Edelweiss Financial Services Limited ($EDELWEISS)

Ladies and gentlemen, good afternoon, and welcome to the Fourth Quarter FY '26 Earnings Conference Call of Edelweiss Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Priyadeep Chopra, President, Edelweiss Financial Services Limited. Thank you, and over to you, ma'am.

Thank you, [indiscernible], and a very warm welcome to our earnings call today. We have on the call with us today Mr. Rashesh Shah, Chairman and MD of Edelweiss; and Ms. Ananya Suneja, CFO, Edelweiss Financial Services. We hope that you've all had a chance to review the investor presentation that we filed with the exchanges earlier today. During our discussion, we will be making references to it. Please take a moment to review the safe harbor statement in our presentation. We will be making statements that may be forward-looking in nature and, hence, may involve certain risks and uncertainties. With that, I'll hand over the call to Rashesh to begin the proceedings. Thank you all for being here again. Over to you, Rashesh.

Yes. Good afternoon to all of you, and a warm welcome to our earnings call for the quarter and the year ended March '26. Thank you. Once again, all of you for joining us. I was supposed to start with the geopolitical tensions and oil line, but I guess all of us know the headwinds that India is currently facing. But in spite of the headwinds, we do believe India remains relatively well positioned in the businesses, we are -- we don't see a very large impact of the [indiscernible], except at the India macro level. And we do think there is some amount of pain, the inflationary risk and the geopolitics for the next 5, 6 months, there is pain. When we talk to investors, we see that they also have the same hypothesis. But I think there is some near-term trend, but India seems to be positioned enough to be resilient to the pain. The pain is not [indiscernible]. But I think we feel that India will withstand the pain and come out of this strongly. At Edelweiss, you would have seen investor presentation, we had growth in the consolidated profit of tax and key [indiscernible] for the operating businesses. Our [indiscernible] has grown by [indiscernible]. This was in spite of some exceptional items, I'll speak about that in a lot of our businesses because of the labor code impact the GST impact on our life insurance business, with all of that post minority investment, our profits have gone up profit after tax from INR 399 crores to INR 547 crores. So a 27% increase in that PAT. There are some [indiscernible] in the fourth quarter on a lot of our businesses because of the market volatility, the treasury income impact in the metal side than or even corporate treasury because of the March volatility, there has been some impact but you've seen markets have stabilized in April. So that has been fairly [indiscernible] all other businesses continue to grow. Alternate asset management, SPAUM, has grown by 32% Y-o-Y at INR 44,000 crores mutual fund AUM, equity AUM is now grown by [indiscernible] to INR 78,000 crores, our MSME disbursements have gone obviously very largely by 200% because we have started scaling it up again. Housing finance disbursements have grown by 27%. Our GI business had a growth of 28% in [indiscernible] has grown by 11% in AUM and AUM is now close INR 10,000 crores. But ARC also had a good recoveries were 8,590, 8, 590 is extremely good. As is always -- it is a very paradoxical because the more you recover, the more your AUM keeps something down. So -- but it's always good to recover because that means you are reducing the risk in the portfolio and returning money to the banks who are holding the ASRs. So we continue to grow all that and before going strategic update, let me give 2 or 3 special updates. And I've got some queries and [indiscernible] from a few of you in the last couple of hours on that. So the first one is on insurance [indiscernible] . So insurance, both the insurance businesses put together for the year had a loss of almost INR 216 crores, which was an increase from last year, which was about INR 70 crores or so. So there has been a growth the loss has gone up in Israel. So the way to look at the insurance business is there is almost INR 110 crores exceptional item, largely the GST impact on life insurance which was a onetime one. We are not talking about the recurring impact, which we are managing and we get to breakeven even in spite of that. But out of the 159 negative of the large insurance business, almost 70% is from the GST impact and then we had the labor cost impact on both the businesses. So that has been an exceptional hit on both the insurance businesses, which our estimate is about INR 110 crores. So if you take that away, then the minus number is INR 100 crore as compared to INR 170 crores of the last year. So there is a significant improvement on the performance of the insurance businesses, if you remove the impact of the exceptional items, which are truly one-off, which are not going to recur in the coming years. Along with that, we still remain committed that we will be breakeven for the year FY '27 in our insurance businesses. We are strengthening ourselves. We are focusing a lot on that. And even without Ind AS will come a year after now, even without Ind AS coming in, we will reach breakeven. Obviously, I said earlier, if Ind AS comes, we are breakeven even now. But without Ind AS, we still -- as per IGAAP, we expect to be breakeven in the insurance businesses in the coming years. On question number 2, which has been on the operating businesses. Operating businesses also have so for impact from INR 566 crores to INR 520 crores. So there is a INR 46 crore for the operating businesses. But as you have seen in the presentation, there is an exceptional item and those exceptional item is about INR 134 crores. So if you adjust for the exceptional item, the businesses have actually grown by 17% at level, [indiscernible] has gone to 640-odd or something. So there has been a fall in the underlying businesses profit, operating profit of the underlying business is by INR 46 crores, but that is after exceptional item on that. So adjusting for exceptional item, we still see that on an apples-to-apples basis, the operating businesses have shown a 70% growth. The [indiscernible] businesses also have an ESOP cost embedded in that, which will be recurring. So we are not removing that with [indiscernible] costs. We expect to continue to grow our operating business profit at approximately 20% per year. That is what we have maintained in the last 4, 5 years. This year also apple-to-apple, we are at 17%, but we have had these exceptional items, which is mainly has been graduating and impact of the new labor cost and the GST impact that has come, which I think all of you are aware about. And the third question I wanted to answer was on the corporate debt. Our corporate debt is about INR 6,400 crores as of now which remains almost flat from last year, but we have done a lot of activities to bring down the debt from underlying businesses. In this year, we expect dividend and capital through buyback and other stock of almost INR 1,000-plus crores. So for this year, will come from dividend and buyback and other stuff from the online businesses. We expect between INR 1,000 to INR 1,500 crores from AAA IPO and the stake sale of Midland should give us other INR 750 crores. And other things like we have a couple of offices that we are in the process of selling to investor doing a sale and leaseback. And we perhaps have investments in the underlying funds, which will also come back. So through this stake sale and dividend we expect almost INR 3,500 crores to be realized in the coming years. When we look at the 6,400 against that, we are [indiscernible] of liquidity cash flow coming in. Out of the balance, 3,000 property investments and the offices we own, Edelweiss House and others are about INR 2,000 crores and INR 1,000 crores are the investments we have in the underlying company in the underlying funds and all that we have. So we have INR 1,000 crores of investments, INR 2,000 crores of property. In between INR 3,000 crores to INR 3,500 crores of stake sale and dividend realizations that we expect in this coming year. So I think on the corporate debt, though, it looks flat, we remain comfortable to go by our earlier guidance that we will keep on reducing it. And we will, I think, bring it down to below INR 3,000 crores in the next 1 year to 18 months for sure. That is our plan, and we continue to work towards it. Along with that, the other update is EPA placement. As you may have seen, we have got the SAB approval for the IPO. Now as soon as markets stabilize and we have a little bit of bandwidth, we will work towards the IPO. We did do a 4-point placement of the ELA to a group of high net worth investors, but more importantly, people who did investors in our funds. There were 3 entries and select individual investors who have been long-term supporters of fund. They are very large investors in the fund, and we wanted to create an alignment of interest with them. So we are very grateful that the 4.4% placement happened with about INR 375 crores out of that. The other important milestone we achieved was we got our transportation-focused in [indiscernible] I think listed it got -- started trading yesterday. It was a very successful IPO and a successful listing. So [indiscernible] has a portfolio value of almost and it's our first transporter and focus in this. So we're very excited about it. The update on strategy investment by [indiscernible] we have got the CCI approval. We are still awaiting RD approval, but everything is on track. We've been replying to the queries, and we hope that the process continues good. Fourth important update has been the Edelweiss ARC, the MTC appointment has been finalized. We have appointed Mr. [indiscernible] who was earlier MD and CEO of SBI Capital Markets is going to join us in the next 3, 4 weeks. We got approval from RBI for his appointment and was just finalizing the paperwork and we are very excited for the next innings of Edelweiss ARC for the growth arrange start. We're seeing that ARC business opportunities are growing again. And with [ Arun Meta ] coming on board, we are pretty excited by that. So I think along with that, our -- both the asset management businesses continue to click along well. But the insurance businesses have also shown good growth and should get to breakeven in this year. And our credit businesses started growing again in a calibrated an ARC recoveries have been strong, and we expect them to grow. As I said, corporate debt, we feel is under control. The plans we have, we are very confident that those plans will allow us to get to the reduction of corporate debt as fast as possible. So with that, I wanted to leave a lot of time for the Q&A. And I just want to sum up by saying our consolidated profit has grown there was some misunderstanding because of the reporting, but the investor presentation clears it out pretty well. The operating businesses PAT was muted because of the exceptional items and the market in the last quarter. Overall, we expect that businesses will continue the healthy growth because that has gone on for the last 3, 4 years in spite of all the volatility and the uncertainty and the businesses have only got stronger. All the other strategic projects as I've given update are on track, and we truly want to thank all our stakeholders, all our bankers on our shareholders for the support and the feel that we've given us over the years. We thank you with that, and we'll now open up for questions and answers.

[Operator Instructions] Our first question comes from the line of [indiscernible] from Equilia Securities.

So I had a few questions. Sir, firstly, as you mentioned about the AAA placement, so I wanted to understand more about the same and particularly the profile of investors who participated in that Sorry, can you repeat that question, please? Yes. So you mentioned about the placement, right? So I wanted to understand more about that, particularly the profile of the investors who participated in that.

Yes. So all the investors are actually investors and the limited partners in our funds who have invested with us over the years, and they have supported us. So they are HNI investors family offices who have all been there. We wanted to do only a 4% placement because it was a long-standing ask from them a lot of investors. As you know, we have an AUM of more than INR 64,000 crores, out of which almost 30,000 is from Indian investors and a lot of that is from Indian high net worth. A lot of that is from Indian merchandise family offices. So -- and we had kept a cap of about INR 40 crores per head. We had a lot of people who wanted to invest even more than that. But we said only INR 40 crores. So we had a group of investors, all of them were our LPs. Our requirement was that they are already investors with us. And we think at about 40, 45 investors in total.

Okay. Understood. Secondly, I wanted to ask regarding the -- so the DRHP was approved last week, right? So could you walk us through the next steps and also when the IPO is expected the time line of IPO. And additionally, I wanted to ask if you are considering any other further placement rounds and what could be the shareholding structure post the IPO?

We do not finalize anything. We don't intend to do anything besides the IPO now. We think, obviously, as you know, the markets are still in a state of uncertainty because of the growth situation. So we'll wait for a couple of months for things to stabilize and then our idea will be to launch. So we are in no hurry because I think we have enough business momentum going on. But if you ask me, I think in the next 3, 4 months, I expect the global situation to stabilize and for us to be able to do the AAA IPO. So maybe July, August?

Okay. Got it. I have one last question. So you also mentioned about the [indiscernible] transaction, right? So could you share the expected time line for closing that transaction? And also if there are any positive shifts that we foresee, such as the cost of funds on the credit rating trajectory or even the acceleration in the disbursement growth.

So growing steadily, we are not putting a lot of high-growth pressure on that because we want to close the coverage. We're also investing in opening some offices and increasing our footprint on affordable housing. So on the bat basis, I think it's on a steady footing. The [indiscernible] transaction, we expect the only thing awaiting is RB approval, which is -- we find this in February -- and usually, the approvals have taken 3 to 4 months normally is what the lawyers inform us. So if you find this in February, we are now March, April. So I think somewhere between May, June, I think we should get the approval. All the other approvals are in place.

Your next question comes from the line of Siddhesh Dharmadhikari from PL Capital.

Has been [indiscernible] with products like usage-based insurance and metrics. So is that a evolution of AI? How do you see the opportunity for further product innovation and differentiation, sir?

Yes. I think it's a very important question because, as you know, in Juno, we have been focusing more on auto insurance. Our aspiration is to be one of the best auto insurance companies in India. It will take time, but our -- the reason we are very bullish on auto insurance motor insurance is because we think it is very data based. It is very data linked and with cars also having a lot of data on driver on fuel consumption and on even with the cost of repair and all, a lot of that is now very standardized the [indiscernible] have become very professional. So I think India is where the U.S. car insurance market was about 40, 50 years ago. And on that basis, with the kind of data and AI available, this business has a lot of possibilities for innovation. We can do a lot of innovation in pricing really allow customers to pay for what rail risk they want, you can slice risk. You can also court pricing, which is customers to customer, [indiscernible] car need to car make all of that. Even on the claims settlement, you will be able to do claims settlement within 3 hours and all that. We have already been experimenting with that because with a lot of AI, you can look at through cameras and all, which if we can look at the damage done can assess the cost very quickly. So there is a lot of improvement on all 3. There are 3 parts of the auto insurance business. One is the pricing and the policy. The second is the customer experience. And third is the claims management. All 3 of them have a huge amount of AI application that is there. So we have large teams doing agency is and all that because a lot of your call center and customer support and all can also use AI in a fairly big way. So though we are very proud about our product innovation at Zuno and you would have seen since inception, Zuno has been growing at between 25% to 40% every year. And the motor insurance market has not been an easy one as I'm sure a lot of you would have seen. Health has been growing much more easily. Motor has been a difficult market but in that difficult market, we have innovated a lot. But we're also very proud of our customer service and claims settlement. And in that also, AI is going to be a big help. So we are investing fairly big in that. Data was always very important to us. Now how the data will be used, I think AI will make it easier and easier.

Understood, sir. And on the FI side, [indiscernible] crossed INR 300-plus crores in AUM, making it one of the largest in the industry. So how do we view the long-term opportunity in this space? And are there any plans to expand the production further?

Yes. I think RF is a new asset class. Everybody thinks it's like on the regional fund or other AIS or another but it actually has some elements of mutual funds, some elements of AI and some elements of the PMS category. So if you go back and study the underlying needs because of PMS serves a very different need than AI does and that's also a very different need than the mutual fund does. Because, as you know, a lot of people ask that why do PMS exist when there is an income tax advantage, capital case, they want to [indiscernible] point. But because serving different kind of needs. In the same way, and SRS is also serving a very different need at the customer level, which is -- some parts of it are available in AI, some parts are available in PMS and some parts are available in a mutual fund. So it's a very hybrid product. You really have to understand customer needs, create the product as per that and more importantly, market it very carefully as per that because even if it's a product which is marketed as another AIF or other PMS or what some people quoted approve and they are, it's not true. I think it is a very different, very, very nuanced product that is there. We are pretty bullish on that. There are some specific customer needs that Sewell cater to and your ability to create products and that is important. We have already launched the first product, which is, as you said, done very well. We are the leaders in that. We are currently looking at a couple of other products also, we should launch our second product in the next few weeks. But we do a lot of research to understand customer needs and then create the product and communicate with the distributor scale here product is for this kind of customer for this kind of need. And that is important, just using a distribution to sell a product in a very average manner will not really allow you to capitalize on this new asset class and new product, very interesting.

The next question comes from the line of Shobhit Sharma from HDFC Securities.

So I have multiple questions. So firstly, on the alternate piece, if I look at your [indiscernible] AUM on the retail assets has surpassed the private credit AUM. So what actually are we doing on that piece? What differentiates us from the competition? And what are our plans to expand that kind of business? Secondly, coming to your mutual fund business, the growth on the profitability seems to be material. So how should we think about the yields on the PAT level yields for the medium term? And similarly, on the mutual fund business, we have seen strong growth on the SIP book. So if you can give us some color on this SIP book, how this book has behaved during the last quarter and what kind of sense we are getting for the month of April. And where are we seeing the SIP -- new SIP folios being generated as this on the presses side? Or is it on the commodity front? And last question is on your insurance business. Are we going to seek a forbearance from the IDA for the applicability of the Ind AS for FY '27?

Okay. I hope I remember all the questions you asked and answer them. I'll try and do it in reverse order. So in insurance, India, yes, we have asked for the forbearance because I think most of the industry players are going to ask because the clarity is still emerging. There's a lot of investment to be made, and you still have to run IGAAP. So if you don't ask for forbearance then for this year, you will end up running India and [indiscernible] both, and you might end up spending a lot of money and effort on that. So I think the idea currently is to take forbearance for a year. So both the insurance businesses will implement Ind AS from the next year. Though it is actually very useful from a profitability point of view, from a profit after tax reported point of view. Ind AS is a lot better for us than IGAAP. In order to avoid complexity, we have taken the full balance. That's your first question. Second, SIP book we are now more than INR 600 crores in SIP in the mutual fund. A lot of this is in equity and commodities, largely equity and a little bit in our international funds. But largely, I think it's about -- our main focus has been equity AUM, and we are adding a fair amount of inflows into that through SIP. On the mutual fund growth, as you can see, now we are at a PAT in level of about 6%, which is still low, and we have some headroom to grow. As our product mix is undergoing a change as our equity component is going up, as our new money is coming at slightly the better economics and all that, when we had of all of that, our aspiration is that from current 6, we should go to 10 basis points by 2030. So it's going to be a slow improvement. We want to be fair to our distributors. We want to be fair to our partners and we want to improve our yield not by reducing [indiscernible] but by calibrating the product portfolio by introducing high economics product by having higher economics on incremental flows that we had. So we think we will continue to grow on the AUM the way we've been growing at about 20% a year. But on the PAT margin, which is about 6 basis points, we would like to go to 10 basis points in the next 3, 4 years. So we have no hurry. We want to do it in a very careful, calibrated manner in a win-win-win manner with the -- with our partners and distributors and creating products like SRF is actually one example that we are creating products which truly add value to the customer and hence, improve our economics. On EAAA, our FP AUM now the real asset has become higher than private [indiscernible] we have not raised a big fund in the last 3, 4 years. So our expect is they will both be equal in [indiscernible], the assets keep on going down because you keep on returning money to the customers an average private credit fund average tenure is only 2.5 years while in real asset, the average tenure is about 4 to 5 years. So the real asset is a slightly longer duration funds while private credit because we also keep on getting income and realizations, we keep on returning the money. So we expect our average private credit fund to have average in and out average horizon of 3 years by the real asset will have 5 years so that would be the difference. But again, a lot of this is based on the new fund launches and we launched a new fund every 2 years or so, 2 to 3 years in private curate. So as the new fund is getting launched in this year, we expect targeted FPAUM will also go up in this year.

Your next question comes from the line of Parth from DAM.

Sorry, sir, I joined the call late, if my questions are just repeating. Also I have 2 questions. One, see, right now, given the volatility in the market, are you seeing any challenges on raising of funds from foreign investors in AAA? And what are the FPA fundraising targets for the next year? And could you also give some color on the pipeline of new fund launches? That would be my first question. I will take after -- second question afterwards.

So we don't have a lot of challenges from global investors on the products we have, which have a higher yield. So the products will have a yield of more than 16% to 18% route yield, there foreign investors are still very keen and all. When the yields are about 13, 14 lakh in performing credit, foreign investors are slightly worried about the rupee effect. They are actually very hot on India, but a lot of -- even the FPI selling we have seen in the market, a lot of that is now driven by the view on the rupee and not the view on underlying Indian opportunities in the market. So -- but we also have a lot of products we are looking at operating a hedge offering to our international plants, which will be in U.S. dollar, and we've hedged the dollar to reps to renew any answer I made. So I think there is opportunity on creating new products because hedging and rupee stability has become a key need for a lot of foreign investors. But where they are wired products like our Special Situations Fund, which expects to make around 18% plus, there, I think investors are fairly okay because at that yield, a rupee is not that big a problem. But the biggest problem across the board for all foreign investors in India today is their view on the rupee and they're looking for some stability on that.

Understood. Sir, secondly, our MSME disbursals have tripled in FY '26. So could you just highlight what were the key drivers or initiatives that has contributed to such significant growth here? And also with our wholesale scaling down and [indiscernible] largely behind us. When can we see our earnings actually starting to reflect the real retail mix? So could you just share some outlook there? And what would be our MSM AUM growth and the ROE trajectories for next 2 to 3 years? That's it on my side.

So yes, I think on ECL finance, we have a lot of equity out there. We have decided that we will grow MSME only after wholesale book is scaled down after on the cleaner is over. So on March '25 is where we concluded that the wholesale is behind us. The stress on the wholesale is behind us. We also hired a new Managing Director, [indiscernible] came on April 1, 2025. And we have almost grown our disbursements in this year. We did about INR 1,000 crores of disbursement in this year. We expect to keep on growing, and we will be happy if you do between INR 1,000, INR 1,700 crores to INR 2,000 crores disbursement in the coming year. They are currently investing a lot also in that business. So the NIMs will be there, but we are also opening a lot of branches and hiring people and all of that and focusing a lot on MSME only. So we expect that the profitability in all is maybe 18 months to 2 years away but the growth has started coming in. We always had growth before profitability. If you look at our asset management business on mutual fund also, until 2 years ago, profits were very low, but we had been growing for 5 years before that. So growth and then profitability rather than try to get profitability and growth at the same time, which becomes much further. So currently, will be in a growth mode for the next couple of years, and we do feel confident about the disbursement growth and the profitability will follow that.

And sir, just in how -- what would be the kind of ROE trajectory over the next 2 to 3 years for us?

[indiscernible] trying to get to a 10% ROE because we are still very [indiscernible] so we should get to consent ROE once we get the scale of term, which is about 18 months to 2 years from now. So we have quite a bit of equity there. So our idea is to get there and you will see in [indiscernible], but it will be gradual. But I think getting to a double-digit ROE is an important milestone for us.

The next question comes from the line of [ Rajesh Vanish Kumar ] from JM Financial.

I just have 2 quick questions. First one being obviously the cost to income in mutual fund that has improved approx 10%, [indiscernible] and as we continue to scale, what is the steady-state efficiency level that we are targeting on -- how does one view the near-term potential in the equity AUM? I'll ask the second question [indiscernible].

So as I said earlier, our expiration in the mutual fund equity loan is to grow at 20% plus. We are growing faster than that, but our [indiscernible] spill grow at 20%. As you know, 8%, 10% comes out of your NTM growth in a normal year. and the other comes from new money. We already have also a very strong SIP book, INR 600-odd crores and all. And as we introduced a couple of new products, NFOs and all, that also helps you connect additional AUM. So I think getting to 18% to 20% AUM growth in equity is a good target to have. Cost/income ratio, we are in the 60s now. I can -- eventually are going to do as a good cost income ratio for a mutual fund should be 45% to 50%. And hopefully, I think we should also get there as the scale happens in the next 2, 3 years. So we do expect that we would also want to list our mutual fund at some point of time. So when we list, we would hope that the cost income is [indiscernible] constantly. I think invest in efficiency and technology and not allow your cost to grow as the income is growing.

Understood. That was helpful. The last question I have is in [indiscernible] recently launched [indiscernible] with IT, which has received [indiscernible]. So the question that comes to the mind is how does [indiscernible] from other infra yields in terms of, let's say, risk income generation on overall [indiscernible]. If you could just throw some light on that.

Sure. Different kind of [indiscernible] there. There are some which are mainly steady in which saw declining in need where the assets are declining because as every year was by the new roads have the road concession, which is 20 has become 90 years, [indiscernible]. So there are also in which we saw growth in where you are [indiscernible] new assets so that your EBIT horizon keeps on expanding. So we want our EBIT to be a growth in it. We'll keep on adding assets as we go along. We understand this business very well. The second is we also have a very strong operating team, which actually can manage the asset and run the asset. So we are not just financial investors. We also do the assets to do well. And most of the which are [indiscernible] transportation in it? And those different seems very nuanced, transportation Indian do a lot of other things besides loans. So we can do things like ad boards and ports and other transportation hubs. We can do cable card, which is a big group in India, all the crude spots are we have a lot of cable cars coming in, a lot of the transportation is going to be via cable cars because that is easy to do, and it doesn't require a lot of infrastructure. So a lot of smaller cities that will also be the gain. So when you have a transportation in it, your options on what assets which are there in transportation are a lot more then in the roading Road is the big part of transportation, but transportation has a little bit more optionality on much higher aging assets also.

The next question comes from the line of Sujan Jain from Walford BMS.

Sir, just a couple of questions. Given the bearish market environment in March, how did it impact performances across our business segments, like which PBT largely flat for the year, what is your assessment of the overall financial impact?

Very hard to put an impact, but I think a lot of our -- a mutual fund also has a lot of sponsored investments, right? They have almost INR 100-odd crores, which are comparisons investments. we also have a lot of treasury activity on arbitrage and other things. So I would say, overall March would have impacted about maybe INR 40 crores, INR 50 crores on a consolidated basis, but they're hard to estimate because there are many factors, different businesses. But across all the businesses because there are equity investments in quite a few businesses also. So across all the businesses, maybe INR 40 crores, INR 50 crores impact would have come. But it's normal. I think this things happen. In India, we have to learn to a little bit on this.

Another question is then, how does the -- or private credit opportunity in India defer from the global markets which key asset class even private credit, do you see as the most attractive for -- in terms of growth perspective going forward? .

So all -- actually, there are 3 categories in private credit. One is special situations. One is performing credit. Other is called investment grade credit, IG credit. They all would be cater to different investor needs. IG credit usually is about 12% to 14%, 12% to 14% performing credit is 14% to 18% [indiscernible] 18 plus. They all have driven nuances. They have different capabilities, and they cater to a different kind of investor needs. So all of them are good. We obviously have been very strong in the special situations category almost if you look at our out of the target credit approximately INR 20,000 crores we have, almost 65% is in special situations. Also, it differs from international because international a lot of private credit funds are slightly open-ended. They are called semiliquid that every quarter, you can go and redeem your holdings and actually, of late, that is where you are seeing some of the problems that are happening. In India, there are no liquid credit funds. All AIF in credit are close-ended. So the fund has a lot of building power. There is no redemption pressure that can come. So one of the biggest difference between private credit globally and India is that India all funds are close ended. So there is holding power. We [indiscernible] have to try to liquidate something in distress. I think globally, a lot of private credit funds have gone into open-ended or things which are referable. On top of that, the international private credit market has also been very competitive and very high growth. A lot of people have gone down the discom. That has not happened in India because in India, there is still a scarcity of capital. It's not easy to use a private credit fund of scale. I mean, private credit funds, which are more than INR 4,000 crores to INR 5,000 crores of you can count them on your figures. There a lot of INR 500,000 crore funds, but today, a big fund is not easy. So I don't think where the intensity of competition, which is creating asset quality issues globally are happening in India. So on that count, India is a pretty open. This is a very small market. but we hope that it continues to grow, but in a steady manner, not a very fast world.

Our next question comes from the line of [indiscernible], an individual investor.

Both of them relate to [indiscernible] I think we spoke a lot about operating leverage in the business. This year, I think revenues were up about 22%, 23%. Costs were also up about 25%. So is that due to some of the exceptional items that we were referring to at the start of the call?

[indiscernible] we will operate at a 50% to 60% cost income ratio because there, it's a very people-driven business. We need people and we constantly invest in new [indiscernible] business as a product. So this year, a little bit of uptick in costs have happened is because we expanded the team, the international sales as we're introducing new -- couple of new products, the investment in that has started. So partly, I think that will be -- I would expect that to be a cost income ratio of about 50% to 60% range, we will fluctuate in that from a quarter-to-quarter basis. The mutual fund is the one where there is a lot more up in average because it's a more retail business. While this is more institutional, more wholesale, so you need salespeople, we need investment deal all of that.

Understood. And just the second one was I think we talked about the INR 1,500 crores going towards debt reduction once the IPO happens. Have we utilized -- we saw the 4.4% for INR 375 crores. We utilize that for debt reduction because net debt seems to be flat year-on-year.

Yes. We [indiscernible] on that on INR 6,000 crores of debt, we have an annual interest burden. I mean every quarter is about INR 100 crores to INR 200 crores. So there is an interest meter also on the other side. So the fact that for our investment holding company, the fact that we have flat itself means that at least whatever interest was that, that has come from stake sale and as early clarify, a lot of the activities we did last year, like [indiscernible] mutual fund, [indiscernible] IPO prep like the dividend coming from underlying companies. A lot of the work has gone in the last year FY '26, but the actual cash will come in FY '27. So I think on that basis, we expect that a lot of the -- over and above the interest, we have say, about INR 400 crores, INR 500 crores will get added only because of interest. But this year, we're expecting INR 2,500 crores to INR 3,000 crores of cash flow realization. So there will be a significant fall in that.

The last question comes from line of [indiscernible] Capital Limited.

Sorry for the questions will be repetitive as I joined in late, but I have a couple of questions. So the first question is on our insurance business. So like combined losses in our insurance business declined by 23% over the last 2 years. And lots in life insurance has remained flat because of GST and other exceptional items. Also in Q2, we saw market volatility as compared to last year. So how confident are we about achieving breakeven over the next 4 quarters? That is my first question. Second question is how do you see India's capital market position in the context of this global and uncertainties, it is there. So [indiscernible] I have my 2 questions.

Starting on the first one. We are pretty confident that we'll get to breakeven -- we are working very hard for that. There were some exceptional items this year, next [indiscernible]. But we are doing a lot of things to get to breakeven. So we keep [indiscernible] confident of getting there. I think, as you said, the global geopolitical event and the global [indiscernible] high oil price is going to affect India. We do think there is something for the next 3 to 6 months. But I think India is resilient or reserves are there, plus I think economy is in a pretty good place to be able to handle that. Just because you handle it, it doesn't mean -- it will not be painful. It will be painful, but handleable.

We will take that as the last question. I would now like to hand the conference back to Ms. Priyadeep Chopra for closing comments.

Thank you, [indiscernible], and thank you, Rashesh, for all the answers. Thank you, each one of you for your time today. I enjoy to have you all and listen in to your insightful questions. Please do write it to ask the Edelweiss Investor Relations for any other questions and feedback or any additional information you may need. Thank you, and have a great day ahead. Bye-bye.

Thank you very much, ladies and gentlemen. On behalf of Atlas Financial Services, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.