Anand Rathi Wealth Limited (ANANDRATHI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the quarter 3 and 9 months ended FY '25 earnings conference call hosted by Anand Rathi Wealth Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Feroze Azeez, Deputy CEO of Anand Rathi Wealth Limited. Thank you, and over to you, sir.

Thank you, madam. Good afternoon, everyone, for joining us in the earnings call -- conference call for the quarter and 9 months ending 31st December 2024. We are all joined with our Group CFO, Jugal Mantri; Product and Research Head, Mr. Shenoy -- Chethan Shenoy; CFO, [indiscernible] Rajesh Bhutara; Head Investor Relationships -- Relations, Mr. Vishal Sanghavi. Let me give you a quick highlight of the company's performance during the 9 months of FY '24. Our consolidated total revenues grew by about 33% year-on-year to INR 739 crores, and our profit after tax increased by 34% year-on-year to INR 227 crores. We have achieved 75% of our revised revenue guidance as well of INR 980 crores on the revenue side and 77% of our revised PAT guidance of INR 295 crores in the first 9 months of FY '25. Total AUM grew by about 39% year-on-year to INR 76,402 crores. In alignment with our policy of rewarding shareholders, the company has declared a bonus share in the ratio of 1:1. We have recorded highest-ever quarterly net flows during the last quarter in spite of sentiments not being the best. During 9 months FY '25, our total net flows registered a remarkable year-on-year growth of 69%, reaching INR 9,145 crores. Equity mutual fund net flows achieved year-on-year growth of about 51% to INR 5,831 crores. Share of equity mutual funds in AUM increased to 55% as of December compared to 52% last December. We believe that our company's performance is consistent and market agnostic, and numbers say so. If you look at the worst Nifty performance after we got listed, was quarter 1 FY '23, where Nifty fell 9.6%. And last quarter, Nifty fell 8.4%. However, for both the quarters, our profit grew by more than 33% on a year-on-year basis. The mean of the year-on-year growth of our last 11 quarters has been 33.8%. That's the mean quarterly year-on-year growth we have shown. The median is 34%, which implies that we've almost produced a normal distributed curve. And the standard deviation of the growth number, which I'm sure is something very unique -- most companies don't compute this. We are very positive by trying to keep consistency as one of the attributes for our shareholders' benefit. And the standard deviation is as little as 4.3%. So our quarterly results growth on a year-on-year basis mean is 33.8%, median is 34%, and the standard deviation is 4.3%. I'm trying to emphasize this a little more because with the limited articulation skills I possess, I wanted to make sure that it gets registered in the listeners' mind. In our flagship Private Wealth business, the first 9 months of FY '25, we added 1,515 new client families on a net basis, bringing our total number of client families to 11,426. Client attrition rate in terms of AUM lost for the 9-month period was as little as 0.28%. Ideally, this client attrition number, we would like to see it as 0 because every human being should be satisfied with our services. That's an aspiration which we will try to always aim for. But nevertheless, 0.28% is a smaller number related to what industry sees. We have added 61 new relationship managers on net basis over the past 12 months, bringing our total RM count to 383. In the last quarter, we have achieved near 0 regret RM attrition. We have lost one RM who has -- who had an AUM greater than INR 40 crores, which we call as regret attrition. So over the last 6 quarters, this is the first attrition. So 5 previous quarters, we had 0 regret RM attrition. And the last quarter, we had one RM left who had greater than INR 40 crores of assets, which we think is the threshold to cross the bridge of wealth management. Digital Wealth business, which is a B2B2C platform, registered an AUM growth of 23% year-on-year to INR 1,827 crores. The number of clients increased 24% to 5,772. The OFA business, Omni Financial Advisors business, which is abbreviated as OFA, which is a SaaS platform, has 6,273 subscribers, which -- with platform assets of INR 1.4 lakh crores at the end of 9 months FY '25. Now I would love to hand over the call to Jugal sir, who's our Group CFO, to take us through the financial performance. Jugal sir, it will be great if the audience could hear you.

Thank you very much, Feroze bhai. Good afternoon to everyone, and wish you all the first festival of the new calendar year, happy Makar Sankranti, happy Pongal, happy [ Lungi ] to all you. First, I will speak about Q3 FY '25 consolidated financial performance. Our consolidated total revenue for the Q3 FY '25 stood at INR 244 crores compared to INR 187 crores in Q3 FY '24, registering a healthy growth of 30% Y-o-Y. Trail revenue was INR 109 crores in Q3, registering a strong Y-o-Y growth of 52% from INR 72 crores in last year's same quarter. Our profit after tax stood at INR 77 crores, registering a 33% Y-o-Y growth compared to INR 58 crores in Q3 FY '24. Profit after tax margin for Q3 FY '25 was at 31.7% as compared to 31% for Q3 FY '24. Now I will take you all through, first, our first 9 months of FY '25 financial performance. The revenue for 9 months FY '25 stood at INR 739 crores compared to INR 555 crores in 9-month FY '24, registering a 33% Y-o-Y growth. Mutual fund distribution revenue, which is the trail revenue, registered a strong growth of 63% Y-o-Y to INR 303 crores in 9 months FY '25. Profit after tax also grew by 34% Y-o-Y to INR 227 crores for 9 months FY '25 compared to INR 169 crores for 9 months FY '24. Profit after tax margin was 30.7% for 9 months FY '25, improved from 30.5% for 9 months FY '24. Return on equity on an annualized basis stood at 44.8% for 9 months FY '25. This is all on the financial performance front. Over to you, Sevel, for the next session of question and answer.

[Operator Instructions] The first question is from the line of Bhavin Pande from Athena Investments.

Am I audible?

Yes, sir.

Congratulations, team, on a wonderful set of performance. Happy New Year and the greetings of Makar Sankranti to our entire team at Anand Rathi. My first question was around operating margins. We can see that at least for the past few quarters, our operating margins have been highest. So the term that we all are looking for a few quarters back, operating leverage, has it started kicking in somehow?

Yes. Bhavin, thank you for your question. See, of course, there's some degree of operating leverage which has kicked in. But we, as a business, believe that we have a target of 40%, 41% of PBT. If operating leverage kicks in, we are going to reinvest that to ensure that this kind of growth, which we have shown for the last 13 quarters after getting listed, or probably 14 years since we have started this business, continues for the longest period of time. So to answer your pointed question, as a shareholder, you expecting a larger operating leverage is not something I would like to create as an expectation for you because we are still scratching the surface in this business. And we believe in a life cycle of a business, in the initial part, you reinvest to make sure there's longevity to growth rather than efficiency in terms of operating margins. That's the answer, Bhavin. I'm very diplomatically trying to answer because I don't want you to create an expectation of operating leverage in spite of having seen it for the last 1 or 2 quarters.

No, no, I'm just trying to get a brief perspective. Second thing, Feroze, on the macro front, all the high-frequency indicators are sort of manifesting themselves into a delayed rate cut cycle, which brings me to our structured product where one of the ideal scenarios is high interest rates, which, in my opinion, might prevail for a while. So how are we looking at that?

Okay, higher interest rates. Okay. Perfect. So first is, see, from a structured product standpoint, if you have to -- unfortunately, I have to get a little technical. See, what happens is in a structured product, firstly, the NBFC, which is our sister company, which is Anand Rathi Global Finance, does not borrow at aggressive rates at all. The implied cost of borrowing in those products are going to be very low. Because why am I calling it the implied cost? Because if there's optionality, a person can't just optically decipher what's the borrowing cost. The implied borrowing cost could be with a spread of not more than 1% with the G-Sec of the corresponding period. If that's the kind of low margins vis-à-vis G-Sec, NBFC borrows that because the money has to be kept safe, so there's hardly any headroom for a reduction in interest rates. Having said which, when you actually embed a derivative, there is some degree of neutrality to interest rates. What happens is the derivatives are priced as per the row of the derivative, by which I mean the carry cost also comes down. So if interest rates come down in the structured products which we design, which are put spread sell, and it's -- that's how you expect the long position in the derivative side, which the cost of carry also comes down. In fact, if the repo rate comes down, the cost of carry, which is nothing but the roll cost of the futures or the synthetic futures market, reduces. So let's assume -- if I have to try and make it a little bit more simpler, if there is an interest rate reduction of 1% on the NBFC side, if at all, which is not -- which is hypothetical, then the row, which is nothing but the 1% reduction of the carry cost, also comes down. So there is a reasonable amount of neutrality between the row of the derivatives and the interest rates of the NBFC, which are there in the product. Let's say, repo rate [ comes down ]. Now if repo is at 6.5%, and it was 4.5% on 3rd April 2020, after COVID, it was brought down. From there on, roll costs would be higher because the repo is higher. So in fact, this is a very good news. If repos are brought down, 10-year G-Sec isn't going to move down because today, the 10 years -- India has seen the flattest yield curve in the history of at least me being born. So the point I'm trying to get to is a reduction in interest rate could -- may not reduce the interest rate -- borrowing cost but can definitely reduce the roll cost.

Okay, okay. And so also flows numbers, they have defied the odds to a larger extent. So how do we look at the contribution? Is it more of an increase to wallet share from existing customers? Or new families have also contributed equally?

In fact, both, sir. If I have to answer your question -- see, let me not answer it in the typical way an analyst is given an answer. I'm just going to tell you conceptually what happens is bad markets make us look better because we run a model portfolio, which has a beta of nothing greater than 0.6, 0.65 with Nifty. Whereas people in good times also [ planned ] several aggressive strategies. When the tide turns, then the risk fructifies. So point I'm trying to make is bad quarters collection is generally given -- when there is a headwind in the industry, I get a tailwind because somebody's win is somebody's loss. That's how you distinguish between a good and a bad adviser. And if you go to the first quarter of this financial year, nobody optically, if you showed them 5 statements, nobody would be able to decipher who was the best. But in a quarter like last quarter, risk-adjusted return is apparent to naked eye. So bad quarters help us similarly to what happened about 4, 5 quarters back when the markets were bad. Now coming to, is this penetration or new clients? In fact, we tried to increase our threshold of onboarding a client. We were first okay to accept INR 50 lakhs. Now we accept only INR 1 crore, at least for new clients whom we add. In spite of that, we started seeing that people are ready to give us larger money than we were hesitant to ask them. So that has created some degree of [indiscernible] and, I think, wallet share increase. And the mathematical way we are trying to establish, for example, if someone were to come and tell me, why do I do mutual funds with you? I take his 10-year transactions and show them. If you just follow my model portfolio, which is audited by one of the big 4s and also in the public domain, if you followed how richer or how poorer would he be. That's why in spite of giving no discounts, we have been able to collect INR 800 crores, INR 900 crores in equity mutual funds for the last quarter. And that should continue. I'm sure that's what you want to know. And I think it will get forced -- it will increase, the rate at which it increases. So the acceleration will be higher, not just velocity.

The next question is from the line of Nemin Doshi from Geojit BMS.

Congratulations on a great set of numbers. Firstly, I just wanted to get some idea as to how are we seeing our SIP flows increasing from a quarter-on-quarter basis. How has this trend been shaping for the current quarter as to are we seeing any redemption pressure? Or there has been an increase in wallet share as you mentioned? So how are we seeing trends over there? And secondly, with respect to our Digital Wealth platform, what are the various initiatives which would be driving this business ahead for us?

So when it comes to trend, okay, we try -- in our business, we try to make sure that we're not trend dependent, firstly, because we're speaking to the same 11,467 families. We first spend a couple of years for them to think like us. So we keep designing their mind to long term, to preparing them to fall. See, if I try and prepare a person for a fall when the fall is happening, I will be -- it will look like a justification. So we prepare them, and we take the check. That stands us apart. When I'm taking a check of INR 10 crores, I'll tell him sir, [Foreign Language]. This is how we try and prepare them before the fall. So coming back to the most important question that you asked, how do we see this trend? We see the trend -- we're putting an effort for a 30%, 40% growth in net mobilization rate. So if we have collected INR 3,500 crores this quarter, just -- I'm just simply rounding it off, I would like to see INR 4,500 crores, INR 5,000 crores for the same quarter next year, at least. When I model my business to get to INR 2 lakh crores, I will model only 10% to 12% increase in the net mob. But am I preparing for a 50% increase net mob every year for the next 3 years at least? The answer is yes. Will I achieve that? Only God knows. Will the effort be there? I'm sure so.

The next question is from the line of [ Krishna Ragavan ] who is an individual investor.

Feroze, we have a substantial investment in your stock, close to 6 digits. I don't mind holding it forever, but of late, when I look at the valuations, it's significantly higher compared to an HDFC AMC or a 360 ONE. So I'm a little tempted to keep looking at it very often. So I'm just trying to understand, are these deep valuations justified?

See, I -- see, market gives you valuation. When I was at 13p, some analysts told me that I'm very expensive. Now when I have 13p more than the next -- second best in terms of valuation, I'm still expensive. If I have to now -- let me -- Mr. [ Krishna ], let me answer this question, not as a part of the company but as a shareholder. See, I personally think markets always discount future and not present. So there are 4, 5 things which stand us apart. In fact, there was one report which came last week, which was comparing 12, 13 businesses across wealth management, asset management, India -- in India and globally. One thing which I was happy to note on the 2 X- and the Y-axis, Anand Rathi stood out. ROE was the highest out of those 12, 14 businesses which were listed on that graph. And PEG, PEG which is P/E to the -- per unit of growth, how much P/E are you paying, it was 0.8 in that report. It was one of the reports, [indiscernible]. So I don't know. That's -- so what I'm trying to get to is, [ Krishna ], one is P/E. If you look at PEG, I look at PEG as a shareholder. PEG is less than 1, which I think is okay. But from a more business standpoint, there are 3, 4 things which stand out. Attrition in a people's business being near 0 is something so unique. So whatever P/E you want to attack, the market wants to attack, it is okay. But people say, I'm a people's business. So in a people's business, if people don't leave you, if somebody is tempting you with them with 100% rise, there must be some reason why they won't leave because the client gets the best risk-adjusted return, right? We -- if you measure the Sharpe ratio of my client for the last 10 years, take the top 100, I would be reasonably confident with the significant levels of upwards of 90% that there would be very few Sharpe ratios on wealth management industry, which will beat my average of the top 100 vis-à-vis any other wealth managers' top 100 clients. So that's why attrition is low. That stands out. I'm just trying to highlight. No new product launch, okay? We have not launched a new product. Like we've done the same old [ beta ] product, 1,000 times, 1,500 times, the same structured product. So no newness and business continuity is something unique. Generally, even if somebody is manufacturing cars, he launches a new car, and then the revenues go up. Mundane same products, trying to put the business on autopilot stands unique. Does it deserve any incremental premium valuation? I don't know. Only market knows and you know. The third is consistency. It's something which is so unique, I think, because I was looking at how results of other companies swing between plus 30% and minus 10% and plus 20%. We have delivered mean, median of 33% and 34% for 11 quarters, which if you did for the NSE 500 companies, which we are a part of, you'll be surprised how many fingers would you need to count that kind of low volatility in growth numbers. That's one. Agnostic market results, most people I speak to in the industry say, [Foreign Language]. So we're giving agnostic -- market-agnostic results is unique for a financial services business. That's why our stock has delivered a point [indiscernible] from the date of listing, with Nifty, the stock has given 0.42 beta -- how much, Vishal?

Yes, 0.42.

From the date of listing with Nifty, the stock has given 0.42 beta because it's a little more market agnostic. These are some of the reasons which make me feel happy about. Does it justify any premium, maybe discount? I don't know. But I can just tell you as a shareholder, what I feel unique in this business. If I have added a few lakh crore shares after it has got listed, this is what I saw.

The next question is from the line of [ Manan Ashar ] from [ GrowthWheel Ventures ]

Congrats for a great set of numbers. Sir, I just had 2 questions. The first one was from the passive fund industry perspective, right? So when we see the passive fund as an industry, how is the industry currently basically shaping up? Because when we are seeing a kind of efficient market in terms -- see, everything is getting priced in, and there's lot of efforts which is basically pushed from analyst side. So how do you think the active versus passive fund industry will compete and how the industry will shape up in the future going forward from here basically in terms of competition against active mutual funds and active products that we provide to our HNI families?

So I personally think the trend from an industry standpoint is clear that the ratio of passive will go up. So the ratio of passive, if you are asking about smart beta strategy, some people will get rap on the knuckles for smart beta strategies because everybody has back-tested them. Nobody has used Monte Carlo simulation to front-test it. And I have tested some beta strategies -- smart beta strategies using a simulator. So point is, will the industry gravitate towards passive? The answer is yes, because most of my competitors believe in low-cost, low-value strategy, right? I -- so -- but let me now come to Anand Rathi Wealth Limited. We don't do anything which is trend based. I've not sold an NFO. I have not sold any other product than mutual fund and structured products. That was not the trend. I've never touched an unlisted stock. You will not find one direct core client of mine. You will not find ETFs more than 0.2% or 0.3% [Foreign Language]. So Anand Rathi Wealth and industry may not match. So as a shareholder, I'm just giving you my disclaimer. If you're trying to derive Anand Rathi Wealth margin, business, strategy, product offering, client benefit from the market trend, you may -- history has proven that they may not be matching. So that's one thing. So the industry will move towards passive because quite a few people don't want to spend energy in just talking too much and taking what comes their way. I personally think last 2 years, okay, if you look at passive, 80% of the AUM is between Nifty and Sensex. Let's assume all the money in passive, which is about 200-odd funds, all of it belongs to one human being. And all the money which is there in 431 active funds belong to one human being. Who did better? You'd be surprised active did better because AUMs of passives are not in NSE 500. NSE 500 is an academic index because the smaller stock will never be able to absorb all the INR 50 lakh crores of AUM, which will grow into equity. So to answer your pointed question, you will see more passive in the industry. You will see no passive in Anand Rathi till data emerges that my client will be benefited either with a reduced risk or an increased risk.

Okay. Sir, but from the industry standpoint, so when we see U.S., the -- basically bifurcation of active versus passive is approximately 60-40. And in India, it's still 85-15. So how do you see the numbers panning out going forward? Do you have any internal estimates? Or how do you see -- or how do you envisage the industry of active versus passive in terms of your products or in terms of industry as a whole?

See, I personally think U.S. has 2 things which are very unique. One is U.S. throws up more standard deviation than India. I'll tell you why in my opinion. But coming back, U.S. has become a market -- valuation-agnostic market practically because if you go passive, passive respects momentum. That's how indices are created. The top 5 stocks of either Nasdaq, S&P or Dow Jones, you will see -- because if there's index fund investing, there's more money coming in. If there's more money coming in, there's more valuation. If there's more valuation, there's more weightage. If there's more weightage, there's more money coming in. So it's like that [Foreign Language], right? You've tightened that. That's how it is. So valuation-agnostic market is what U.S. has turned out to become. So passive has this collateral damage to a capital market that valuation and business models will have lesser respect, momentum, and price will have more respect. That's one thing which stands apart. Second, if you ask me the ratio, India will get there. But if you -- it will be ironical, and I'll be saddened if India got through those ratios because a passive fund guy will buy whichever stock has the maximum weightage irrespective whether the price at 100p or 2p, right? And I'll be saddened if we go the U.S. way in Indian equity markets. Now coming to the point of why India is throwing up. People say India, the volatilities are there. [indiscernible] as a derivative person, that volatility in India is lower. If you go from 22nd March 2020, which is when NSE declared -- brought in a circular, which limited shorting in India, I think, because there are quite a few financial services professionals here, I'm just trying to bring your attention to one of the most important circulars. After that, S&P 500 has thrown up 18.6% standard deviation on a daily basis, and Nifty has grown up 18% standard deviation. In spite of S&P 500 representing 50% of world's market cap, throwing up a more standard deviation than Nifty, which is 4% of world's market cap, is because of that circular, which is -- which ideally was day -- 1 day before the lockdown. I'm just trying to create curiosity [indiscernible] circular up. You can't short more than INR 500 crores in Indian market. So I'm very positive about Indian markets because it's a more investor-friendly market than a speculator friendly. In real estate, you can't short. Why should equity, which is another growth asset, have unlimited shorting capability? That's why somebody today, any of us have INR 4 lakh in our account, and I want to buy a Thursday put option, the last one, which is INR 1, you will not be permitted to spend more than INR 2.5 lakhs of premium on buying that because you will beat the INR 500 crore notional, Nifty being at 23,000. So coming back to your pointed question, I see passive happening. But I think Indian markets are going to be very different. They're going to be different because of this circular becoming tightened from 1st of April. And if the circular was supposed to be withdrawn, I wouldn't bore the group with that circular being highlighted. But on 1st of April, this will become an intraday circular from a [ daily circular ], which will make that market more stable.

Got it. Sir, one of the discount broking houses have recently entered into passive funds and are aggressively distributing as well. Those guys also basically got a significant AUM are going towards [ E&C ]. How do you see the competition shaping up from that direction because those guys have already figured out the distribution side of the products?

See, I think we -- I'm not too worried about competition because if it is good for my client, I will embrace it. And I know how to, as a business, add enough value in a business where the best and the worst equity fund has a performance difference for last calendar year, if I'm not wrong, 42%, whereas say [ dispersed universe name ], which has an 8% [indiscernible]. So I think even if I go passive, I'll be able to charge that from the client. So it doesn't bother me. But competition definitely makes us become more mathematical. And because if I have to say no to passive, I need to have a story of mathematics rather than English. So if you see why did INR 800 crores get collected when passive is taking most of the share? Now if you see sectorial funds took the maximum share last year. If you look at INR 15,000 crores, INR 16,000 crores of sectorial inflows in the last month of December AMFI number sales, I'm not doing sectorial. I didn't do NFOs, but I still sold something as mundane as the same 14 schemes to everybody and that to reach people who don't like standardizations because it makes them feel like they're not as big as they are.

Got it, sir. Okay. You said you are not very worried about the competition coming from that trend.

I'm [indiscernible] so that I can get a little more mathematical than I am today.

The next question is from the line of Lalit Deo from Equirus Securities.

Congrats on a good set of numbers. So sir, just 2, 3 questions. So one is the data keeping. So firstly, in this quarter, like what were the flows both primary and secondary in our structured products? Second, sir, given the market conditions, when the markets look weak, then how do we see the mobilization on both the brands? Like while equity -- the flows in equity are not so great, how do you see the flows in the structured products in the next 1 year over, sir?

So firstly, Jugal sir will be the best person to answer.

So as far as concerned with the mobilization of the -- in the primary issuances, this quarter, there was INR 1,347 crores were mobilized in non-principal protected structured product, which was like last year comparable, it was INR 1,231 crores. And as far as concerned with the secondary structured products, it was INR 589 crores in Q3 FY '25 compared to INR 427 crores Y-o-Y. And if you look at the 9 months number, then it was INR 4,630 crores primary against about INR 4,000 crores in 9 months. And secondary was about INR 1,546 crores against INR 960 crores.

Sure, sir.

Mr. Lalit, does that answer your question?

Yes. And the second question was on the flow side in the structured products. Like over the next 12 months, like how should we see given the markets behaving?

Okay. Shall I answer this, Jugal sir, or you want to take it?

No, you can continue.

Sir, I missed your name. I'm so sorry.

Mr. Lalit.

Lalit. So the flows will be good, owing to the fact that quite a few analysts were worried last year, saying that [Foreign Language]. So next year, again, since we have moved from 3-year to 5-year in the year, August 2020, if I'm not wrong, so this was a lull year of maturities. So next year, again, those maturities start happening. So if you look at my gross mobilization, which is maturity plus my new clients, new business and some degree of realignment, all 3 buckets can fire last year, but of the year, which we are sitting in, which we have 9 months gone by. So I think next financial year, I'm more positive because all the 3 cylinders can fire. This year, the main cylinder was not there, but still, God was very kind, so we've got some growth numbers which we had projected and realigned. Now come to the second part is that we are adding more clients with a larger size. So when you add a new client with INR 50 lakhs, because INR 1 crore was the minimum for -- is the minimum for structured products, the new clients couldn't subscribe to structured products, so they were underlying portfolios. After we said that we want INR 1 crore, people have started giving us INR 2 crores, INR 2.5 crores. So new clients also now have the capability with our little push of minimum thresholds being higher to begin with structured products. So my 3 cylinders, new clients, structured product purchase, maturity and some degree of realignment, all have headroom. I really pray to the Lord that whatever guidance we end up giving in the next quarter, we are able to again live up to that DNA which we have, undercommit, overdeliver.

And what Feroze that you have said that we have been like -- it is based on the advice normally, what happens that it is targeted that the client should hold between 25% to 30% of their AUM into market-linked debentures. So as long as we are confident in the AUM growth, this will have the consequential similar positive impact on the mobilization of MLDs.

Absolutely. Thanks, Jugalji. This is the main point actually. The subpoint is what I spoke of, 3.

Right. And sir, first I just wanted to have some of that color on the equity MF flows. So like in this quarter, we have -- like on a sequential basis, we have done very well. So just wanted to understand like how should we look at this net flows in the equity mutual fund over the next 1 year as well?

Our net flows, so you would see some degree of staticness in our net flows. So in the sense, if we are collecting INR 800 crores, last quarter -- how much did we collect equity flows?

INR 2,700 crores.

INR 2,700 crores or INR 850 crores, INR 900 crores, right. So will that be the rate at which we will collect the money? Yes, because we have promised people -- not promise, promise is a very strong word. We've indicated that our aspiration is to take our market share to 4% in the total AUM. For me to have a market share of 4%, there are 2 things which influence market share. I should collect at the rate greater than the industry's rate of collection, and my model portfolio should perform better than the average performance of equity mutual funds, right? So if you see our model portfolio of 14 schemes has beaten Nifty by about 7.5%, 8% till day before yesterday in this financial year in absolute terms. So that gives me more market share in AUM. So to answer your pointed question, will the thrust continue? The answer is yes, because we have tried to have a desire to get to 4% market share in the next few years in Indian mutual fund category 3 as per AMFI.

The next question is from the line of Srinath Sridhar from Insight Financial Services (sic) [ Infinite Financial Services ].

So when you mean by take your market share to 4%, so currently, it's around INR 42,000 crores. So out of the INR 30 lakh crore equity mutual fund basket, so it's around 1.4%, right? So by when do you target to achieve a 4%?

Mr. Sridhar, I think you have got the old number. Currently, our mutual fund AUM is about INR 46,000 crores. To be precise, it is INR 45,875 crores. Out of this, INR 41,738 crores is in equity mutual fund.

Right. So -- but overall, industry is around INR 30 lakh crores, right?

Yes. Basically of the active, so category 3 mutual funds [ precisely ]. So irrespective, so whatever we -- of course, it's a very uphill task. We are only 383 people, and there are lakhs of people in the [ ARN ], right? So it is 1 [ ARN ] with 383 current representatives. We're in the private banking business. But I think what is happening is people are -- at least in our industry, are moving their monies to AIFs, long-only. But we are speaking to mutual funds. As of now, our market share is 3.37% -- 1.37%, sorry, 1.37%. How much was it? It was 1.29%, right? So it will be a sticky number. A couple of years back, it was 1%, 1.01%. So I don't know, it might take a decade. It might 1.5 decades. It might take 5 years, but yes, that kind of period. I don't know, but that's the aspiration. So first, to get that, I really need to have a -- my market share in net flow is 4.8%. So can the AUM [Foreign Language]? If industry is collecting 100, should I at least start collecting 4, 5? That's what we -- first step was that. So don't know, sir, 15 years, 10 years, but that's our aspiration.

Great. Sir, my other question is on the MF trail, so you made around 0.74% last year -- in the 9 months in the last year. And it's around 0.88% this year. So how -- can you just explain that increase in MF trail in the current year? Is it just due to the increase in market -- market's gone up, so AUM has gone up? Or is it -- have we moved our model portfolio to smaller AMCs where the trail is higher?

No, sir, we don't do anything. No, smaller AMCs are smaller schemes because it is at scheme level still. There was a circular last December, but that didn't get implemented. So trails are -- our expenses are scheme dependent, not even AMC dependent, point one. Point two, you are -- you might be dividing my model portfolio for these schemes. I can tell you as transparently as it could get, 1.09% post GST is my trail. If I brought in INR 1 crore, I earn INR 1,09,000 post GST in a year if there was no market movement up or down. Now what you are maybe calculating my yield is on the basis of the year-end of the quarter, year-end number. And those trails are calculated on average assets. So that's our -- 1.09% is what is our trail. If you -- that's the stated trail. Of course, markets could move up and down and some degree of, pardon me, for a tolerance of [ this way, that way ].

The next question is from the line of [ Nihal Devi ] from IIFL Capital. [Operator Instructions]

Yes. Sorry about that. Good afternoon, everyone...

Sorry to interrupt, sir. Your voice is very less. I would request you to please use your handset.

Yes. Is this better?

Yes, sir, please go ahead.

Okay. Yes. So my question, and apologies if it's already been asked, my audio was a bit spotty so I may have missed it. So what is the gross inflows into structured products for the 9 months and this quarter?

Jugal sir?

9 months, we have shared with you, it was INR 4,630 crores in primary compared to INR 3,994 last year. And for the quarter, it was INR 1,347 crores compared to INR 1,231 crores last year in primaries.

[Operator Instructions] The next question is from the line of [ Arman ] from Bluesky Capital.

Just a simple question to Feroze is something which you emphasized, I guess, and never been answered, more color have never been put on, is that standard deviation part which you told, which is quite exceptional. If I see just the 5-year standard deviation of Nifty itself is around 18% to 19%. And you said about their mean to standard deviation is just around 4.3%. So what does make us so exceptionally outperforming in this kind of that we can give a consistent return with such a low standard deviation? What does make us that we consistently deliver quarter after quarter for 13 quarters in spite market volatility, in spite Nifty moving here and there, we consistently deliver this kind of standard deviation?

So let me clarify again. So I think -- sir, I missed your name.

[ Arman ].

[ Arman ], so when you look at any number -- any variable, you can calculate the standard deviation for, okay? Nifty has a standard deviation, like you rightly said. It has thrown up a daily standard deviation of 18%. And clients' portfolio standard deviation is a separate topic. That's not what I alluded to, if at all. I was misunderstood, if at all. I'm just [ give ] -- now coming to the quarterly results, which we have given -- can you just help me show that results? So we could -- so first 2 quarters was a COVID base, so we ignored those COVID bases and tried to see how much have we grown year-on-year for a quarter, okay? And there, you would see that we sometimes grew 31%, sometimes 32%, 33%. The worst one I could see was -- I'll just try and explain it to him. Bear with me. This one, right? Forgot it. So when I say that 4.3% is the standard deviation, it is a standard deviation of these numbers, which I'm now going to read out. Quarter 4 FY '23, we grew by the worst after we got listed, which was 23.4% year-on-year growth for that quarter, okay? Like that, if I look at all the quarters like Q1 FY '24, we grew by 34%. Q2 FY '24, we grew by 34.3%. So if I look at all these quarterly growth, 11 data points are very few in a listed company's life. As time progresses, this has become more meaningful data. So we have grown 33%, average 33.8%; median is 34%. And this 4.3% is nothing but the standard deviation of these 11 data points, right? I'm just trying to make sure that nobody misunderstands me. That -- so does it answer -- why are we able to do that? Now I'll answer your question.

Yes, sir. Yes, sir. Yes, sir. That was very clear. That's why I'm telling because in this 11 or 12 quarters or 13 quarters, which is the data which you are telling about, this is -- if we see just Nifty or maybe any of the listed companies' return which are into the same business, that will be -- I'm sure a few of the companies I have read there, more than 15%. So that's what makes us exceptional. So what we are doing exceptionally well in spite doing the same work which everyone else is doing?

See, everybody has their uniqueness in their own right, okay? Right or wrong, okay? I would -- so now let me tell you why. There are 2 things. One is this business has a huge advantage, that I'm speaking to the same 11,467 people quarter-on-quarter. If I was selling a commodity, which was hard -- whether it is a physical commodity, phones, cars, I would be speaking about 11,000 different customers every year, every quarter. So that's one huge benefit in this business. Now you capitalize on that benefit is a separate story. Second, if you adopt a portfolio approach, not a product approach, then, like Jugal sir has said, it's an allocation, right? I don't have to resell the same thing. If a person has decided to put 65% in equity mutual fund, 35% in structured, I don't have to again every month go and reinforce that, right? A client I have whom I am a relationship manager myself, I manage about 19 clients as a relationship manager, apart from whatever else I do in the company. I don't have to even have a conversation with them. There's a maturity, it gets reinvested. So if I was going to build this business on [Foreign Language], then I have to explain him on a hard point some time, I have to sell him a mine fund sometimes, which I did in ABN AMRO unfortunately. So this business has been built on portfolio-level management rather than product-level innovation. So that is the key reason why. Same set of people, convince them on a portfolio allocation and then just manage it. You don't have to resell the same thing. That's one of the key reasons or the only reason. And then you don't have a leaking bucket, right? You don't do RM attrition, then clients will not leave. Client attrition is 0.28%. RM attrition in 1.5 years, 1 person. That also is a cleansing. I'll not get into that. But people have to fit into my culture. If they don't fit into my culture, then I would let them go irrespective as a company, not as in a Feroze in my [ sound form ] because I would let them go, I mean, ARWL, whom I'm speaking for. If there's no cultural fitment, commercial attractiveness, doesn't [ lever ] us at all, right? So these are some of the reasons. No leaking bucket and portfolio-level management to the same set of people, you don't have to remarket. If I'm launching 1 structured product for the 2,000th time, do I have to explain again in the futures? The collateral benefit of the marketing to the same person or the [ fourth maturity, fourth maturity with 30 seconds less. 30 seconds, we e-mail, collect it ]. So I'm trying to cascade the marketing benefit by not being overly innovative at the product level. Hope you captured the essence. I know long-ish kind of answer.

[ Arman ], does that answer your question?

Yes, yes.

The next question is from the line of Sunil Shah from SRE PMS.

Congratulations, Feroze, and the entire team at Anand Rathi for a wonderful performance. Great, good to almost hear you on a quarterly basis on the minimum side. Feroze, one data point that you shared, which was minus 4.3% standard deviation, which is about the profitability growth rate. That's really very, very impressive and as my previous colleague also shared, so that's really very, very important thing to know. And we always want to ask for more. So perhaps we could also do a study on the net profit margin as well and the standard deviation around it. So that would also be one more important message to communicate, that not only the growth rate is secured and positive but also the margin is pretty intact. Lastly, from a shareholder's point of view, the ROE ratio as well. So if the return on equity is also having a very low volatility, that also would help. We can also do the calculation at our end. Perhaps an exercise from your side on a quarterly basis would help us immensely. So a soft request on that. That was one point. Second is on the clients. We have almost close to 11,000-odd families or clients that we address to is what I understand. Is that correct?

Yes, sir.

Yes. Sir, so how about now tapping the global market? India has arrived, and we have done that. We have faced volatility, everything. The ticket size that we are now talking about, INR 1 crore, in the domestic market could be significantly higher in the global market. And we have a track record which is so phenomenal of [indiscernible] for clients. So any thoughts around that? Are we looking at that as a market for the next leg of growth? And anything that you could share with us?

So Sunil bhai, we have got a very large presence in terms -- in Dubai, okay, where we have a full-fledged repo office. And in the Board meeting concluded yesterday, it was proposed and decided that we are going to form a subsidiary in U.K. to kick-start and explore the wealth management opportunities there in U.K. So though it is going to take 6 to 9 months to have the subsidiary come up and it gets incorporated, but there is a plan that having successfully settled and come to a stage at Dubai, let us go out in other markets and explore the same. So the plans are already afoot for the same.

Sure. Sir -- Jugal sir, and also Feroze, now that the GIFT City windows also opened up to serve the global clients and where we can also save on the tax side, so anything there where we can have a PMS or an AIF which can then indirectly invest also in the mutual fund industry, meaning PMS or AIF? My guess is PMS can certainly do that to invest on behalf of the clients in the mutual fund industry, which will still further up our margin of 1.15%, 1.2% to slightly higher and save on taxes as well. So just a food for thought, just something to think upon or work on that direction. Or have we evaluated such an opportunity? Can I understand that better?

Yes. Sunil. So firstly, let me promise you that Vishalji has taken note of the analysis you have needed, and we will try and produce that on a quarterly basis or at least, Vishal sir, you know Sunil's...

Yes, certainly.

So we'll send that to you. Second, I think just a comment on the positive comments you gave. I think we deserve to give -- well, we are duty bound to try and be as consistent and predictable to a shareholder. That has always been our aspiration. So we're trying our best to keep this standard deviation low because, I think, equity investors got [indiscernible] of predictability on each year [indiscernible] returned 7% fixed, 2nd December. Equity, we've tried really best, and we promised -- one thing which I want to assure you is with our effort to bring in consistency is going to always supercede super normal growth in a few years, right? You can grow 70%, but it's okay, but you have to try and bring consistently. That's what, Rakesh sir, who is our professional guru has already guided us, saying that they are predictable. That's where it comes from. Coming to the ROE and margin bit. Margin, Rakesh sir says that he's not on the call, so let me articulate his mandate to me as one of his direct reports. [Foreign Language] There, we are not too worried about the volatility, but we are very much worried about the benchmark. And it's a company on that. Well, it's probably [ 44, 42 lakhs ]. But that's the key mandate, which is given to me. And I try my best to not disappoint my boss, which is Rakesh sir. So that I thought I should highlight. Definitely, this volatility numbers will be completed. Now coming to -- Jugal sir [Foreign Language]. Now coming to GIFT City. We have this litmus test, saying that [Foreign Language]. With that, so in the GIFT City thing, I'm talking to a couple of very, very good friends in the industry who run a couple of large asset management companies. And if they have an AIF license already there, I will not try and be so positive about having an Anand Rathi AIF license there. We have an AIF license, the normal AIF license, which we have so far not used it. But that's a backup product testing platform yet. So yes, sir, we'll [Foreign Language]. At a subsidiary level, those are also being explored. [Foreign Language]

Sure, sure. Great to hear that. Just my two cents on what we can do as investors or new people running the company to be better. That was the idea there, just food for thought.

The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services Limited.

Just one question on your -- if I divide your distribution of financial products revenue by the AUM of the non-PPSP AUM, right, the yield seems to be dropping consistently, okay? Now how do I look at this? And why is this decline?

Firstly, let's check the hypothesis, whether my yield is declining consistently. The hypothesis might not be true if you divide it by the average asset, not quarter-end asset because market has a [Foreign Language]. So AUM is a picture, one click, right, at the end of the quarter. Profit is a movie, right? So movie to movie compared to [Foreign Language]. So yields of our structured products, which have matured, if you calculate the yield, yield is always per annum. However, it's being recognized upfront later, all that. If I look at the yield of structured products which have matured at market value, it is 1.1617, and our mutual funds is 1.09, okay? Sometimes what happens is you bring a lot of raw material that could definitely be the reason. Sorry, I think highlight that. Now what happens is the client tells you, these are my mutual funds, these are my stocks, take them all. So I will do a change of broker, which will yield me nothing for the first 6 months. So my yield will drop on an overall AUM basis because I've brought in -- if I do a good job of transferring assets and establishing that I'm a better mutual fund distributor, that drops my yield unless it gets realigned. Just because I want him in the 14-scheme basket, I will not book his taxes. I would want to wait till it gets into long term sometimes. Sometimes, it's -- I will never do surgical cut, right? If somebody says, [Foreign Language]. So I will not earn nothing on that asset. So better my business, sometimes yield will drop. I'm just giving you an illustration, and that's the most practical illustration because quite a few clients of ours realize that we have one of the okay distributors in mutual funds and they transfer their broker codes, change of broker, as you call it. 6 months, you earn nothing. Does it answer, sir?

I'll come back to -- I'll come back and probably discuss it Vishal separately on this. Secondly, on the AUM bit of the structured products, how do you think about the growth there?

So it will be in the range of 25% to 35% of my total AUM. If market drops, mutual fund drops, certainly, it will show a larger number. Sometimes when market rises very sharply, it will show like a smaller number. Last year, FY '24 beginning May, we had 29%, 30% in structured products. Now it is lesser because the extent of mark-to-market on the long-only side is greater than in the structured. So it will range between 25% and 35%, depending on how the market performs. But in a client's portfolio, it's generally in the range of 30% to 35%.

Feroze bhai, I will add to what you said on yield. Mr. Jain, there are like -- as Feroze bhai has rightly said that as far as concerned with the yield on individual product, okay, there is no change which has happened. So fact of the life is that the yields which I'm earning, be it on equity, mutual fund or net mutual fund or on the market-linked debenture, the rates are -- in last 3 years, it has not moved more than, say, a few percentage points. But what happens that when your proportion of one asset class in overall AUM changes, that impact your overall average yield. So if you'll see the equity mutual fund, the mutual fund proportion, which has gone up from, say, 52% to 55%, okay, in the last 1 year, in my overall AUM, there you will find that because of this, there is a slight drop. And on top of it, the second point which Feroze bhai has already added, that you will have to consider the daily average balances of the mutual fund AUM. And if you calculate the yield, that will give a clear picture instead of taking only the period-ended number. So anyway, you are more than welcome to have a detailed discussion with Vishal on the yield computation front.

Okay, sir. Just again on that AUM bit of the structured products. So you mentioned about mix, right? But given the interest rate trajectory and scenario, would you say that this is a product which could give better returns in the case that the interest rates would decline? And resultantly, you would possibly want to grow this business at a pace which could be better -- or is it unrelated to the mutual fund business?

Mr. Jain, that is not the objective to this versus that. The overall solution, which as Feroze bhai has explained, I think -- Feroze bhai, you can repeat the same about the asset allocation, which we have been doing instead of focusing on a single product.

Yes. Mr. Jain, how we look at it, like Jugalji said, we don't do anything which is top down. If my client's objective is my only reason why I exist. If he has to deliver 14% return with 0.6 beta, whatever helps me achieve that is where I will be married to. Macroeconomic [Foreign Language]. Now coming to the point of how this works is if a person has a certain objective, 14% with lease risk, 13% with the lease standard deviation possible. 65-35 CAGR allocation, that will be the allocation. We will not take a single product and say, [Foreign Language]. So we have counseled -- we, in fact, Rakesh has sacked a person who had more allocation in his book for structured products, okay? I'm just telling you this. That's the cultural attribute. A few years back, he's found his RM was in the chucker of upfront income. He was selling more proportions to its clients of structured products. Mutual funds or structured products not sold as a combination for a portfolio objective is frowned upon internally.

Ladies and gentlemen, due to time constraints, we will take this as the last question. I now hand the conference over to Mr. Feroze for closing comments.

Yes. Thank you so much, everyone, to join us on this call and be patient with us. And we hope we tried to answer your questions. If you need more information, Vishal, sir, Sanghavi, our Investor Relations Head; and Rajesh, our group -- our CFO, are always there. And please reach out to us. We are duty bound to answer them to our best ability.

On behalf of Anand Rathi Wealth Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you, everyone.

Thank you. Wish you all happy 2025.