Nippon Life India Asset Management Limited (NAM-INDIA.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Nippon Life India Asset Management Limited Q2 and FY '26 Earnings Conference Call hosted by InCred Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Meghna from InCred Capital. Thank you, and over to you, ma'am.

Thank you, Ikra, and good evening to everyone. On behalf of InCred Equities, I welcome you all to Nippon Life India Asset Management Second Quarter FY '26 Earnings Conference Call. We have along with us Mr. Sundeep Sikka, Executive Director. We are thankful to the management for allowing us this opportunity. I would now like to hand it over to Mr. Sundeep sir for his opening remarks. Over to you, sir.

Thank you, and good evening, and welcome to our Q2 FY '26 earnings conference call. We have with us our CFO, Parag; CBO, Saugata; Deputy CFO, Amol; Chief Digital Officer, Arpan; Head of AIF, Ashish; and Deputy Head of AIF, Aashwin; and Matsui Shin, Nominee of Nippon Life Japan. I would like to share key highlights of our performance. And post that, I will hand over to Parag to speak in greater detail on the recent industry trends as well as our performance, post which we will move to Q&A. Coming to the key highlights, I would like to start by mentioning that NAM India has achieved its highest ever quarterly operating profit at INR 4.19 billion. Further, NAM India was the fastest-growing AMC in the top 10 AMCs in H1 FY '26. This led to an increase in our overall AUM and equity market share. We have had the highest increase in AUM market share in the industry in H1 FY '26. Our market share at 8.51% is the highest since June 2019. Importantly, both equity sales market share and SIP market share remained well above our equity AUM market share. Our SIP market share was again greater than 10% in September 2025, and our equity net sales market share was in the high single digit for the quarter. Also, happy to share the Board of Directors have declared an interim dividend of INR 9 per share, along with the Q2 FY '26 results. Now I will hand over the call to Parag for further details on the industry trends and our performance.

Thank you, Sundeep. Let me start off with the markets. Equity markets for quarter 2 FY '26 witnessed a decline from prior quarter levels. The Nifty decreased by 3.6% quarter-on-quarter, while the Nifty Mid and Small Cap indices decreased by 4.3% and 6.2% quarter-on-quarter, respectively. The repo rate was stable at 5.5%, while the 10-year G-Sec yield increased by 25 basis quarter-on-quarter to 6.58%. Coming to data on the mutual fund industry. Industry quarterly average AUM grew by 16.5% year-on-year and 6.9% quarter-on-quarter in Q2 FY '26 to INR 77.1 trillion. The share of equity in overall AUM increased marginally quarter-on-quarter ending at 56.8% for Q2 FY '26 from 56.6% in Q1 FY '26. Now moving to the industry flows. The equity category, excluding index fund and arbitrage fund, witnessed a gross inflow of INR 2.62 trillion and net inflows of INR 1.41 trillion. Both gross inflows and net inflows were higher quarter-on-quarter. Categories with the highest inflows were Flexi Cap, Small Cap and Mid Cap funds. The fixed income category witnessed a net outflow of INR 28 billion in the quarter after the net flow of -- in the prior quarter. The ETF categories had a net inflow of INR 317 billion. Moving on to SIP. Industry SIP contribution for the quarter was INR 861 billion, up 21% year-on-year and 7% quarter-on-quarter. Monthly SIP flows in September 2025 stood at INR 294 billion, an all-time high. Further, contributing SIP folios increased by 6.1 million, that is 7% higher to 92.5 million for September 2025 over June 2025. At the end of the quarter, unique investors in the mutual fund industry increased to 57 million, that is an increase of 14% year-on-year. Now moving to our business performance. We closed the quarter with a total assets under management of INR 7.61 trillion. This includes mutual fund, managed accounts, offshore fund and GIFT City funds. Our mutual fund quarterly average AUM grew 19.5% year-on-year and 7.1% quarter-on-quarter to reach INR 6.57 trillion. We were the fastest-growing AMC in the top 10 in H1 FY '26 and had the highest increase in quarterly average AUM market share in H1 FY '26 among all AMCs. I would like -- I would now like to share a few key highlights for the quarter. Starting with the market share. Our market share increased 22 basis year-on-year and 2 basis quarter-on-quarter to 8.51%. Our equity market share increased 17 basis year-on-year and 9 basis quarter-on-quarter to 7.13%. The share of equity AUM in our overall AUM increased by 0.7% quarter-on-quarter to 47.6% for Q2 FY '26. We achieved a high single-digit market share in net sales in equity plus hybrid segment in Q2 FY '26. We continue to have the largest investor base in the mutual fund industry with 21.9 million unique investors. We are humbled to have over 1 in 3 mutual fund investors invest with us. During the quarter, we also completed the NFO of Nippon India MNC Fund, which collected INR 3.8 billion. I would also like to touch upon some important aspect of our systematic book. I'm happy to share that there has been continued momentum in our systematic flows. Our monthly systematic book rose by 16% year-on-year and 10% quarter-on-quarter to INR 36.4 billion for September 2025. This resulted in an annualized systematic book of INR 437 billion. SIP market share stood at 10.02% for September 2025. Moving on briefly to the ETF segment. We continue to be one of the largest ETF players with AUM of INR 1.83 trillion and a market share of 19.77%, which increased by 160 basis year-on-year. Our share in the industry ETF folios is 50%. We also have 49% share of ETF volume on the NSE and BSE. Our ETF average daily volume across key funds remained far higher than rest of the industry. The industry witnessed a surge in gold and silver ETF volume in the quarter. In terms of closing AUM, NAM India Mutual Fund gold ETF was up 36% quarter-on-quarter and the silver ETF was up 89% quarter-on-quarter. Combined AUM in these 2 ETF was INR 450 billion as of September 30, 2025. In Q2 FY '26, we launched 3 new products: Nippon India Nifty 1 Day Rate Liquid ETF, Nippon India Nifty India Manufacturing ETF, Nippon India Nifty India Manufacturing Index Fund. Moving on to our digital franchise. Digital purchases transaction and new SIP register rose to 4.2 million in Q2 FY '26, up 18% year-on-year. Digital business contributed 75% of the total new purchases transaction in H1 FY '26. NAM -- Nippon India Mutual Fund continues to strengthen and enhance its digital capabilities to meet the ever-growing needs of today's tech-savvy investors. Our focus remains on providing best-in-class digital experience to our customer with constant addition in features and capabilities across journeys. Now I would like to briefly update you on our subsidiary and GIFT City. Starting off with AIF. Under Nippon India AIF, we offer Category 2 and Category 3 AIFs and have raised cumulative commitment of INR 87.2 billion across various screens, up 30% year-on-year. In Q2 FY '26, we raised INR 6.2 billion of commitment across various asset classes. Fundraising is currently underway for 2 of our listed equity AIF, residential RE fund and direct VC fund. Fund deployment across all the strategies was robust in the quarter with 12 active investment in performing credit and full deployment in our venture capital FOF across 14 funds with underlying exposure to 410-plus start-up companies. Our future product pipeline includes Nippon India Credit Opportunity AIF Scheme 2, second performing credit fund. On the offshore front, asset under management grew 6% in H1 FY '26 to INR 161 billion, with inflows coming in from various geographies in Asia, Europe and Latin America. We continue to expand our footprint in the Japanese institutional and retail markets in conjunction with Nissay Asset Management Corporation, Japan. We also continue to expand our footprint in the new geographies in the Asian, European and Latin American region. Moving to GIFT City. As stated previously, we currently have 2 feeder funds, namely Nippon India ETF, Nifty 50 BeES GIFT Fund; and Nippon India Large Cap Fund GIFT. The AUM of these funds more than doubled quarter-on-quarter to USD 31 million. Now on to our financial performance. For Q2 FY '26, revenue stood at INR 6.58 billion, up 15% Y-o-Y and 8% quarter-on-quarter. Other income stood at INR 0.37 billion, down 70% year-on-year and 75% quarter-on-quarter. Operating expenses stood at INR 2.39 billion, up 16% year-on-year and 5% quarter-on-quarter. Operating profit stood at INR 4.19 billion, up 15% year-on-year and 11% quarter-on-quarter. Profit after tax stood at INR 3.45 billion, down 4% year-on-year, 13% quarter-on-quarter. For H1 FY '26, operating profit grew by 18% year-on-year. Profit after tax grew by 7% year-on-year. Further, the Board of Directors has declared an interim dividend of INR 9 per share, along with the quarterly results. With this, I would like to conclude my remarks and open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Prayesh Jain from Motilal Oswal.

Sir firstly, on the regulatory change, the consultation paper. What are your thoughts as to what could be the impact if it is implemented as it is? That would be my first question.

You want to continue with all the questions, then we can answer it together.

Sure. I'll do that. Second is from an industry perspective, the SIF category is kind of seeing a lot of launches by everyone. What are your thoughts as to where will kind of Nippon play a role in that? And thirdly, from a bookkeeping standpoint, could you give us the yields on the various asset classes? Yes, that would be my questions. [Technical Difficulty]

Ladies and gentlemen, the management line has been disconnected. Please hold on while we get them connected. Ladies and gentlemen, thank you for being on hold. The management has been reconnected. Thank you and over to you.

Should I repeat the questions?

Prayesh, if you could repeat the second question you had. First one, I noted; the second one, please.

Yes. The second question was on the SIF category, where we've seen quite a few launches -- a couple of launches in the industry. What are your thoughts and what are the plans there for that particular segment? And do you think that this segment can be a big segment going ahead, and whether Nippon is setting up a separate team and what are the thoughts there? And third is a bookkeeping question on what is the yields, realized yields across the category, equity hybrid, equity debt and liquid and others?

Prayesh, I'll take the first 2 questions, and I'll request Parag to take the third one. So I think on the recent SEBI consultation paper, which has come on October 28, firstly, let me say the regulator has been continuously taking steps in the interest of the industry and this seems to be a similar step. I think while we need to look at the paper holistically as it seeks to enhance regulatory clarity and investor protectism, but it also promotes ease of regulatory compliance. Now there could definitely be some financial impact. Now we are still evaluating, but it's only been 2 days, day before yesterday it came, today was a Board meeting. But we are internally assessing it. But I would just like to give you with this thought that this is a consultation paper, we should not assume that whatever, I mean, ultimately SEBI has always done, taken feedback from public and basis that have taken some decisions. So this is a consultation paper at this point of time. And the question is, in the present form and manner, there can be some financial impact. We have not been able to calculate what is that impact. But we believe overall, it is not as damaging as we perceived to be. So that's point question number one. I think question number two, SIF. We already have set in a team in place. I think we have Andrew and team, which is working on SIF. So we will be -- we are in the process of launching our funds. To your question, how big? I think we personally believe I think this category can be very, very big because there is an inherent demand [indiscernible]. The reason we are trying to go slow on it is I think we are trying to build up a stronger foundation before we launch the products, I mean, whether to do it from a risk framework point of view and various other things. But we are very, very bullish about this category.

And Prayesh, on yields, the equity yield is 54 basis, debt is 25, liquid is 12 and ETF overall is 17 basis. The average yield on overall assets is 36 basis, which remains similar as last quarter.

Any -- just a follow-up on that yield part. So any alterations in commissions, something which we have done in this quarter or any changes that we're looking to do going ahead?

Yes. So Prayesh, I was just continuing that. We did one scheme in this quarter, which covers almost overall 4 schemes in the last 2 years, covering almost 60% of the equity AUM, and we have done on a variable basis. So that is a long-term strategy we always done when we do a reduction in -- any changes or rationalization in the commission.

So we've done 1 you're saying in this quarter?

Total 4 for the...

The next question is from the line of Divij Punjabi from Banyan Tree Advisors.

So we're seeing a high increase in other expenses of 9.4% quarter-on-quarter. So can you just help us understand that increase?

Okay. So Divij, the other expenses increase is due to some of the branding exercise, which we did in the current quarter, which was not there in the last quarter, plus there are some investment which we have done on the technology side, which is coming and some of the expenses which are there for the new offices, which we have taken in our new office, which we have taken. For that, there are some maintenance charges which have started coming from this quarter. So that is what roughly overall reason for the increase in other expenses.

My second question is around the debt segment. So growth here has started to pick up. So can you just help us understand like which things are doing well here and what is the outlook going ahead?

Yes. So Divij, this is Saugata Chatterjee here. So if you have been following our commentary for the last 3 quarters, we have been communicating that fixed income is one category where we wanted to build up our scale and market share. And across the categories, we have started seeing positive inflows coming in, which includes the short term as well as the longer-term products. And that's, I think, the reason why our market share has started now inching up. And with the view on interest rates from a slightly longer-term point of view being positive, we feel that such products will definitely add value to the investors' portfolio. And we are doing a lot of engagement with investors and distributors to ensure that these categories start getting meaningful allocation into the investors' portfolio.

[Operator Instructions] The next question is from the line of Harsh Gupta Madhusudan from Ionic.

My question is, is it possible for India to see futures and options on ETFs? Is there a regulatory requirement against it or is it just because the AUM is not large enough?

I think this is a question I don't think I'll be able to answer. I think there are certain restrictions at this point of time. I mean at this point of time, we have more vanilla products. But you never know, I think one good thing is I think SEBI is always in a conservative mode. So you may see something like that coming in ETFs also. But at this point of time, it is not there. But the only good thing what has happened is I think in SIF, I think this option will be available. So with respect to ETFs, I mean, it's a future, it will be impropriate for me to comment on something which the regulation does not allow to do at this point.

Is there any other form of ETF innovation that you have in pipeline for Nippon or across the industry, are you noticing anything?

So I think I'll give you a little different perspective. Let me give you a different perspective to the whole thing. While we'll continue innovating and launching products, but if you see globally, you look at the top 10 economies -- countries in the world where the ETFs are of a significant size, 80% to 90% of the ETFs are in the plain vanilla benchmarks. So it is -- I mean, whether it's -- so like in our case also in India, whether it is Nifty, Sensex, Bank Nifty, gold, so typically, this is a trend across the world. In some places, it could be 70%, in some cases it could be 80%. So we'll continue working on innovation, but I think our bigger focus will be to continue to focus on the core products, which are there where the investor appetite is higher and to ensure there's lower tracking error and high liquidity.

The next question is from the line of Kushagra Goel from CLSA.

Regarding your non-MF AUM, so just -- I know you talked about how the subsidiary and AIFs are leased. But if you could share more color on how we should look at it growing going forward as well? And secondly, if you could share it's yield or the fees which you get on that, how should we think about those moving?

So Kushagra, the idea is to grow our non-MF businesses, and we have a separate subsidiary, which is our alternate asset -- alternate investment fund subsidiary, where we continue to grow our AUM, and we continue to keep on doing various launches on private credit, equity and VC funds. So we are selling it in India market, also in international markets. So that is the idea, plus growing our offshore subsidiary AUM will also be a focus area for us going forward. Currently, it's a small part of our overall business, but the ambition is to grow bigger. The yields currently on these products is in the range of around -- it's very wide depending on the product [Technical Difficulty].

Ladies and gentlemen the management line got disconnected. Please hold on, while we get them reconnected.

Sorry, the call got disconnected. I think some technical glitch. So the yields on these products are a wide range. It's -- some of the product, it's in the 60 basis and some product we earn around 120, so the range is very wide.

[Operator Instructions] The next question is from the line of Meghna Luthra from InCred Equities.

I just had 2 quick questions. One is a data-keeping question that is the gold ETF the same yield as other ETF book? And my second question is, I wanted to understand what is the -- what proportion of our sourcing, especially on the SIP front is from fintech? And how do we compete in this segment? For instance in the MFD segment, there are elements of relationship with the MFD, the performance of the fund, the location and the commission. So what elements play out in the fintech segment? These are my two questions. And what proportion is of the SIP book is from fintech?

So gold ETF, the realization is much higher than the average ETF. Normally -- so I think it's much higher. Our average yield for ETFs is 70 basis points. For a gold ETF, it's higher. To your question on fintechs, I think that we -- if you were to go back to a lot of calls every time we say, I mean, it is not about when investors invest, it is not always about brokerages or anything. It's ultimately a package of trusting the brand performance, various things that pull the investors. And I think from an earlier question, which was asked to Parag, I mean with expenses going up to which he answered that, I think we are investing in building the brand. It is the brand that pulls the investors towards us, the brand perception, performance and especially because we are very strong from a risk management point of view, investors who clearly -- I mean, there are some investors who are always looking for returns, some investors who are more looking at risk-adjusted return, and I think I mean those are the investors they get attracted to us. But I think there is no other pull factor -- there's no other factor. I mean these are -- it's a composition of multiple things: brand, emotional connect with the brand and the pull that gets created because of that.

Okay, sir. And what proportion would be source of SIP sourced through fintechs?

SIP fintech is about 25% by value.

Okay. And the gold ETF number, sir, I don't think we'll be disclosing that, right?

No, we will not be disclosing that.

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

Sir, I have 2 questions. Firstly, on this rationalization of equity, [indiscernible] so going ahead, how should one look at those? Are we planning to [indiscernible] and if you could quantify like what, how it could have helped get the yields impact of 1 basis points? Second, just a clarification on...

Can you repeat the question? It was a little this thing...

Your voice was cracking, Lalit. Can you please repeat it?

Yes, sir. So just wanted to understand like on the rationalization of commissions in one of the schemes. So going ahead, how should one look at this? Like are we planning to do rationalization in those schemes? And secondly, sir, one clarification on the ESOP cost. So as per the filing, it says that our ESOP cost for the quarter was around INR 6 crores. So -- and whereas we have earlier guided that it would be in the range of around INR 46 crores to INR 48 crores. So I just wanted to understand like how -- so will that cost increase in the next subsequent quarters?

Okay. So I'll take the first part, Saugata this side. With regard to rationalization, like we have been mentioning that almost 60% of the equity AUM has been covered under the rationalization scheme, and that definitely is a long-term strategy, which we have built. The good part is we have multiple products which are in the process of building up scale. And hence, we will be conscious of the fact how do we price our products in the market. And as and when the scale and size increases, we will definitely take decisions around those products. As of now, these are the 4 categories or 4 schemes where we'll continue to maintain the rationalization, what we have done.

And Lalit, on the ESOP, the INR 6 crores is on the new scheme and the overall spend is for the current quarter is around INR 9-odd crores.

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

Just a couple of questions. Firstly, the previous question on the ESOP, so what should be the run rate that we should be taking for the second half and year going ahead? And second is on the offshore business, if I look at the AUM, it's been kind of actually on a decline or slightly declining trajectory from about INR 172 billion in September '24 to about INR 161 billion in September '25 on the managed side, right? Now why is this kind of stagnant or a slight decline? And how do you think we can grow this piece of the business?

So on [indiscernible] the ESOP, the total expected spend for the year is in the range of around -- the one which we mentioned earlier is in the range of around INR 40 crores to INR 43-odd crores. Currently, we have around INR 18 crores, INR 19 crores of hit in the first 2 quarters.

And next year?

Next year, we will be in the range of around -- if the current plan continues, it will be around INR 26-odd crores.

Got that. And on the question on offshore?

So as you know, Prayesh, the overall geopolitical situation internationally, and that is why the offshore is slightly not grown. And the decline is mainly due to the MTM, which has happened because offshore is a lot of driven by the equity flows in India. So the MTM impact also had on the AUM, which has resulted in lower AUM.

I think only thing I'd like to add is, I think while definitely, it's a little AUM is lower, but there is a lot of initiatives and activities happening. I think and you will see in the coming few years, I think the AUM from offshore will keep increasing.

Question on the [indiscernible] we have kind of altered the commissions, how should we think about the yields going ahead on the equity side? Do you still maintain the 1 to 2 basis points every time every year on an overall basis?

Yes. So Prayesh, the historical data shows that. And we think that with the growth in the AUM and with the telescopic pricing, we are -- at least we remain in the range of around 2 basis every year...

On the equity or on the overall?

Overall, overall.

The next question is from the line of Mohit from Centrum.

My first question is actually, I was looking at your distributed assets pie chart, and I see the retail share jumped sequentially from 50% to 54%, whereas corporate fell from 14% to 11%. So one -- so how should one read into this? And do you think that retail gain is kind of sustainable?

Saugata, this side. So I think it's an important question because like you have been observing our commentary and what we have been communicating is that we have a very strong retail franchise through the mutual fund distributors as well as our SIP book is increasing. The growth of SIP book, the growth of equity assets and the deepening of the investor base, what we have done by going deep into India is resulting in more retail money coming to us, which probably is something which we will keep building on because these are [indiscernible] long-term assets, what we are gaining. We also did mention to you that we are trying to build our fixed income business through the distribution channel, that's also helping us to get a lot of retail money now into mutual funds. So the pie shift has happened. It may not increase substantially from here on, but the overall growth in the distribution business will definitely happen as we go ahead.

Understood. That is helpful. Secondly is in terms of the branch expansion, so I think you opened 5 branches in Q2. So what is your strategy going forward and what will be the impact on your operating expenses on the same?

I don't think so -- I mean the impact on the new branches will be very high. So I think what we are doing is basically, I think -- to break it down in 2 parts. I think one is, I think some of the old existing branches which were there, I think we're going to refurnish in bigger branches more in the format of banking kind of a thing, where it's more, I mean, a customer-friendly kind of thing. That is one. And the other branches which we plan to open in very small cities and towns, we were talking of 300 to -- 200, 300 city locations and above. I mean out there, the cost is not very high. So I mean, I don't think so from the cost point of view, the branches will be high. The only cost that you have seen in this financial year is going to be the new office that we have acquired. So -- but that's going to be a onetime thing, but branch cost will not be very high.

Okay. But what is the strategy? I think you would open such branches in the, say, next 18 to 24 months as well?

So we would like to refurnish a lot of our branches, which were more basically in the old format. I mean when there are smaller branches and all, I think we are trying to be more visible. I think bigger branches, more bank kind of branches. So I mean, if you were to see our branches in Jaipur, Surat, Bhubaneswar, I mean, they're very unconventional branch -- mutual fund branches, they're more similar to bank branches. So that's the concept that we are working on.

Understood. That is helpful. My last question is in terms of the market share in ETF business. I think it's very healthy. We have kind of expanded as well if I look over the last 12 to 14 quarters. But if I look sequentially, it was kind of flattish. And basically, my question is that, do you think that owing to competition, we have peaked at around 20% market share or do you think there's scope for further expansion?

Yes, again, I don't think it's a question of competition. I mean, if you were to again look at it globally ETF business, the top 2 or 3 players typically take 80% to 90% market share on their liquidity. So it's a little -- I think what you have seen is because I think we had a little bit of EPFO money, I mean, in EPFO, which was in CPSE ETF long back. I think and their goal of -- I mean as per the public information available, they are booking some profit. But overall, I think I have taken the other way around during Diwali period, if you look at gold and ETF, I think we were 53% volume on the stock exchange. And this continues to grow. So at a healthy 20%, even if we were to maintain the same number and the market grows, I think it's a very big positive for us.

Congratulations, Sundeep sir, for reappointment as MD and CEO.

Yes. Thank you very much.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

So thank you all. Thank you all for joining this call. If you have any questions, you can connect with our Investor Relations, Arash, and we are happy to answer your questions. Thank you.

Thank you, sir. On behalf of Nippon Life India Asset Management Limited that concludes this conference. Thank you for joining us, and you may now disconnect your lines.