running. We continue to see flows through our current brand setup across our existing funds such as India ESG Engagement Fund, ABSL Flexi Cap Fund for inward remittance and Global Bluechip Fund for outward remittance under LRS scheme [indiscernible] globally competitive solution [indiscernible] in Australia. Our passive business has continued to demonstrate good momentum with quarterly average AUM touching INR 38,600 crores, representing a year-on-year growth of about 28% and customer base expanding to 15.1 lakh folios. Our ETF offerings are witnessed global traction with ETF quarterly average AUM growing by 40% year-on-year, significantly outperform industry ETF growth rate of 25%. We are building towards a better long-term outcome by improving on tracking differences as a key focus, while also improving tracking error. Last year, industry-wide, we witnessed good inflows in precious metals like gold and silver and our offering in this space make an exceptional case for diversifications. As of today, our passive product suite comprises of 32 distinct offerings across fixed income, commodities and multi asset allocation fund designed to address the diverse investment needs of our investors. Moving to the financial performance. Q3 FY '26 revenue from operations stood at INR 478 crores, up 7% year-on-year. Q3 FY '26 profit after tax was at INR 358 crores, up by 19% year-on-year. Fy '26 profit after tax stood at INR 270 crores, up by 20% year-on-year. Our 9 months revenue from operation stood at INR 1,387 crores, up 10% year-on-year. Our 9-month profit before tax stood at INR 1,046 crores, up by 11% year-on-year and profit after tax for the 9 months stood at INR 788 crores, up by 12% year-on-year. With this, I would like to open the floor for any questions that you may have. And I'll be joined by Pradeep Sharma to answer any of your questions that you may have.

[Operator Instructions] The first question comes from the line of Mohit Mangal with Centrum.

Am I audible?

Yes.

Yes, you are.

So my first question is towards the employee benefit expenses. So even if I remove that labor code extra cost, the employee benefit expenses were higher by around 20% Y-o-Y. So what explains this increase in employee benefit expenses?

Yes. Pradeep [indiscernible] answering.

So Mohit, actually, employee benefit expenses have gone up Y-o-Y basically on 2 counts. That is one is the additional impact of the gratuity based on the new labor code, right, which accounts to around INR 2.82 crores. That is one. Second is on the ESOP cost. This is actually the -- our parent company, ABCL, some ESOP was given to our select employees. So there is a cost of ESOP of around INR 4.66 crores for this quarter. So these are the 2 [indiscernible] which are actually increasing the cost for the quarter.

Okay. So going forward, we should expect this to be recurring or is it onetime?

No. So gratuity is a onetime cost. It's not recurring. And the ESOP cost would be there for next 4 quarters -- 3 more quarters on this account.

Got it.

Yes. That is basically post this rolling out of [indiscernible] option for employees in the recent opening. Yes.

Understood. And secondly, if you can share segment-wise yield...

Yes. So equity -- our yields are around 64, 65 basis points. And for that, it is around 24 basis points and liquid is around 13 basis points.

Understood. Yes. And in terms of the PMS and AIF, do you -- can you give some revenue numbers for 9M and Q3?

Yes. So the alternate revenue for Q3 was around INR 34 crores, which is around 4.5% of our total revenue.

That is helpful. Sir, lastly, on yields, sir, how do you see yields actually going forward for the next say 4 to 5 quarters? Do you see a meaningful decline? How do we see the yields basically?

Yes. I think broadly, Mohit, I think -- at this point of time, we estimate the impact of the circular would be minimal. And to the extent very limited impact we should see. At the same time, since we are looking at building the size, I think we're already seeing some kind of momentum coming in, in the overall key portfolios in terms of traction. So to the extent as the size of the funds increases, of course, there will be a corresponding increase in revenue, but may come at the marginal reduction on the other thing. But again, I don't see it very significant. At the same time, we're also looking at building our other businesses, especially the alternate as well as the PMS and broader on overall basis from the AMC point of view, we should see an improved performance rather than any significant reduction in the yield.

Right. So sir when you say the yield is minimal impact because of circular, do you mean to say that we'll be able to pass on to the distributor?

No, I think we'll see it. I think as we come closer to the implementation date, of course, we will see how best it has to be optimally utilized for the benefit of everyone, keeping in mind the investor the center. These are preliminary assessment is actually we'll have to balance it out to ensure it has a minimum impact.

Understood, understood. Sir, my last question is on [indiscernible] your thoughts and then we'll be able to launch it?

Yes. So Mangal [indiscernible], we have already filed applications and the approval also as the [indiscernible] awaited. We thought that [indiscernible] this month. And since we have asked for the revised structure in the portfolio, it's likely to -- the approval is likely to come this month. I think hopefully in month of February, we launch it. By the time budget would also be out and we'll be the first one -- our first fund will be launched in the month of February. We'll also, of course, plan to launch the equity loan [ chart ] fund [indiscernible] applications once we are confident that we can -- we have the talent pool to manage the fund once the person has comes on board. I think [indiscernible] March. Only one fund we'll launch, which is a hybrid fund, which is the equity taxation sometime in February.

[Operator Instructions] Next question comes from the line of Prayesh Jain with Motilal Oswal Financial Services Limited.

Sir, firstly, like our fund performance has been improving and quite a few schemes are appearing in the top quartile on 1-year return basis, and they contribute to a large portion of our equity AUM as well. But in spite of that, we kind of continue to lose market share on the equity side as well as if I look at the SIP data that you provided, that also keeps coming down now, how -- generally, it does take a lag effect. And I understand from a fund performance improvement to market share improvement. But still, it's been some time that our fund performance has improved. But we're still not seeing any -- even market share not being stable, right, we keep seeing decline month-on-month in terms of market share. So where do you -- when do you see the effect of this fund performance translating into market share gains both on SIP as well as normal market shares?

Thanks, Prayesh. See, I think the way I look at is, I think if I look at the whole of last 1.5 years, the market share loss has been coming down in terms of -- as a basis points. That's something we are seeing now we almost come to stabilizing kind of thing. We were now almost come to a stage where it is now getting stabilized. That's one. Second is on the fund performance moving from 1 to 2 and 3, and that's something we are already seeing it start reflecting most of our funds, while we have done very well on 1.5 years now starting uploading on the 3 years. Normally what happens is as the short-term performance, our [indiscernible] in the long-term performance, it comes as part of the recommendation list, while we seeing that happened in the last 2 quarters, the number of approvals that is coming from the organized channel partners, that is something to be taken as a single of products coming as part of the recommendation list and basis which is coming in. And second, some of the online platforms where we also saw significant flows on funds which were top performing funds. [indiscernible] starting some of our funds appearing in that segment as that's why it takes some time for all these things to come in the [indiscernible] so-called public domain. So I think these are some of the things, we are already seeing it reflecting on net inflows coming in funds like Sun Life Equity, Flexi Cap Fund, [indiscernible] Fund, we are seeing improvement in terms of flows. Balanced Advantage Fund have seen good flows and Multi Asset Allocation Fund have got good flows. So I think that, of course, the category in which where we even see an industry-wide [indiscernible] the [indiscernible] scheme, if I knock that off, other schemes, they are getting the flows already began. See SIP is drive -- if I look at SIP numbers minus the SEP. SEP is comping which comes from large ticket investors, they, of course, dynamically manage that and therefore, minus the SIP we have take it, I think we are already seeing that SIP numbers on equity getting better. Of course, there is no question that it has to gain further momentum given the fact the industry [indiscernible] segment. I think the lastly, of course, from a sales team point of view, the high focus that we have been have put in place in terms of improving the productivity of every RM across the country with improved fund performance and reasonably high level of engagement and become of activities in the Retail segment, which our retail team is doing it, I think should start reflecting in terms of improved performance coming on the numbers as we move forward. I'm reasonably confident the way things are shaping up. I think it's [indiscernible] remain improve these numbers on a quarter-on-quarter basis. See as far as the markets are concerned, of course, if I have to look at top 10 players with the rest of the players, we must also have to remember that overall market is expanding, and more players are coming in. I think we also, of course, keep a close watch on our absolute performance improvement. In fact, when I look at this year overall this year 9 months numbers and close to about INR 600 crores of net sales that we have got on some of our equity as a product. And overall as fund, we got almost about INR [ 25,000 ] crores net sales. But these are numbers is actually a reflection of the confidence with the team -- we admit the team is driving the whole thing. I think improved performance will only further boost the confidence of the entire team across the country and our distributing partner to bring the numbers up. And that's something I'm already seeing it as a -- the reflection coming from our [ Audio Gap]. Prayesh, are you there?

Yes, yes. Sorry. So sir, if I got your number right, you said INR 4,500 crores of flows in this year, in this 9 months.

No, no. Total is about INR 55,000 crores roughly is the overall as the funds that's including fixed income and equity will be close about INR 1,600 crores of net sales across all our equity [indiscernible]

Okay. And sir...

Prayesh, I'm just saying. I'm just saying, why I think [indiscernible] number is not disclosed generally. It is a number generally we keep track of it, how we are progressing on quarter-on-quarter basis. Those numbers are not generally disclosed anywhere, but I'm just going by the trend that I'm seeing like Flexi Cap Fund, I'm seeing some inflows, [indiscernible] we are seeing inflows. Maybe the rate of inflows could be lower. But I think what I see is actually the beginning of the reverse of the trend itself will gain momentum. Yes.

Right. Sir, anything on the distribution side where you would want to take action, given that we are there in the top quartile performance, any commission actions that you would want to take wherein you kind of increase a bit of commissions and take some pressure on your yields and get the volume growth, which can help you? Is there anything of that sorts as a part of the strategy?

So that's something we keep doing it, Prayesh, as part of our strategy products which can generate volume. At the same time, if one have to consider for a brief period in terms of supporting sales activities, that's something we do it. Already the focus products that I'm talking about it, the team do have some bit of flexibility to push for the volume. That's something we keep doing it. But I think as we start seeing -- keep in mind even from an employee point of view, in order to motivate employees to run out on the market, improve their productivity, we do incentivize them [indiscernible] drive is still [indiscernible]. But that's something we keep doing it. I'm sure this strategy will ever be -- always ever evolving and nothing is onetime we have to do it. This anyway is a continuous process. We also ran another segment-wise distribution partners, which we call the Privilege Club, something, again, we keep driving it in order to help them improve their overall ranking and whatever we can do in terms of various activities that we undertake. That remains one of our focus area.