Nippon Life India Asset Management Limited (NAMINDIA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to Nippon Life India Asset Management's Limited 3Q FY '20 Earnings Conference call hosted by JM Financial. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Mr. Sameer Bhise from JM Financial. Thank you, and over to you, sir.

Thank you, Bikram. Good evening, everyone, and welcome to Nippon Life India Asset Management's 3Q FY '20 call. With the management team, we have Mr. Sundeep Sikka, CEO; Mr. Minoru Kimura, Board Member and Representative of Nippon Life; Mr. Prateek Jain, the Chief Financial Officer; Mr. Saugata Chatterjee, the Co-Chief Business Officer, Distribution; Mr. Aashwin Dugal, who is Co-Chief Business Officer, Institutional; and Mr. Saha, who is the Head of Digital Business. With this, I would like to transfer the call to Sundeep Sikka, CEO of the company. Over to you, sir. Thank you.

Thanks. Good evening, and welcome to our Q3 FY'20 earnings conference call. We have with us our Board Member and Head of Asia-Pacific, Nippon Life, Kimura-san; Prateek Jain, Chief Financial Officer; Saugata Chatterjee, Co-Chief Business Officer, Distribution; Aashwin Dugal, Co-Chief Business Officer, Institutional Sales; and Arpan Saha, Head of Digital Business. This is the first full quarter post the change in ownership. We have launched our new brand, Nippon India Mutual Fund, on 7th of October. Post rebranding, feedback from investors, distributors has been positive, and we have seen the [indiscernible] across all segments. We have done rebranding of over 300 branches and [indiscernible]. Some of the initiatives taken are yielding results, and we have started to see green shoots with return of institutional investors and HNIs that started investing again. Over 170 new corporate SMEs have begun investing with us post the transition. Nippon India Mutual Funds with this reversal of trend is seeing growth after 4 quarters of decline. Our monthly average asset from a low in September '19 of INR 1.97 [ billion, ] rose to INR 2.07 billion. We will continue to build on this momentum in the coming quarters. We continue to have one of the largest retail AUM industry at INR 546 billion, driven by strong on-ground presence and a robust distribution network. Our endeavor is to include as many retail investors, especially from these 30 locations. Our retail AUM contribution to total AUM is amongst the highest in the industry, which stands at 26%. I'm happy to share that for the quarter, profit before tax increased by 19% to INR 1.94 billion. Net profit rose by 36% to [ INR 1.09 billion ]. Our SIP count increased 11% from INR 2.9 million to INR 3.3 million. The progress highlights our retail execution capabilities. The annualized SIP book now is over [ INR 100 billion ]. Over 80% of the incremental SIPs have a tenure of greater than 5 years. We continue to be amongst the leaders in Beyond Top 30 Cities category. This category contributes an AUM of INR 387 billion. Nearly 19% of total assets have been sourced from this -- these 30 locations and against an industry average of 16%. We are the second largest ETF players with a market share of 16% of Indian of AUM of INR 264 billion. If we exclude the ETF allocation, which goes to 2 PSE-owned mutual funds, we are the largest ETF there in the country. On the digital front, I'm happy to share that digital platform contributed to over 40% of our total new purchase transactions. Our investments in digital ecosystem are yielding results, and it grew by 38% to around 1.1 million transactions. Nippon India Mutual Fund Remains well diversified in terms of distribution with new single distributors contributing more than 5.3% of the total AUM. We have 76,000 distribution channels with us. Let me share a brief update on the other businesses, mainly international and alternative investments. Last quarter, we received Sovereign Wealth Fund equity mandate of USD 500 million. I'm happy to share that we launched Nippon India Digital Innovation Fund, a fund-of-funds in technology venture capital space that was announced in June. We have received commitments and LOIs aggregating to greater than USD 100 million from marquee investors from Japan. It is considered in an alternate investment space. I'm happy to share with you, we have launched our first offshore real estate fund in Japan, which is a second offshore initiative after Teachers' Fund. [indiscernible] we have multiple offerings in Japan across traditional equity, fixed income, alternate funds and technology, fund-of-funds, real estate fund and overall the managed asset being -- including commitments of greater than USD 700 million. I'm happy to announce that the Board has declared an interim dividend INR 3 per share. As part of our stated dividend policy, we share 60% to 90% of the profits to the shareholders. To conclude, post transition of the ownership, we have already seen signs of recovery with increased growth, reflecting in sequential -- reflected in the sequential rise in the AUM. We are confident that this will recoup our lost market share in the coming 3 quarters. We are, with our wide distribution network, retail strength and strong parentage -- this will enable us to further capture the untapped opportunities in the Indian asset management space, starting across mutual funds, ETFs, AIF and global sources to India. With these comments, I'm happy to take any questions.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [ Operator Instructions ] We have our first question from the line of Sanjay Shah from Alphaline Wealth Advisors.

Sir, what are the implications of the recent decision by the IRDA to cancel the pledged enforcement of Reliance General Insurance by Nippon? Was hoping means the total value of that pledge shares. And are -- do we expect any write-offs with regard to any Reliance subsidiaries?

Well, let me -- I think, while I will not be able to discuss too much about this issue because as we are getting a regulator and a committee process. I would like to just highlight the fact that the amount in question is INR 320 crores, and it has already been written down as per the valuation norms [indiscernible]. And this investment is in the -- one of our schemes. So it had already been written down. However, from our perspective, we'll continue towards pursuing whatever is required in the interest of the [indiscernible].

Sir, my next question is, what is our current exposure of our total -- AUM in Reliance Capital? And are there any risk of write-offs?

What is current -- everything is disclosed in the portfolio. The total exposure to Reliance Capital is INR 130 crores only.

INR 130 crores only.

See, all this is our exposure from the mutual fund since the balance sheet of the AMC does not carry any kind of exposures.

[Operator Instructions] We have a next question from the line of Shubhranshu Mishra from Bank of Baroda Capital Markets.

Two quick questions. First is, what is the expectation of the profit pool contribution from the offshore funds and the AIF funds, say, with a 1-year or a 2-year perspective?

So at the current, if you see that we've put both consolidated as well as the stand-alone numbers for -- we uploaded the numbers, and the current amount, which we get in terms of the consolidation within the range of about INR 10 crores at the PAT level.

This is from outside or AIF or both the -- or both of that?

No. This is for both the businesses...

Okay. How much for offshore? And how much for AIF, sir? That's what I'm trying...

So we do not disclose the breakup. However, that will be available in our annual balance sheet.

Okay. So -- and what is the expectation over the 2-year perspective?

So we have, in the past, mentioned that our average realization from offshore businesses ranges between 33 basis points to about 40 basis points, and we continue to operate at those margins. And again, it all depends on the what kind of mandate we get and what -- in what space do we get. And we -- as we have mentioned in the past that we have capabilities in terms of equity, fixed income, commodities and ETF space.

And every mandate will be different, like the tech mandate, which the USD 100 million we talked about, which we have bought, has also got the carry profit sharing.

Okay. Right. And sir, the second question is more to do with your AUM mix. So what are the top 20 IFAs contributing to your AUM and the top 3 banks and the top 3 national distributors, if you can share that with us?

I think it will be difficult to give individual numbers. However, I think, about more than 50% of our flow is coming from IFAs or distributors, who are catering to retail.

Right. And again, not all -- what would be -- what I'm trying to get at is the concentration. So top 20, top 50, you would have some kind of a plan.

As the AUMs are given in the presentation and vis-à-vis the past numbers as well. So you can have a look at the presentation, Slide #16, the IFA assets have been given out there with the detailed breakup of what is being contributed by banks, national distributors and IFAs.

[Operator Instructions] We have a next question from the line of Rishabh Parekh from Sunidhi Securities.

Just a couple of questions. One is this other income spike in this quarter to about INR 57 crores from a run rate of about INR 50 crores. Is this -- what is this?

So Rishabh, if you see last quarter, we have actually seen a dip because of the decline in the equity market as well as there were certain markdowns, which happened in the fixed income space. This is because our investment into our own mutual fund schemes, and therefore, there was some mark-to-market adjustment to that effect. So actually, if you see from a year-to-year basis, the amount remains constant. So this amount of INR 57 crore on an year-on basis is largely flat.

And this is the expected run rate going forward as well? I mean...

Also, we can't predict. Again, this is subject to mark-to-market conditions. However, if you see most of our investments into our own mutual fund schemes and into fixed deposits, so to that extent we are insulated, only to the impact would be on the -- whatever happens on the market conditions, we won't be able to predict. That's why it's...

Yes. Yes, fair enough. And just had a question on your SIP book. There has been -- from Q1 onwards, there has been a marginal dip every quarter in the monthly average rate, it was started at [ 8.16% ] Q1. Now it's gone down to [ 8.38% ]. And this is despite an increase in the count. So basically, it means that the average ticket size is going down. So how would you -- if you can throw some more color your strategy around the SIP book and plans going forward in terms of a monthly flow.

I think if you were to look at it, firstly, I think you're right. I think average ticket size is going down by design and we believe smaller ticket size is more sticky, number 1. Across the industry, if you were to see what is happening is the new SIPs, where our new SIPs and the termination ratio has been increasing. We have seen in a while, under the new SIPs, we've been adding about 80,000 to 100,000 SIPs a month. But over the last couple of -- in the 1 or 2 years, and across the markets, we have seen a lot of schemes because all the equity markets have been in a very narrow rally, some of the schemes have not been able to deliver the expected results, because of which some of the schemes has been terminated and which is the phenomena across the industry. But again, we continue our focus on getting -- going deep and getting smaller ticket SIPs.

So is this 80,000 to 1 lakh SIPs monthly addition rate, that is net or gross?

This is gross.

This is gross. So what would be the current translated cancelations approximately?

I think it would be, I think, across -- I mean, since about the last 2 months has been about 40% to 50%.

[Operator Instructions] We have next question from the line of Vikas [ Jhingran ], who is a shareholder.

My question is regarding the [indiscernible]. If you look at quarter-on-quarter basis. It was mentioned in the note which was given to BSE that for the first time we were seeing [indiscernible] but it was quite flattish. So what are the predictions going forward? I mean is it talking about some of the [indiscernible]. So what kind of a growth rate do you expect in coming quarters?

So I think, from our perspective, I would like to again say we will not be able to [indiscernible] the guidance. I think we clearly believe with a lot of loss of market share that happened was because of a lot of headwinds, I think, as you are aware in past. A lot of those headwinds have gone away. I'm not trying to put a number that in this quarter [indiscernible] you know. But however, I think they're very positive. Going further -- going forward, the trends will be much better. .

Okay. And my last question is if you look at the last 4 quarter results when it was not taken over by Nippon, the revenue was very high. But the EPS -- if you look at the EPS numbers in the last 4 quarters, we are growing, so is this purely because of the tax impact or there is any other reason behind it?

Sorry, come again.

What I'm saying is...

First part of the question...

My question is if you look at the gross revenue from the last 4 quarters, so it is quietly going down because we are losing the market share as far as AUM is concerned, but if you look at the bottom line, the EPS numbers every quarter, so we are quite steady and we know -- and the trend is increasing. So probably because of the tax impact, or is there any -- or some internal mix or some cost efficiencies being brought in?

So obviously, we have brought in cost efficiencies, but the revenue part is related to the regulatory change, which came into effect from the April 1. So the -- in terms of the new regime, now the -- whatever revenue do we charge, one that -- overall revenue charging has been reduced by the regulators. And secondly, we have to book certain expenses in this scheme, which we used to earlier book on the AMC, and therefore, what you see there is a decline in the revenue, however, profitability margin was being maintained.

[Operator Instructions] We have next question from the line of Dhruv Shah from Ambika Fincap.

Congratulations on the decent set of numbers. In your last quarter, you said that debt AUM would be going up from quarter-on-quarter basis. But if you see from September to December, we have seen a dip of 6.5%. So when do you see this stabilizing? The debt AUM, I am talking about.

I think the -- if the way you should see it is overall industry -- across the industry, debt AUM, I mean, the flows have been negative. But I think if you would look at the fixed income category, I think we are clearly seeing, I mean, a lot of people who were on the sidelines, I think they are now, again, positive for debt. I think you can see over the next few quarters, people will start moving into debts. But I think from our perspective, the way we see is, I think we leave that choice for the investor to make. But the fact for me is I think post this transition, investors, depending on whichever asset class that they invest to, a lot of them, overall, were earlier ignoring us, I think, have started investing back.

But the decrease of debt is a bit big, right, 6.5% on quarter-on-quarter?

Of course, that's the credit funds, which you see across the industry, has seen an outflow. So I think the way I see it, I think it may take a quarter or so more before the investors start coming back to the credit fund which is long-funded.

Okay. And in your presentation, you had said that around 170 institutions has tied up. So what does that mean? And does that provide to offshore for -- in the [indiscernible]

170 new investors have started -- institutional investors have started investing back in fixed income from this point.

Okay. So they were there already and now they have again started? Or they are the new ones?

Some could be new also, but there are 170 new people who have come back after more than a year.

Okay. And my second question is on your direct AUM. How much will be your direct contribution to your AUM, if you can share that?

Overall it's -- I think, equity is about 14% because a lot of institutional money is also there, which comes direct. But I think relevant to the [ visibility ], I think it is -- equity is about 14%.

We have next question from the line of Keshav Binani from HDFC Securities.

Sir, continuing on the debt question. Can you sort of quantify what -- how much of the downfall in debt is because of the stressed exposures, and you've taken a write-off on those? And how much could be because of outflow? Broad-based sense, if you could give us.

It will be difficult to put it around this way. I think, overall, I think firstly, whatever is there, I mean, any papers there is required to down -- to mark it down, it has been done. So that is there, that is #1. But I think it will be very difficult to -- how much went also because of the markdown and how much is outflow. Overall, the AUMs came -- have come down substantially. And I think, respectively, we clearly expect things to change now. But I think at this point of time, we don't have any paper there's a markdown. If it was required, that has not been done.

Okay. So just on continuation with that. If -- now that we are -- the debt will grow, obviously. So on that front, what's your strategy? Will you be willing to pay probably higher distributor commissions to recoup our lost market share on the debt side? Obviously, on the liquid side, we're seeing inflows coming in and AUM growth is pretty healthy quarter-over-quarter. But on the debt side, will you be willing to pay higher commissions?

Our focus always remained on positive growth. I think we don't -- as a strategy, don't go out to pay extra brokerage to get business. We are confident of regaining, getting back the allocation based on the strength of the product and our distribution.

Okay. And the second question I had was on the staff costs. So on the staff cost number, if you see, it has declined about 5% Q-on-Q. And even the staff number has come down from 1,100, to 1,050, so -- but the branches haven't come down. So who are these people who are no more employed with us? And how are we cutting down in staff costs? That was the...

So basically, that we have mentioned in the past that we'll keep working on the efficiency and automation. So -- and of course, there has been some normal attrition which we have not been replacing. It is not that people have left. So there are normal attrition and because of automation, we have been rebadging the people. So obviously, we are -- as we mentioned, that we'll continue to focus on those efficiencies, and the result is in front of you.

So these people largely can be alluded to back office, sort of -- these are not the sales personnel. Can we...

No, no, no. No, of course not, because the front line sales force cannot be replaced. So what we're talking about these efficiencies and automation in, predominantly, the back office.

[Operator Instructions] And your next question from the line of [ Abhishek Naik ] from RW Investment Advisors.

My question is on -- regarding the ETFs. So what's the mix of institution and retail contribution to ETFs? And what is -- what are the current inflows? Are they -- with respect to current inflows, sorry -- are they more towards retail -- coming from more retail side or institutional side?

I think ETFs, as a category, if you were to look at India, I think we have, roughly, at this point of time, about -- roughly about 909 lakh investors in ETF. However, if you were to look at from a volume point of view, majority of the ETF AUM typically comes from institutions and HNIs more than retail. I think it's more because they are both savvy. Again, very difficult to put a number to it, how much is institution, how much is retail AUM in it. But I think we are seeing one thing very clearly that over a period of time, on a regular basis, more retail investors are also coming into ETF. I think what I'd like to highlight is that, for ETF business, one of the most important things, is basically liquidity on the exchanges. We are happy to share with you we have 76% market share of ETF volumes, both on NSE and BSE.

Yes, yes. And so continuing that, so can we say that the current ETF's retail investors' assets, are they coming from top 30 cities?

Again, that data is never available because it comes through the exchange. And if so, it will actually be difficult for us to give you the data. But I think [indiscernible], I think we are seeing steady investors coming from across, that's not only from small cities or big cities, I think you have investors coming from across the country.

Okay. One last question. What would be your blended margins for equity, debt, liquid and ETF separately?

Yes. So right now, the stand-alone basis, you see our net realization is about 53 basis points. And on the consolidated, it's about 55 basis points.

Separately, can you share for equity funds, debt funds?

We do not give this breakup. This will be available in our annual results. Quarter-on-quarter, we don't give this breakup.

Okay, sir. Just one more question. So the 170 new investors that have been activated this quarter, so their inflows will be more towards debt or more towards equity?

Majority, I think, that's very difficult to us, but I think majority will be towards the fixed income.

So we have next question from the line of Jignesh Shial from Emkay Global.

Two questions quickly. One now since the transformation has been done, the Reliance is out, how is the overall experience on the corporate debt side? And are you seeing the synergies of the Nippon as a brand? How is that helpful? If you can give some numbers right now, that would be helpful. And number two, the real intellectual -- one second please, I'm sorry. I'm not able to access the PPT quickly, but can you give me what kind of fund is it and how big can it be? Gradually, your [indiscernible] international funds and all. These are my two questions.

I think your first question, I think, post the transformation, on 7th of October, we changed the brand of the company. It was changed from the Reliance Mutual Funds to Nippon India Mutual Fund. Overall feedback has been very positive. As expected, whenever a change like this happens, it typically -- it starts with the corporate treasuries, which start moving fast. They normally take decisions first, then comes the HNIs and the retail. So I think, it's going as planned. Nippon has been very proactively -- the Nippon representatives in India and from Asia have been listing a lot of institutional investors across the country. And this has been giving a lot of comfort to the investors. So the fact that 170 investors which have come, many of them have also been listed by Nippon as representatives, both from India and Asia. Coming to your second question on international. As far as international mandate is concerned at this point of time, as mentioned in my -- as I mentioned earlier, the last quarter mandate that we got from SWF, Sovereign Wealth Fund, was an equity mandate of a USD 500 billion -- USD 500 million. In Japan, we have launched this technology fund, which is USD 100 million, which is a fund, which has a fixed fee plus the profit sharing. We have also launched another fund. This is of USD 100 million. We have also launched another real estate fund. We have just started fundraising here. As we talk today, we are about maybe USD 20 million , USD 25 million, but I think we have just very recently started here, so this is a separate fund. Other than that, we already have 3 other funds in Japan, 2 bond funds and 1 equity fund, which have total -- all 3 put together have AUM of USD 1.2 billion. It was distributed by 18 different distributors in Japan. And all this has been done in -- with the support of Nippon Life and the [ shares of ] management in Japan.

Okay. So do we expect this numbers to grow rapidly over a period of time? I mean, 3 years down the line, can we expect us to multiply? Or can you put a number [indiscernible] within this particular line item on the supply side?

It'll be very difficult to give a future guidance. However, this would always be the function of capital flow coming into India. As long as India remains attractive, the capital flow to India as long as it keeps coming, I think we are in a very strong position compared to any other asset manager in India because of the parentage of Nippon Life.

Understood. Now just looking at -- you've answered to Rishabh saying that overall reductions have been higher, but the ticket size had been dipping [indiscernible]so, so is brand Reliance moving away and is bearing impact, which we are seeing it, which needs to be countered directly or something like -- and it's more or less as it seems [ to know that ] that you are witnessing as a part?

I think this is an industry phenomenon. I think, also, I think -- because I think these are -- these terminations have nothing to do with the brand. This is more industry phenomenon, as I mentioned. And now, if you see, majority of the SIPs, which came in the industry started from 2015, '16 onwards. And I think during that and last 2, 3 years, some of the investors have not been able to -- I mean, get the desire being [indiscernible] expectation is high. And this is, as I mentioned earlier, across the industry, the termination ratio, the new termination ratio is at all-time high at about 60%, 65%. I will attribute it both to industry, capital markets other than the brand. Because if it is a brand issue, we would not be getting new SIPs.

Understood. And the interim dividend has been declared. We stick to the same policy, right? 85% of the profits will be distributed as dividend. If I'm wrong, that is something you will discuss, right?

We have a stated dividend policy for the last 5 years, 60% to 90% of the profit will be distributed as dividends. We've been doing this for the last 5 years. And today's interim dividend, which has been approved by the Board is exactly in those lines.

Okay. And lastly, quickly, this is to Prateek. So what should be -- is this the rate -- tax rate we should assume the same? Or there is still some changes can be up for now on the tax rate part?

So the last quarter, there were the tax adjustments to be done. But after that, now it is -- the rate is close to about 24% odd, which is the new corporate tax rate.

Yes. So we should keep it the same way, right? 24% would be your effective tax rate for the next year also?

That's right, that's right.

[Operator Instructions] We have next question from the line of Ritwik Sheth from [ Warner ] Financial.

There's a couple of questions. Firstly, on the employee cost, we've seen some kind of reduction quarter-on-quarter for the first time in the last 8 quarters. So is there something to read on? And because you've been saying that employee costs should be peaking out in the previous calls, so it looks like that. So can you throw some light on this?

So Ritwik, we just answered on this one some -- couple of questions back. However, to reiterate that, look, in terms of the overall getting the operating efficiencies and using a lot of automations, there has been some decline in the workforce, most on the back office side. And also, as we said that due to the various ESOPs and other provisions, which actually tapered down on a telescopic manner, the employee cost on a run rate basis will taper down a bit.

Okay, okay. And so on the ESOP part, till when should we expect the expenses to get recognized in the P&L?

So typically, what happens the first year when it is granted, the cost is highest. And then it keeps going down. And the top first 3 years is that's where the main cost is and then it's late, becoming negligible.

Right. Sure. So I believe that only some portion of it is left and going forward, it should taper down drastically. Is that understanding right?

Yes. Broadly, that is the -- broadly, that is correct.

Okay. Okay. And what net -- what is the cash position as of December 2019?

What do you mean by cash position?

Net cash on the AMC's balance sheet.

No. So see, if you see our overall financial assets are in the range of INR 2,650-odd crores. And predominantly, those have been invested into realizable -- immediately realizable securities, which includes mutual fund, fixed deposits, et cetera.

Right. So that's about INR 2,650 crores, you said.

No, the entire network of the company has been invested predominantly into liquid assets now. We have no ICDs per se, but barring actually to our own subsidiary. It is about INR 2,650-odd crores, yes.

We have next question from the line of Rishabh Parekh from Sunidhi Securities.

Sundeep, sorry. Just taking up on your international funds. So you just gave a breakup of the AUM across all your international funds. And you mentioned that you had $1.2 billion across 2 fixed income and 1 equity fund in Japan. So this, I'm assuming would be advisory in nature as opposed to managed. Am I correct?

Yes, I think because what happens is we have a subsidiary in Singapore. So from a Rnam point of view, we will be -- it's a mix of having the right system and right way. For us, it will be the right -- from India, it will be right. Right.

We have next question from the line of Sanjay Shah from Alphaline Wealth Advisors.

Yes, sir. Sir, will it be possible to have some words from the new management in how they look the opportunity years ahead, maybe 2, 3 years ahead from now? And what are the verticals or areas where they see a huge opportunity and where they would like to grow from here?

[indiscernible] then after that Kimura-san from the Nippon Life would also tell you his thoughts. I think from our point of view the way we see, I think for us, certain focus will remain on profitable growth. We clearly believe that, I think, today, in spite of the fact that asset management industry has -- the mutual fund industry has in that [indiscernible] growth, but still, I mean, due to the fact that there has been a 2% to 3% of the population is unlisted. We see a lot of scope there. And clearly, asset management industry and mutual fund industry is all about scale. I think as the scale goes up, I think therefore, the fixed cost does not go up. So we think we have a very good, strong distribution platform. And we believe with all the changes that are happening, we will gain proportionately in in future. Having said that also, I think I would like to also highlight, while there are many times in India, we see asset management company, we -- and mutual fund as synonymous, I think from -- for us, we see ourselves in different verticals. On one side, we see a great opportunity in mutual funds. And as I mentioned, with a strong distribution reach and the track record, I think we will try to capitalize on that. On the other side, ETFs, which is again, is something should have started over 3 years back, 2 to 4 years back, we are in a very dominant position and as markets mature, and we will see some institutional savvy investors moving to ETFs, we see a very good opportunity there. Similarly, we have been building our expertise and capabilities in alternative space. The factors what I mentioned about real estate fund, which has been north in Japan and the technology front, I think we see all these opportunities also getting bigger. And as the flow into capital markets from across the vast network keeps increasing, we will try to leverage Nippon Life global network to see what we can get. So broadly, if I were to put it correctly, I think from a long-term vision point of view, today 90% of the business of the company comes from only mutual funds. I think going forward, we believe the mutual fund business and the revenue that we get, that expense has the potential to multiply many times over the next 5 to 10 years. At the same time, it will be an endeavor to -- as a percentage to keep decreasing the mutual fund business and the overall profits for mutual funds reducing it and other revenues be there. So that will be our thought. I think, again, I'll request Kimura-san, Asia-Pacific Head of Nippon Life, also to share vision about the company.

Thank you very much. I think I totally agree with Sundeep's on the comments on the direction of the company. But we very much like to see the continuous [indiscernible] healthy growth in the Indian market. That is the first priorities. At the same time, we are trying to help the development of international business and also alternative business. And because we are continuously focusing on the profitability, so profit-oriented and try to diversify the business line and income source. So I think in the long run, as Sundeep mentioned, keeping balance in the Indian market, at the same time try to diversify into the international and global scale. That's [indiscernible] vision for the company.

[Operator Instructions] We have the next question from the line of Dipan Mehta from Elixir Equities.

Yes, sir. Congratulations on a good set of numbers.

[Operator Instructions]

Sir, congratulations on a good set of financials. My question is regarding the top management. Considering that those uncertainty as far as ownership and other aspects, can you give an overview as to how all the top fund managers and the sales team more or less the same? Or there has been a churn over there?

The entire top financial team, not more or less, 100% is the same, remains committed. And from our point of view, I think what we have to understand is many times -- because this question comes many times, Nippon Life is not a new shareholder. Nippon Life has been working with the management team for the last 7 years. So as stated by Nippon Life earlier, Nippon Life will not have increased the stake hold in the company without the management team. And the -- so the management team is totally committed to the company and has long-term plans to continue with the company and Nippon Life since there have not been any addition or any change.

We have next question from the line of Lalitabh Srivastava from Sharekhan.

I don't know whether I got -- this question was asked earlier or not, I got disconnected. Sir, you currently say that your balance sheet has around INR 2,300-odd crores -- INR 2,650-odd crores invested in immediately liquidated instruments. So on a normalized level, can you please share, is this the normal level of liquid investments that you maintain on your balance sheet? Or basically, what is the normal level to that? And yes, that is the question.

No. So basically, our capital plus the reserves and surplus more or less, as we have a negative working capital requirement. But entire of this money, which is there, which is the capital as well as the net worth of the company is deployed. Earlier in the past, we had given some ICDs, but we have subsequently stopped that. And now that most of the money, which is there available as part of the investable surplus has been deployed in our mutual funds both as a seed investment as well as our own valuation investment into these schemes, and some part of the money has been into fixed deposits as required by the SEBI LODR requirements.

Yes. And secondly, sir, if I just go through [ the file ] around INR 165 crores from the IPO proceeds are headlined under inorganic and strategic investment. So any plans on that asset, if you can share, sir?

I think we'll be not able to comment on that. But I think we remain open to inorganic opportunities if it is accretive to shareholders.

We have the next question from the line of Suraj Navandar from Prithvi Finmart.

Sir, there is a significant drop in fees and commission expenses, if I look year-on-year from [ INR 7 crores ] and also INR 12 crores. If you can please explain that?

So I mentioned earlier as well that these expenses were earlier allowed by the regulator. And subsequent to the October 22 circular last year, there has been a ban on any kind of upfront commission. Whatever number is here is actually the amortization of the past amount, which we have paid for our close-ended schemes, that is getting amortized. And over the period, this line will not have any amount in there, except for the PMS, which also has now been -- there is no upfront commission allowed. So going forward, this entire fee and brokerage expenses will not be updated in our balance sheet and P&L.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Sir, over to you. Over to you, sir, for the closing comments.

Thank you.

Thank you very much.

Thank you very much, sir. Ladies and gentlemen, on behalf of JM Financial, that concludes this conference call. Thank you for joining with us. And you may now disconnect your lines.