Computer Age Management Services Limited (543232) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Computer Age Management Services Limited Q4 FY '22 Earnings Conference Call. We have with us today on the call, Mr. Anuj Kumar, Managing Director; Mr. Ram Charan, CFO; Mr. Anish Sawlani, Head, Investor Relations. We request the participants to kindly refer to the safe harbor statement in the earnings presentation. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Kumar, Managing Director, for his opening remarks. Thank you, and over to you, sir.

Thank you, Inba, and good morning to all the participants. Thanks for taking the time out to join this earnings call. Like the format we presented in the past, we will take you through a presentation. And then maybe in about 20, 25 minutes, we would be done, and then we should have enough time for Q&A. Overall, as all of you know, FY '22 has been a strong year compared to the, I would say, reasonably lean performance that we saw in FY '21. FY '22 was a strong year across all key metrics, whether you see financial or operating metrics, investor interest in mutual funds, our product launches, our digital properties, et cetera. So we will kind of cover all of these aspects in the presentation, and I will begin. In terms of key highlights, the first one that I would like to mention is that Zerodha, as a potential asset manager, which is about to join the marketplace has opted to go with CAMS. Some of you may have noticed this in the exchange filing we made about a week or 10 days back. We haven't yet done an official press release. But just in terms of the future outlook, although it does take a new AMC a lot of time to build business, that's a very positive outcome for CAMS. The second is that we had announced to you earlier, and you would have seen it in the press that in order to strengthen our overall position in the alternatives market, we anyways have a very strong play going. We made a strategic acquisition in a fintech platform called Fintuple, which services both PMS and AIF operators. That has now got concluded in the month of April and CAMS authority in this company under the platform. On account aggregator, the CAMSFinserv account aggregator platform went live in 4Q of the year with 2 clients. We've had 10 new wins in the fourth quarter. These are largely in the area of brokerages, housing finance, fintechs, NBFCs and banks. One medium-sized bank has chosen to join our platform. Volumes are scaling up, not very rapidly. Some of the largest banks haven't yet joined in. There's been some delay there. But the very heartening piece of news is that SEBI has now officially confirmed that SEBI-governed entities will be joining the account aggregate architecture. That will happen in the coming months. So that broadens out the play from lending entities to capital market entities. And then, of course, our expectation is that both insurance and pension will follow just to complete that entire story. We've spoken about our NPS platform. I'm sure a lot of you would have joined the launch ceremony of the platform, which was inaugurated by the PFRDHM. Very pleased to share with you that the eNPS product, which is a direct-to-consumer electronic product bought directly, not off the payroll, went live sometime in March. In the month of April -- and I'm just talking of the first completed month, we are in the first week of May right now. We've achieved over 4% share. These are very early days, shares, absolute volumes, et cetera, will start making sense once we've delivered all of this for the first maybe 4 or 5 months. But just from a perspective of something which has gone live recently, we now have 4% share in eNPS registrations and the #2 CRA position only in eNPS. The government and PoP business is yet to start acquiring. The PoP business, hopefully, will start acquiring consumers by the end of this month, beginning of next. But in the eNPS part, we've seen a strong start. You would have read CAMSRep's new algo, new product variant on deep level contact tracing by throwing large amounts of investor data, including social media presence, et cetera, to trace untraceable policyholders who are due for receiving policy benefits but haven't got them yet. Unclaimed amounts continue to be a problem that every sector of the financial services industry is dealing with, insurance, especially because that is the only reason why people buy insurance. 5 large private sector life insurers have now joined and have subscribed to the solution, and we are expecting more to come in. This is overall accretive to the business and we are very hopeful that this very deeply intellectually imbued algorithmic way of doing tracing of customers who are otherwise not available will create ripples in the market and interest in the consumers. And then on CAMSPay, we launched UPI AutoPay and Insta NACH. It is an industry first from a mutual fund industry perspective. Mutual fund industry did not have these products. They've now gone live and showing very strong early results. So in summary, those were the 5 or 6 things that I wanted to call out across our various business lines. As we dive deeper, I will leave you with some data. And this data is about various segments of the mutual fund market, how we've done in terms of share of assets and share of sales. I mean if you condense this entire picture, it is about absolute asset momentum and growth in share. It's about absolute sales momentum and growth in share. And we will talk about these as much was the equity segment and then overall. Equity share growth, which is equity AUM, we grew by INR 3.37 lakh crores and just an unprecedented number, which we hadn't seen in previous years. This INR 3.37 lakh crores is actually the growth of equity assets from March of '21 to March of '22. If you take the rest of the market, this is about 183% of the overall rest of the market, the INR 3.37 lakh crore number. The rest of the market grew by about INR 1.8 lakh crores. Our share in industry equity assets, so you've seen our 70% market share, which is obviously in different asset classes has been different. In equity assets, this share has crept up 62.5% in March '21 to 65% in March '22. So that's about a 2.5% share gain in just pure equity assets during this time period. If I take you to gross sales, gross sales and net sales are both important. Gross sales, I think, represent a more primary metric than net sales because net sales balance out people who are exiting. This is about people who are coming in. In equity, 64% share in gross sales, INR 4.29 crores with the rest of the industry doing INR 2.40 crores. And in debt, this share was 77%. So 77% of all debt gross sales came to CAMS service funds, which is INR 6.19 lakh crores and INR 1.84 lakh crores done by the rest of the industry. All numbers are in lakh crore as far as AUM numbers are concerned. If we club everything together, we take overall gross sales, merging all the segments, 70% share. CAMS did INR 66 lakh crores of gross sales. The rest of the industry did INR 28 lakh crores. And this equity includes hybrid and arbitrage. These are standard definitions -- standard asset definitions and SEBI definitions, which play out here. On the NFO side, which you know was again after the hiatus, very strong momentum creating set of events in the industry, played out almost throughout the year, played out very intensely in August to December and then to some extent, in Jan to March. And of course, there is a small time period for which there will be no NFOs. Overall, CAMS industry did over INR 52,000 crores at 70% share. The rest of the industry did about INR 22,000 crores across asset classes. So overall, 70% in the equity NFO inflows. And in overall inflows for NFOs, this share was 65%. So whether you see overall gross sales, you see share of the equity assets expanding from 62.5% to 65%. You can see overall gross sales at 70% share. You can see equity NFO inflows, 70% share. If you take overall NFO inflows, that was 65%. Where are we in the client base? What are the clients doing? Top 5 AMCs by AUM constitute the account's clientele as of the quarter end. 10 of the top 15 AMCs constitute our clientele. And then interestingly, 4 of the top 5 AMCs based on equity assets, too. So we've discussed equity market share in various forums. Just wanted to be sure that some of that flavor on the share side, on industry rankings purely on equity and on the NFO collections comes out because that kind of rounds up the entire story. On transactions, which you know as participation increases, transaction counts increase in the industry. Just tracing through first quarter of the year to fourth quarter, we rose to a historic high of 115 million transactions, so INR 11.5 crores. This was INR 11 crores in the previous quarter, October, November, December, was just over INR 10 crores in the quarter before that, which is second quarter of the year, July, September and was INR 8.75 crores in the quarter before that. So you can consistently see, and you're aware that a lot of this is just SIP participation, is SIP market share and SIP volumes, all of which have gone through a very robust kicker in the last 6 to 8 months. So that's largely contributed 1Q total transactions at INR 8.75 lakh crores and then 11.5 in the fourth quarter. So within the year, transaction volume has gone up by almost INR 3 crore, INR 2.75 crores, which is, again, I don't recollect when the numbers looked so strong and so positive. On SIP registrations, and you have seen that SIP registrations have become a I would say, a more secular, a more steady foundational metric than something which reacts to every income cycle, every interest rate cycle, every change in the marketplace. Those numbers have been very, very heartening. CAM's new SIP registrations in FY '21 were just under 73 lakh. That has grown to 158 lakh. So that number has more than doubled from FY '21 to FY '22. Overall, if you see, 72.9% was a 52% share of the SIP registration market in FY '21. And the 158 lakh in FY '22 is a 59% share. So a 7% gain in share, 52% to 59%, and more than doubling of the volumes. Despite us having created a number of utilities where investors can stop, pause their SIPs and do various other things, the only one metric that you need to look at to see how steady the SIP collections market has been is towards the SIP collections themselves because there's no net or gross number there because that's just money which comes out of investor bank. And you've seeing almost INR 400 crores to INR 500 crores increment at industry level in the last maybe 3 to 4 months. So those are stable on-ground foundational metrics which I said, do not react to every change in marketplace and marketplace dynamics, which is good for the industry because that is a long-term decision of saving an investment which an investor has taken. And he knows that seasonality is a part of this entire movement. So let's move forward. Moving to digital. I think a fantastic story in digital. I'll talk about myCAMS first, which continues to remain the largest mobile app in the mutual fund arena in the country with 5 million registered users. Significant uptick in new people registering onto myCAMS. So 11 lakh new investors were added to myCAMS, 26% more than FY '21. So you can see that almost 20% of the 5 million -- a little more than that, 25% investors came only in one financial year. If you took the sigma of all digital transactions across CAMS service funds and then saw the traction of MCAM, that's 1/3, 1 out of 3 digital transactions for CAM Service funds is coming from myCAMS, which is very heartening. On MFCentral, which was built and put out in the market by CAMs and the other RTA, again, a strong journey forward. The mobile app version was launched and has seen over 40,000 downloads. The app is rated strongly of 4 in both the Play Store and the App Store, close to 2 lakh investor registrations, almost 2 lakh nonfinancial transactions, just short of 1 lakh cash downloads and average log-ins over 7,000, almost 7,500 a day. Now obviously, for a platform of this nature, we are expecting the log-in sessions will be several x times, will be 5 to 10x of this number over a period of time. But given the fact that we've been in the market in the last 3 or 4 months, that's very heartening. Financial transactions for investors will go live in the current quarter. Just go back. Overall, CAMS digital properties service an aggregate AUM of just short of INR 8 lakh crores. So if you took the entire picture, if I took approximately the aggregate AUM of INR 27 lakh crore, INR 8 lakh crore comes under the purview of CAMS digital properties, which is almost 30%, which is just a vindication of the increasing penetration of digital usage amongst consumers and the steady relevance and share gain of CAMS digital properties within that segment, I think it just mitigates those 2 things. The other thing that I want to talk to you about and which we've spoken often in both individual investor meetings, group meetings and in earnings calls is the behavior of the alternatives markets, especially AIF. In the last quarter or 2, we've cemented our position in this market as the domestic AIF services market leader. And I'm talking about hard metrics, and I'll tell you what hard and soft metrics are. But overall assets under administration of INR 1.4 lakh crore, we don't run like I've said to many of you, only stamp duty, only marginal service mandates. These are full service mandates. 15 new sustained wins in the last quarter in 4Q FY '22. Given the fact you know that while there are upwards of 800 AIF and PMS operations, the unique operators are perhaps under 300, which is that one entity could have multiple schemes. We continue to penetrate this market and make strong wins. On the digital onboarding side, which is a product we put out in the market in August, so it's been live for the last 7 to 8 months, over 30 funds have signed up for AIF and PMS digital onboarding with either CAMS or with F. We are aggressively wanting to scale this number to get to, let's say, 100 within the next 12 months. We also see that almost half the funds which are signing up for digital haven't yet signed up with us on the RTM services side, which is a very heartening route to market. We've opened a new route to this market, which means entities which are still not completely bought in on outsourcing of the RTM offering already coming in for the digital and creates a strong scope for us to win the other scope as it comes in. On gift service, the office is operational, like we had said in the last call, live with 4 clients. More and more expression of interest continues to come in from the market. And then like I said, we've deepened our digital footprint in the AIF ecosystem with a 51% stake in Fintuple Technologies. I spoke about account aggregator. We spoke about the fact that we've had 10 new wins, 2 clients are now live and increasingly, clients are going live in this market. The semi-governed entities will now begin to show interest as officially the endorsement from the regulators come. So we expect that part to move quickly during the balance part of the current year and current financial year. Go to the next. And then I spoke about NPS and eNPS of having scored a 4% share in the eNPS market during the last month, just the month of April. In terms of share, I think all these numbers are known to you, so I will go...

Sorry, Mr. Anuj Kumar, we not able to hear you, sir. Are you still connected?

Can you hear me now?

Yes, sir.

So on the market share, et cetera, you know the numbers, but I will quickly take you through these, especially for 4Q based on quarterly AUM, 69% market share. Net flows into equity assets, despite some of the overhangs that we have seen in the overall marketplace in capital markets, both in India and globally, those inflows remained positive in 4Q of FY '22. Inflows through SIP, this is just the monthly SIP collection for the quarter were up 7.2% quarter-on-quarter. In terms of absolute numbers, INR 26.7 lakh crores was the quarter average assets serviced by CAMS within which equity was INR 11 lakh crores. Like you know, this grew -- overall assets grew almost 20% year-on-year and equity grew over 40%. Within this, of the 26.7% when I juxtapose it with the industry assets, that's INR 38.8 lakh crore. Industry equity is INR 17.2%. We are 11 out of that. In terms of transaction volumes, like I said, grew from about INR 8.75 crores to INR 11.5 crores. So that's quarter-on-quarter, 4% up, but a very strong 34% increase year-on-year. Live investor portfolios for the quarter touched INR 51.6 million, so INR 5.16 crores, up 38% year-on-year. a very steady growth. SIP book has almost touched INR 3 crores, just a lack or 2 short of that, so at INR 29.9 million, up 39% year-on-year. Unique investors serviced were 2.29 crores, 22.9 million, again, 38% increase year-on-year. And SIP transactions, which kind of form the bedrock of the overall transaction counts at 87.5 million, INR 8.75 crores, up 42% year-on-year. So that's largely the story on transaction counts, digital sales market share, NFO market share, asset market share, SIP collections, those kind of things. Like I said, the overhang of interest rates, incidents around global peace or lack of peace, inflation, et cetera, continue to be what they are. And you've heard enough industry experts speak about that. So we are not going into those aspects in detail. But the impression I want to leave with you is that in terms of foundational building blocks, which is investors coming in, investors reposing their faith, coming in for monthly formats of savings and investment coming through SIP, transacting with us, monitoring the portfolios, adding monies, all of those trends have largely remained intact, especially between 3Q to 4Q. So we're not seeing any impact yet. And that is the positive underpinning of the entire marketplace. And of course, the fact that despite the overhang, overall assets and equity assets have continued to remain stable in the market. I'll pause here and hand over to Ram Charan to take us through the financials.

Thank you, Anuj. I'll just take you through the yearly financial highlights for FY '22 and some flavor on the quarter that went by. As Anuj mentioned, FY '22 was a very strong year for CAMS in terms of financials. The AUM that we track, which is the average AUM grew by 27.6% in the year, that is FY '21 versus FY '22. So our revenue kind of tracked this and revenue grew by around 29%. It ended at INR 909.7 crores, up 29% over INR 705 crores, which we clocked in the earlier year. Out of this, the MF revenue, again, almost tracked the entire growth in AUM, which is -- it grew by 28.8%. The AUM grew by 28%. So it almost tracked the entire growth of AUM. The MF revenue was at INR 820 crores versus INR 636 crores the earlier year, in which the asset-based revenue, again, healthy growth, tracking the AUM growth. Asset-based revenue grew by 27% year-on-year for the financial year. It ended at INR 690 crores versus INR 542 crores for the earlier year. So the strong growth in AUM is reflected entirely in the growth in asset-based revenue. The non-asset-based revenue, which is our transaction-based revenue, which is out-of-pocket expenses, call center revenue, et cetera, that also had a healthy growth of 38.6%, and it was at INR 130 crores for the year as opposed to INR 94 crores for the earlier year. The non-MF revenue did a smart recovery when compared to last year. Non-MF revenue, if you will recollect, consists of the AIF business, the CAMSPay business, the KRA and the insurance repository business and some amount of the software services that we do to our mutual fund clients. So that grew almost 30% year-on-year. It ended up around INR 90 crores -- INR 89.6 crores to be precise, as opposed to INR 68 crores. So overall, a very healthy growth in the top line across all categories in MF, that is asset, non-asset-based as well as non-MF. From a profitability perspective, we ended up with a very strong operating EBITDA of INR 400 crores, INR 400.39 crores to be precise, which was actually a 47% growth in EBITDA over the last year. Last year, the EBITDA FY '21 was INR 272 crores. And the operating EBITDA percentage, if you don't consider leases, capitalization is around 44%. This, again, is a very large growth when compared to last year, tracking the growth in revenue and the cost optimization that has happened. In terms of PBT, we ended the year with INR 382.65 crores, which is up almost 40% over the last year, last year number of INR 274 crores. And PAT, it was up almost 40%. Again, INR 286 crores was the PAT for the FY '22 as opposed INR 205 crores for the last year. So the profitability, again, strong numbers backed by increase in top line as well as cost arbitrage in some of the heads. So we ended up with a high net profit margin of 31 percentage. And last year, the percentage was 28%. So improvement in profitability metrics also for the financial year. Just to give you some flavor of the Q4 numbers in terms of revenue, we ended Q4 with a revenue of INR 243 crores, INR 243.18 crores, which was up 21.7% year-on-year, the same quarter of FY '21. This actually breaks down into an MF revenue of INR 217 crores, which was again up 20.6% year-on-year. And an asset-based revenue was at INR 152 crores -- sorry, INR 181 crores, which was up 19% year-on-year. Again, the asset-based revenue growth tracks the increase in AUM, which was up around 19.6%. The asset-based revenue was up 19%. Similarly, from a non-asset-based revenue, it was up almost 30% year-on-year on the back of improvement in transaction revenue as well as call center and other applications. This ended at INR 36 crores as opposed to INR 28 crores in the last year. And in terms of non-MF revenue on the quarter, we clocked a revenue of around INR 25.54 crores. Again, it was up around 32% over last year, growth across all verticals, including AIF, CAMSPay, CAMSRep contributed to this 32% increase in growth. In terms of quarter-on-quarter growth, there was a small -- as the AUM actually remained flat on a quarter-on-quarter basis, so the MF revenue growth was also muted. It was marginal. And the non-MF revenue actually grew substantially quarter-on-quarter to 15% almost. So that was at INR 25 crores as opposed to INR 22 crores last year. So this resulted in an overall small increase, marginal increase in the revenue. And the EBITDA, given that we continue to invest in our new initiatives with regard to the CRA business that Anuj spoke about, the account aggregator business, the TSP business, the investments we continue to make. So there was a small decline sequentially on the EBITDA margins and the EBITDA number by INR 1.5 crores from operating perspective. This is a flavor of the revenue and the profitability for the quarter. I'll just hand it back for more questions that you may have.

[Operator Instructions] We will take the first question from the line of Devesh Agarwal from IIFL Securities.

Congratulations on good set of numbers. Firstly, I wanted to understand on the quarterly mutual fund revenues. If I divide that with the assets that you service, there has been an improvement in the yields on a sequential basis. Could you explain that? Because the assets are more or less similar and so is the equity share.

So Devesh, actually, there is one important change that's happened to the statement that you're making, which is that the equity mix has improved marginally. If you see compared to last time, it's almost like a percentage in terms of the equity assets overall. So that is the beneficial impact. And even within that, there are some inter-customer movements that happened in the last quarter. It's not that every customer actually did not grow. So there were some customers who grew and so there was a favorable impact of that, too. So both put together, that is -- you are right, the yields have inched up marginally in the quarter, which is again a validation of what we have been speaking earlier. We have always been saying that if the assets remain stable or degrow, the yield depletion will not happen. It will remain stable or there will be a marginal increase. I think the numbers for the current quarter kind of seem to validate our commentary on that earlier.

All right, sir. Secondly, sir, on your non-asset-based mutual fund revenues, could you highlight how much comes from the transaction? And what would be share of the transaction in that non-asset-based revenues?

So the transaction revenue will be between 25% to 30%, depending on the quarter, Devesh. That will be the percentage of the non-asset base. The remaining will be call center, and we have some license fee that we do. For example, our MF Decks application, our front office applications and all those things, we kind of get some license fee for that, and then there is the OP. So the major part is the transaction base, which is between 25% and 30%.

All right. And again, on the non-mutual fund revenue, we see an inch up this quarter, almost 1%. Again, what has driven that? And going ahead, what would be your guidance in terms of the contribution from the non-mutual fund business given that now both AA and NPS have gone live?

That's right. The non-mutual fund business has kind of grown well in the sequential quarter as well as year-on-year. AIF, as Anuj was mentioning earlier, is on a good growth trajectory. So it has kind of come up almost like 35% year-on-year. And even on a sequential basis, it's kind of up almost 7%, 8%. So that's kind of done well across the board. Yes, our CAMSPay business, as you saw, new offerings are coming in. They have started kind of some traction on that. They have again improved around 11% quarter-on-quarter. Similar for our KRA business, insurance repository during the last quarter, we did see some small uptick in the policy conversions also. So that kind of did go up around 15%, 17%. So we have seen across the board increase in the last quarter in the non-mutual fund business. On the second part of the business -- second part of the question that you asked on specifically on AA and this, I will probably let Anuj answer that.

So Devesh, like Ram Charan said, non-mutual fund, almost all cylinders were firing; AIF, CAMSPay, KRA and insurance. Right now, there is, I would say, very marginal negligible contribution from AA and NPS. NPS, like I told you, was the first -- the very first completed month of operation. Whatever impact they have, we will see it from this quarter, but we are expecting real impact of that to come -- any real impact to come in the second half of the year. So that thing hasn't played out yet. That will play out -- it is the other 4 components which have contributed to the non-mutual fund revenue. Does that answer your question?

It looks like the participant connection has dropped out while we move to our next question. [Operator Instructions] The next question is from the line of Punit Kumar from Reliable Investments.

Mr. Anuj, thanks for the excellent presentation that you always do. Number two, the numbers were good. It needs the congratulations. Last, you need to take care of your thought, which doesn't seem to be in the best possible shape. So Mr. Ram Charan, you can answer 2.5 questions that I'm going to ask. Number one, if you see this quarter, which is March quarter over last year, it has grown by 21.3%, whereas the December quarter has grown by 25.7%. This is year-on-year. Does that mean that we are slipping? Number two, there are a lot of things happening around in terms of the parent company trading, parent company selling. What is Deutsche Bank doing into it? We took the loan from which bank? All those kinds of confusions are not getting reflected well in the market, I think so. And the last question, small one is, are we compromising on the auditor name in terms of quality?

So Punit, thanks for your comments. I will answer this in part, and then I'll ask Ram Charan to take over. See, the release that you saw is a very routine kind of occurrence. That occurrence is, and I'll give you the detail, private equity companies, when they hold an investment, hold it in an entity. The owner of that entity is typically their investors or LPs. It is possible to have some loan in that entity, which means you made INR 100 investment, INR 90 came from the investors, INR 10 came from a banker to total the INR 100 through which the investment is made. So whatever you are seeing and the filing that you've seen is about banker A, who had lent that INR 10, now moving away and banker B coming in. This is at the investor level. This is not CAMS pledging anything or any of the domestic shareholders pledging anything. This is at the level of one level up investor switching that small amount of loan from banker A to banker B. All these loans are backed by pledges of shares. So we are sure that there is some pledge happening there. But this is not at company level at all. So that is one thing that we are letting you know. The standard accepted process in the market, as you know, is to declare these events too, which is how you saw the filing. So that's the answer to your question. If you want a separate conversation, we're happy to have a separate conversation. Don't treat it as anything outside a routine switching of a lender by somebody who borrowed money. That's all that it is. And the pledge is a standard pledge. I will hand back to Ram Charan to comment upon 3Q and 4Q and if anything is left.

So you are right in terms of the growth, what we did year-on-year in Q3 to Q4 is a little lesser, but it also tracks the AUM growth. If you actually saw the AUM growth in Q3 was around 28% and hence, the revenue growth tracked right there. The year-on-year revenue growth for the current year is again 20% to 23%, our revenue growth is tracking there. So it's a function of the AUM growth that's happened in the industry in Q3 versus Q4. This is, in fact, if anything, have remained stable or become a little better. So this is not a sign of any depletion in any of our offerings or revenue potential or anything. If you see from a longer-term perspective, our CAGR continues to be -- if you actually see the year-end and see the 3-year CAGR, 5-year CAGR and 10-year CAGR, the 5- and 10-year CAGR continues to be healthy. The industry continues to be around 19.8%, 20%. And our CAMS revenue continues to grow, in fact, a little higher than last calculation, almost like 16%. So this is kind of a longer-term trend that will play out. Quarter-on-quarter, there could be fluctuations in the asset growth. And our revenue, since we are 89%, 90% based on MF asset growth, our revenue will track that small movement of fluctuations quarter-on-quarter, but this is not a reflection of the long term any depletion that's happened in our potential.

We'll take our next question from the line of Dipanjan Ghosh from Kotak Securities.

Just a few questions from my side. So on the first one, if you can break up your non-asset-linked MF revenues.

Sorry to interrupt. Could you just hold your phone or microphone closer to you? We can't hear you that well.

Am I audible now?

Yes.

Sure. So on the first part, I just wanted to understand how much of your non-asset-linked MF revenues during the year was led by higher NFO-related volumes that we witnessed in FY 2022?

So for the year, it's not a significant percentage. It's a single-digit percentage because the revenue model for NFOs is the applications-based billing. So although there were mega NFOs and there will be some revenue that comes from NFOs, Dipanjan, the way we look at it, it's more kind of a future revenue potential for the NFOs rather than the onetime revenue that we get by processing the application forms. So that will be less than INR 5 crores, INR 10 crores for the year. That's not going to be significant. The potential that gives us for future revenue is what is more appetizing in that.

On the second question, so now that you have gone live with the AA proposition and it has kicked off, if you can share some unit economics more on the non-PSP side of the business in terms of how your revenue model is structured and the margins that you probably intend to make on more of a steady-state basis in the business?

Okay. See, as you know, there are 2 components to this. One is the account aggregator and TSP. So the-- yes, we are seeing traction, and we are seeing use cases also evolve. A couple of them regarding the lending use case as well as the broker onboarding is kind of a little more crystallized now than what it was earlier, but still it is early days. See, the revenue model for this is a onetime implementation cost where we -- especially in the TSP model, where we kind of enable the end customers, SIP and SIU, to actually have an encryption and decryption layer and some -- over and above that, there is some analytics that we will do for them. That's the onetime implementation cost that we will charge. And the predominant revenue will come from -- for AA as well as TSP will be a per pool cost. So in terms of the one data that passes through our pipe first to the TSP layer and then the AI layer and the TSP layer and to the FIU. So that actually constitutes one pool, which will be built one by the TSP and one by the AA. It's too early to predict on what the margins will be. What we are sure is that it's a wide market, it's a large market, use cases are evolving, and it's going to be a volume-based market. It's not going to be a niche market for sure. So the prices are settling down. As you would know, in the initial part of it, there will be some competition on prices. So we are still at a stage where there is some discovery happening on what is the appropriate price. But our models are clear, and we think that in the medium and long term, this will be a profitable business for us.

Sure. Just 2 more questions from my side. One is on the offshore fund servicing that you have started through the GIFT City. What are the services you're providing? And if you can shed some color on your proposition or plans for that business segment going ahead?

Yes, sure. So if you see -- I'm sure you're aware of the GIFT City and how the overall architecture is being promoted, largely for domestic deployment. So think of a domestic fund, which is going to invest in domestic assets, but is planning to raise money overseas. The options for fund administration were largely outside India. The arbitrage which is getting created is with the strong push of the government and the regulators, can a lot of that offshore administration come into India. You know that a lot of that administration sits in Malaysia, Singapore, et cetera. I guess most of the participants on this call belong to a fund houser or two and know how that architecture works. So as that arbitrage plays out, as the, I would say, the incentivization of participants to operate out of India goes up, we will see momentum in new funds filing for permission with SEBI and then taking up offices. In fact, I was with one of our domestic clients yesterday, and they've just leased space 10 days back because -- and applied for permission. I would still not say that there is earth-shattering momentum yet. GIFT City has been around for a few years. The momentum is building up. But with the incentivization, it is possible that a lot of overseas fund raise with deployment in India, that architecture will start playing out in GIFT City, and that is the way this market will develop. So like we said, we've had about 4 sign-ups, about 1 a month. We are expecting that at momentum, we should be perhaps getting a signing a week, but there is some time for that to happen.

Sure. Last question from my side. So firstly, congratulations on a new deal win during the quarter. I just want to understand when you pitch to a new client who has not yet commenced MF business, how do you determine the pricing model? What is the pitch really constitute barring the propositions and service offerings that obviously will be a part of the pitch?

For sure. So today, if you see the RTS service stack is a very, very broad stack. And sometimes I have publicly said that calling ourselves just registrars is perhaps a misnomer and condenses the scope that we perform. So overall, what a consumer looks for and what we pitch is essentially our capability to do recordkeeping, investor servicing, execution of investor trades, payments, settlements, all of that kind of work. The regulatory adherence, the compliance, cybersecurity, ability to deliver gold standards and uptime, BCP as an integral part of our overall architecture, our digital assets, our front office spread, I think there are 10 to 15 core components that play out. And while I don't want to take you to any one of these, I'll just give you an example, that when a new fund house comes in and looks at myCAMS and sees that there are 50 lakh investors to whom they can potentially pitch. We obviously don't allow advertising or marketing on myCAMS. It's just a transaction platform but you can make yourself visible to 50 lakh consumers. There is no other place which can allow you that. Similarly, you can make yourself visible to walk-ins in 280 branch offices across the country. There is no other place where you can do that easily. And similarly, our track record of managing fund houses, which have assets of several lakh crore, but at the other hand, also fund houses which have only INR 2,000 crores or INR 3000 crores right? I mean, we have the entire spectrum. And the amount of attention CAMS is able to pay to kind of introduce fines in their overall execution. Our best-in-class cybersecurity scores, which you've seen in many of our presentation decks, very, very strong capability in managing business in any of our 3 centers if there was a geopolitical or any other weather-related crisis in one of the cities. I think consumers look at each one of these components. But more than that, more than the formal presentations, I think they look at a lot of market feedback. They talk to our consumers, they talk to many other parts of the ecosystem to form a belief in our capability. But that's how business has grown over the last many decades, which is not as aggressive today. But like I said, there are 10 to 15 very strong core themes, including our leadership team, very strong mintage leadership team, which help to position in front of a new client. That plays out identically in the capital markets, very intense in AMC sales, but also equally intense in AR sales.

Our next question is from the line of Sanjay Awatramani from Envision Capital.

Sir, can you highlight which can be your core competitors in the market?

So depending upon which product you're looking for, the competitors change. If I look at the core business, which is the RTA business, there is one large license RTA, you know the name. They are competitors. When it comes to a lot of other capabilities, our ability to, for example, offer APIs of all kinds, have websites, transaction portals, et cetera, built, there are a lot of IT companies which do that kind of work, and they are all competitors. If you see account aggregator and TSP, if you go to the website, you will see about 30 different TSPs, IT companies of all kinds, including a few of the big 4 in India are TSPs, account aggregators, there are 4 licensed ones, NPS, CRA, there are 3 licensed entities. So depending upon which market segment you're looking at, the answer changes. But if you are restricting yourselves to the core, which is head-to-head, is there 1 or 2 or 3 RTA competitors, there's only one.

We'll take our next question from the line of Kaushik Agarwal from Haitong Securities.

Congratulations sir, for the quarter. Sir, I have a few questions. So number one is regarding this press release where you mentioned that CAMFinserv has collaborated with Microsoft India to develop the AA marketplace. So I just wanted to understand what kind of collaboration is this? And is there any sort of investments which we are going to do in the near future in terms of money or in terms of the manpower for this specific collaboration? Number one. Number two is a data keeping point. I just wanted to know the ESOP number for Q4 FY '22 and Q4 FY '21 and for full year FY '22?

For sure. Very good question. So just as you know, our business is kind of moving away almost to be a predominantly technology-oriented business and a platform business. Within that, account aggregator is a new initiative, and we wanted to be sure that we had best-in-class partnerships in the country. With entities which were not just commercially partnering with us, I mean, I can go and buy something from Microsoft and I can call it a partnership, but that is not how this was built. Microsoft as an India-centric initiative has partnered with the market leaders, specific market leaders in different segments, let's say, someone in banking, someone in insurance, someone in account aggregator, et cetera, with the explicit, I would say, objective of deepening and broadening the market, making specific innovations relevant to that market, helping enhance the product basis their tech capabilities and then helping with the go-to-market. Selling will continue remaining our responsibility, but because of their wide breadth and wide reach, they will certainly evangelize the product class and evangelize CAMS. This is not a financial JV. It is not a financial JV. It's not a financial partnership. It is not that we are each putting in money to create something. It's not a foundation, not a chair. It's a stated partnership between 2 corporates, which goes beyond, I would say, the stated commercial agenda of one being a seller and the other being a buyer. It is in Microsoft's interest to do foundational work in the country. Think of it as foundational market-making work that they're doing jointly with CAMS in the area of account aggregator.

So I'll take the question on ESOP. So for the year, the cost to P&L that we have taken, when you see a salary cost of INR 321 crores, that includes INR 25.3 crores cost because of ESOP, which is a noncash charge. That answers one part of your question. For the quarter, our cost accounted is around INR 7.5 crores, which was probably around INR 4.8 crores more than what it was in the same quarter last year.

Okay. Okay. Sir, just last question on the margin side. We have seen like on a Q-on-Q basis or due to obvious reasons that you mentioned during the initial remarks that there was some investment being made due to which the EBITDA margin has seen like from 45% to about 43.6% during the quarter. What's your 2 to 3 years view on the margin trajectory for the company?

So our commentary has been consistent on that. What we have been saying is that the normal margin and because of various reasons, including from a yield depletion because of growth in volume to salary increase, to our investments that we do in a new business as well as in information security and talent. Our long-term view of the margin has been in a good year, it will be a little more than 40%. And in a year where assets don't grow, it will be probably between 35% and 40%. We don't see any reason to revise that guidance as of now in terms of where we think the margins will settle at. We'll have to wait and see regarding the asset growth over the remaining period of the year, and then we'll probably have to revise any commentary we have on that.

Our next question is from the line of Jatin Jadhav from Sahasrar Capital.

First of all, congratulations on a good set of numbers. Actually, my question is just a follow-up regarding the margins itself. I just wanted to know if you all are planning to -- planning on margin expansion, what steps can be taken in order to improve PAT and EBIT margins?

So from a margin perspective, historically, if you see what has been the margins has been within the range of 35% to 40%. In a good year, it has been around 40%. Over the last 1 year, definitely, you have seen some margin expansion happening. It's been a combination of the growth in the assets as well as some amount of cost optimization that has happened. The automation that's happened has kind of benefited to an extent on the cost. But going forward, from a margin perspective, I think our expectation is that to maintain a early 40s kind of a margin will involve a lot of work from our side. It's not -- we're not looking at a huge margin expansion for reasons that are well documented. Number one, this volume-based pricing or the slab-based pricing will ensure that going forward, the yield will keep falling down as the assets grow, and that needs to be managed. This is something that we enter into a relationship with our customers on a win-win basis. So that's something that is not reversible. And you know that India is a wage inflationary country, right? So if you kind of have to be in the market, you have to give them decent wage hikes. So on a year-on-year basis, you're going to get this 10%, 15% increase in salary cost. And then the investments that we need to make to maintain our salience in terms of information technology services, the huge CapEx that we are incurring. Last year was, in fact, the highest year in terms of CAMS. We spent some INR 65 crores only on IT assets and CapEx just to ensure that we are geared up for the transaction volume as well as cash requirements. So these things will keep happening, and there is scope that the RTAs will need to do for the same fee will keep creeping up. That's the nature of the business, nature of the business, any regulatory changes that come, we'll have to invest on that. We'll have to invest on the IT infrastructure. So our overall view is that we will continue to doing all these things, continue to kind of handle price reductions, continue to handle wage inflations and continue to invest in business and new business. And if we kind of retain the same margins level going forward, the early 40s, I think this is kind of we have done well. That's been our outlook.

Our next question is from the line of Prasheel Shah from CapGrow Capital.

Yes. My question is regarding -- so regarding the competition. So as you rightly mentioned, there are only 2 players in this market. So how do we differentiate ourselves from your competitor, which in KFin Tech?

So you can see that the MF RTA market is now almost close to 30-year-old market. Within this marketplace, as I explained earlier, consumers and asset managers are looking for a set of trades, a set of capabilities and are wanting to make a decision based on that. The business has become extremely regulated. The market expectation is 100% quality. Small things that go wrong catch the attention of not just consumers, but governing bodies, auditors, boards, trustees, all of them. Gold plating in end results, in quality, in complaints, in investor servicing and the cord keeping, in the way we manage APIs, the way we manage uptime of our ID assets, the speed at which we process things. the capability of the team, the vintage of the team, capability of the digital assets, investors who prefer getting serviced digitally on our assets, spread of the front offices, like I said, our various criteria that asset managers would deploy. Of course, they would also look at commercial and price, et cetera. Over the last 30 years, while both companies have been in the arena, you can look at the clientele. You can look at the head of the market. You can see the winning track record of large significant logos, large brands, et cetera, and make up your own mind. And of course, you're in touch with the marketplace, I'm sure you're speaking to our clients, et cetera. Differentiation doesn't get created in a day. Differentiation doesn't get created in PowerPoints. Differentiation will not happen because of something that I did yesterday or in the last 3 months. I think it is just sustained investment, sustained capability, demonstrated results, exceeding expectations across all these metrics that I spoke about, which have brought us where we are. So that's really the answer to the question. I do not want to say that it is some technology edge or it is some people edge or it is some digital edge. I think it's a culmination of all of these factors built over decades, the trust that CAMS has built as a significant center of the arena market participant, which has brought us where we are. That's really how I would answer your question.

Okay. And just some months back, maybe a little more than a year, Kotak had sort of invested in KFin Tech. So what do you make of that investment? Is there any threat of them over a period of maybe 2 or 3 years down the line sort of moving to KFin Tech as their RTA. Do you see that as a threat?

No, we don't see that as a threat. Our understanding is that the Kotak Group continues to make strategic investments in entities across the marketplace. This is one of those investments. Is it tightly coupled or tightly tied to a decision to buy RTA services from one entity to the other between this entity and the other? We do not see that connection. We have not sensed anything.

And acquiring Zerodha as a client, so after -- so can you just walk us through the journey of how acquiring a new clientele goes, when do you sort of start earning from this partnership?

So typically, when an application for an AMC is made, that becomes visible. It's a small market. So we know who all are participating in the marketplace. A lot of times, potential consumers do reach out to us or we reach out to them depending upon who makes the phone call first. The process, it takes time because the newly registered AMCs in the run-up to getting the license are supposed to demonstrate that they have capabilities of fund management, capabilities of investor servicing and that they are beginning to identify partnerships for all of this. They're obviously also supposed to have other partnerships in the area of fund administration in the area of custody, et cetera. So they begin to start the process much before the license comes in and sometimes coinciding with the license, they are able to culminate the process and appoint all of them. Revenue only starts post launch. Typically, everyone will start with the scheme. Most of them will start with an equity scheme. There are track records where AMCs have started with a debt or a liquid scheme, too. So the first scheme has to come out, which comes out as an NFO. And that is when you start getting the first assets and the first transaction to build. The whole process as a long -- I mean, on an average will take about a year at least, but that sometimes take even longer.

Yes. Just one last question. So what I meant was when does it start adding value in terms -- not just in terms of revenue, but also in terms of profitability?

Okay. So think of it this way. I'll just give you a metric and then you can make your own decision. I'm not giving you a specific accounting answer. For any new AMC to be relevant for themselves and for suppliers like us to make money, there has to be a critical mass. And think of that critical mass as being at least INR 10,000 crores of AUM because before that, those are really small numbers at which business is still kind of suboptimal in size for them. And because it is for them, obviously, for the other participants too, it has not yet crossed the critical threshold. So it takes that minimum threshold for it to become profitable in the range of let's say INR 8,000 crores to INR 10,000 crores. That typically takes time. It will not happen in the first year, but it can happen, let's say, between the second and third year. If the sales setup is strong, AMCs could get to that level. Those are the levels, let's say between INR 5,000 crores, INR 10,000 crores that the assets begin to make sense, commercial sense.

Ladies and gentlemen, that was the last question. I now hand the floor back to Mr. Ram Charan for closing comments. Over to you, sir.

Thank you. Thanks, everybody, for attending the earnings call of CAMS. Please feel free to reach out for any further questions to either Orient Capital IR or to Anish Sawlani in the e-mail addresses given in our corporate presentation or in the communication that you have received. Look forward to your continued coverage and support. Thanks again for attending.

Thank you, members of the management. Ladies and gentlemen, on behalf of Computer Age Management Services Limited, that concludes this conference. For further questions, please reach out to Anish Sawlani from IR team of CAMS by writing to [email protected]. Thank you for joining us, and you may now disconnect your lines.