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

Ladies and gentlemen, good day, and welcome to the Nippon Life India Asset Management Limited Q2 FY '21 Earnings Conference Call hosted by B&K Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ajox Frederick from B&K Securities India Private Limited. Thank you, and over to you, sir. Sir, you are in the main conference. Please go ahead with your opening remarks.

Thanks, Faizal. Good evening, everyone, and thanks for joining the call. On behalf of Batlivala & Karani Securities, we welcome you all to the Nippon Life India Asset Management Limited 2Q FY '21 post results conference call. I would now request ED and CEO, Mr. Sundeep Sikka, to start the call with his opening remarks on the results, post which we can start the Q&A session. Over to you, sir.

Thanks a lot. Good evening, everyone, and welcome to our Q2 FY '21 earnings conference call. We have with us Prateek Jain, Chief Financial Officer; Saugata Chatterjee, Co-Chief Business Officer, Distribution; Aashwin Dugal, Co-Chief Business Officer, Institutional; Arpan Saha, Chief Digital Officer; Fujikake-san, nominee from Nippon Life Insurance Japan. It has been 1 year since the change in shareholding. Since then, the Nippon India Mutual Fund brand has been widely accepted by investors and distributors, especially in B30 locations. In this period, despite a lockdown for over 6 months, we have achieved important milestones towards increasing the investor base and diversifying our asset mix. Nippon India Mutual Fund added over 281,000 new retail folios. The fixed income assets rose by 21%, driven by activation of over 600 institutional clients, including 27 out of the top 100 Indian corporates. We completed one of the largest digital NFOs in H1 for Nippon India Multi Asset Fund. The NFO garnered INR 7 billion with the participation by more than 80,000 investors spread across 370 locations. We manage a comprehensive bouquet of products in the passive category. Nippon India Mutual Funds Gold ETF is the biggest in its category and has doubled in the last 12 months to cross INR 51 billion in assets as on September 2020. We consolidated our product mix -- product offering further through the launch of India's first Information Technology ETF and the Smallcap 250 Index Fund. The IT ETF has accessed over INR 7 billion in September 2020. NAM India received a prestigious mandate to manage Post Office Life Insurance and rural post office insurance funds. This is the first government mandate after shareholding change and greatly enhances our credibility across domestic and foreign investors. As on September 2020, Nippon India Mutual Fund maintained its high market share of unique mutual fund investors in the industry at 29%. Nippon India Mutual Fund improved its share marginally over this quarter, a testament to the retail -- strong retail presence. In Q2, despite partial lockdown, we added more than 168,000 retail folios. We continue to have one of the largest retail AUMs in the industry at INR 520 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 26% compared to 20% for the industry. We continue to be amongst the leaders in Beyond 30 cities category. This category contributes AUM of INR 363 billion. Over 18% of the total assets are sourced from these locations against the industry average of 16.1%. As on September 30, 2020, 69% of the individual assets have a vintage of more than 12 months against 68% on 31st March 2020. On a gross basis, Nippon India Mutual Fund added 312,000 SIPs and systematic investment folios in the quarter. The progress highlights our retail execution capability during the challenging period. The analyzed systematic transaction book is at INR 74 billion. During the quarter, new digital SIP registration grew by 117%. In volatile markets, folios with lower ticket size have demonstrated longer vintage and better stickiness. As a part of our derisking strategy, we have specific focus on ETF, AIF and other offshore businesses. As one of the largest ETF players with a market share of 13%, in this segment, Nippon India Mutual Fund manages an AUM of INR 286 billion. Excluding EPFO allocation which goes to 2 public sector-owned mutual funds, we are one of the largest ETF players in the country. Nippon India ETF has 33% share of the industry ETF investors. In Q2, we added 151,000 ETF folios as against 97,600 for the entire previous year. Nippon India Mutual Fund has 70% share of ETF volume on BSE and NSE put together. Nippon India ETF average daily volumes across key funds are far higher than the rest of the industry. In our AIF business, we manage Category II and Category III AIF across various asset classes. Launched in 2019, Nippon India Digital Innovation Fund has committed funds in excess of USD 100 billion and has initiated investment activities. As on September 2020, Nippon India AIF raised commitments of INR 34 billion across all funds. Post consolidation in the last few years, we expect to grow our existing funds and expand into further categories in AIF and PMS in future. As seen in our recent NFO, online and digital assets have become a key source for investor acquisition and communication. Digital platforms contribute 48% of our total new purchase transactions. We continue to benefit from our early investments in digital ecosystem and executed 4.8 lakh purchases in Q2 through the digital assets, an increase of 31%. We have ongoing tie-ups with over 20 digital partners. Nippon India Mutual Fund has well diversified and nimble distribution base. We added over 400 IFAs in this quarter to take the IFA base to over 77,000. As on September 2020, we have approximately 77,400 distributors empaneled with us. Direct channel contributed 53% of the mutual fund AUM. Of the distributed assets, share of IFAs was 54%, 79% of the distributor assets are contributed by individual investors. Nippon India Mutual Fund has a wide presence through approximately 290 branches across the country. We continue to review our existing branch operations and future expansion plans. Given the new normal, our marketing efforts are increasingly focused to our digital channels, which are more cost effective, as against off-line advertising. Now on our mutual fund assets under management. As on September 30, 2020, the AUM was at INR 1,929 billion, an increase of 18% over March 2020. The quarterly average assets under management was INR 2,000 billion as compared to INR 1,800 billion for the quarter ended June 30, 2020. For the quarter ended September -- September 30, 2020, the total income was stable at INR 3.2 billion. Profit after tax increased by 6% to INR 1.5 billion. In this quarter, overall operating expenses decreased by 20% to INR 1.3 billion. Consistent focus on cost optimization and rationalization over the last 6 to 8 quarters has resulted in reduction in employee costs and other expenses. Operating expenses as a ratio of average assets under management reduced from 43 basis points in Q2 FY '19 to 26 basis points in Q2 FY '21. With a view to the industry dynamics and prevailing macro conditions, we continue to evaluate investments for inorganic opportunities and strategic partnerships. Against this backdrop, we will consider deployment of our IPO proceeds towards value creative and strategic initiatives. To sum up, we are in midst of exciting phase with a partial recovery in equity markets, initial signs of economic rebound and gradual opening of business activity. At Nippon Asset Management India, investor centricity remains a top priority. We remain to deliver complete product suite, superior fund performance and efficient client servicing through extensive use of technology. Despite external hurdles, on-the-ground execution remained strong, driven by retail strength, top-quality digital ecosystem and control on cost. We are confident to continue a trend of profitable growth in coming quarters. Before concluding, I would like to also welcome our new Board members, Mr. Ashvin Parekh, a financial services veteran with a rich experience of 30 years, has joined NAM India Board and has also been appointed the Chairman of the Audit Committee. With reference to Nippon Life India Trustee Limited, leading chartered Accountant and industry expert, Mr. Nilesh Vikamsey; and Mr. Kohei Sano, part of Global Business Risk and Control at Nippon Life Tokyo have also joined the Trustee Board. We are sure that the induction of such esteemed individuals will further strengthen our Board, and we will benefit from their valuable guidance, specifically in this field of finance, corporate governance and risk management. With these comments, we are happy to take your questions.

[Operator Instructions] The first question is from the line of Viraj from SiMPL.

Congratulations for good set of numbers in such a challenging environment. I -- couple of questions. First is, just want to understand the yield part a bit better. So if you look at sequentially, we have a better product mix in little high share of equity and retail, and the B30 book also is much more higher. But overall, revenue yield has not really moved up much for us. So just trying to understand here, sir, has there been any change in the channel, commission or -- so if you can just provide some color on that. And added to that, you have made a lot of changes in the equity investment deal part of the -- in the last couple of quarters. But if you look at our overall performance of key flagship funds, especially on the large cap and tax saver and other, fund performance is still probably at the lower end. So where are we in that journey in terms of that transition, which will result in a better performance? So if you can just elaborate a bit more on that.

Sure. I'll request Prateek to take the first question on yield, then I'll talk about the fund performance.

So well, the -- in terms of our realization, if you look at our equity realization remains the same as what it was last year. However, due to the internal asset mix change in the fixed income category from long duration and credit fund post the COVID environment and, of course, post the Templeton issue, both industry and we have seen money moving from long duration fund and from the credit risk fund because of the extreme conservative behavior to ultra short term and liquid category. And therefore, the yields on the debt fund category has come down, which has resulted in overall decline in the yield. However, on our equity and ETF portfolios, the yield remains to be the same as what it was last year.

I think with respect to the performance of some of our flagship schemes, we've done a couple of changes. I think both -- few in processes. And also we've been had also restructuring of the funds within the fund managers and also have seen addition of new portfolio joining us. Yes, it has taken a little time. I think the performance of some of our flagship funds has -- 1 or 2 funds have not been as good. But we are very confident some of the new changes that we are doing in processes will definitely in the -- over the next few quarters, you'll see the change in performance.

Okay. Sir, can you elaborate apart from new fund management hires, what are the changes within the existing teams overall? Is there a need to actually -- are we seeing a need to actually increase the commission payout to push the AUM in those funds?

I think I've always -- I think we have always been very clear. I think for us, it -- our focus remains on profitable growth. We do not believe in acquiring business by paying higher brokerages. That is not a sustainable strategy. As I mentioned, I think we have seen both addition of fund managers, realignment of portfolios. And a lot of changes, which have been implemented with the feedback of Nippon Life on the risk management side from Japan, we are very confident you'll see the positive results over the next few quarters. You will -- you may also see addition of new fund managers in the team.

Okay. Just last question was on the first slide. In the press release -- in the footnote, we talked about this impact of social security code. So what was the impact -- possible impact could be on our financials?

So right now, the code has not been notified. And therefore, there is no impact assessment. And that's what we have said. That currently, we are unable to assess the impact, and that's what we put the note in. However, as soon as -- while we are -- we do not deal in, what you call it, lower-end segment of the employee where salary levels are lower. And most of our -- all the employees of our are covered both under gratuities and pension schemes. And hence, we do not see material impact going forward.

The next question is from the line of Kunal Thanvi from Banyan Tree Advisors.

Congrats for good set of results. My -- I had 2 questions broadly. One was on the cost structure. So if you look at the employee cost this quarter has been the biggest improvement, right? Wanted your sense on how sustainable this is? Is this a function of lower or no bonus payments this year, and it will go back to a normalized rate next year? That is question number one. The second is on what's your sense on the flows in the industry with last time when we were in discussion, we talked about market hitting the previous highs and then the behavior of an investor generally phases from changes. That is what we have learnt in the history. So now with -- what kind of flow scenarios that we are looking at? And are there any green shoots in terms of reversal of outflows? Or we are still 2, 3 quarters behind that green shoots?

So thanks. Let me take the first question on the employee first, I think. As we have mentioned in the past, I think, for us, the employee cost is -- constitutes of -- 1/3 of it is variable, which is, I think -- and we have not -- so I think that will always be variable depending on the performance of the company. And over -- also, I think what we've been seeing is, earlier, the company did not have ESOPs. Now going forward, I think as majority -- or 15% of the company is covered through ESOPs. I think relatively, I think, the PLI part will be covered through ESOPs. So that is number one. Number two, as far as the flows are concerned, from our perspective, the way we, I think, over the last 3, 4 quarters have not been the best for the industry. I think, however, we remain confident, I think, because over the last few quarters, while the market is almost at all-time highs, we are almost touching where it was before the fall nearing plus/minus 5%. But from our perspective, the way we see is across the industry, overall, I think there has been a slowdown in the flow -- equity flows. And we are a part of it. We are a part of it. I think what we are trying to do is, I think we are trying to build our distribution capability, digital capability and keeping the cost levels low so that as and when these flows come back to the market, I think it only adds to the bottom line. I think so -- however, overall, from our perspective, one thing is very clear. If I was to look at the last 12 months, clearly, I think -- and I was -- to break the last 2 was broken down into previous 12 months and 12 months before that, the financial year, I think between October '18 to '19, we were in a continuously negative outflow boat. I think that outflow has been contained. So I think as we are seeing the new investors have not been coming to the industry, but what you saw during our 2 NFOs, whether it's a multi asset class where you saw almost INR 800 crores coming in and 70,000, 80,000 investors, whether the IT ETF, again, the same thing. So we remain very confident that I think we -- once the investors come back, I think we'll be able to gain disproportionately. Till that time we are trying to keep our cost structure low because the positive part is, I think once the flows come and the revenue goes up, the cost structure will not go up proportionately.

The next question is from the line of Rahul Nandwani from Centrum.

Two questions. One question on the post office AUM that mandate that you have received. So what kind of a top line and bottom line you are looking at in terms of percentage of AUM?

I think bottom line, we'll not be able to share because being a confidential I think it will be unfair. But I think from a top line point of view, it adds about INR 50,000 crores to INR 60,000 crores.

INR 50,000 crores to INR 60,000 in terms of AUM?

AUM and out of which about INR 6,000 crores is equity.

Okay, sir. Out of the INR 50,000 to INR 60,000, 10% is equity.

Yes, 10% is equity.

And rest would be in debt.

Yes, fixed income. Yes.

And also on the international mandates, you said that you have received INR 34 billion commitments. So what sort of a drawdown are you looking at? So those are commitments, right? So when will they flow to the AUM?

The ones we talked about the Indo-Japanese Tech Fund in the AIF, the drawdown has already started. Effectively, we see that in the next 2 to 3 years, 3 years, I think we'll be able to have a complete drawdown of this $100 million.

So for the technology fund?

Technology fund, yes.

And overall INR 34 billion commitments that you mentioned in our PPT?

That actually is even shorter, before that.

Within the next 2 years?

Yes, tech fund is over a longer period of time. It's about 4 years. And the balance is in the next 2 years.

In the next 2 years. And sir, what's the sort of yields do you look at? Or is it confidential?

The tech fund comes with -- basically, I think it comes with the carry. It's 1% fee, fixed fees. And plus, I mean there is a carry above a certain benchmark.

Okay. Yes, sure. Understood. It's like a PE fund.

Yes, it's a PE fund.

The next question is from the line of Madhukar Ladha from HDFC Securities.

First question on the yields side. Is there a reduction in yields on the debt AUM on a quarter-over-quarter basis?

Yes. So Madhukar, I mentioned that what has happened, if you see, and this has been an industry-wide phenomenon that if you see it in last 6-odd months due to the conservative behavior on the part of the investor, either the money has moved from risk -- credit risk funds and long-duration fund to the shorter duration and also the -- all the new money has come towards the ultra-short-term category. And there, our propensity to earn is lower as compared to historically what we used to charge on credit fund and duration fund. And hence, because of this internal change in mix, the debt fund realization has been lower as compared to what it used to be earlier in the last half year.

Yes. But I just wanted to verify whether this has been the case even on a quarter-on-quarter basis? Or -- yes.

No. So on a quarter-on-quarter basis, there has been -- I don't think that there is a very material difference on a quarter-on-quarter basis. Well, there we have -- on the duration side, again, we have received more money on the shorter term. And therefore, because assets have grown on the shorter duration, there is a marginal decline there as well.

If I see Q1 '21, it's 22 basis points.

Yes. 1 basis point.

So this, Madhukar, Q1 '21, I think the realization in debt was 22 basis point and which has come to 20.5% now. So there's not much. It's more to do with [indiscernible].

Yes. Okay. Okay. Understood. Got it. And on the -- your other income has shot up in this quarter considerably. Can you tell out the reasons?

So compared to the last quarter...

I think it's almost like 9.5%.

Yes. So compared to the last quarter, if you see, it is slightly lower, and this is a function of the market because if you recollect, Madhukar, the last quarter of previous financial year, we took a hit because of our investment in our own equity and ETF schemes, which has been majority been reversed in quarter 1 and quarter 2 because of the market bouncing back.

Okay. Okay. So largely that -- nothing extraordinary in there.

No, not at all.

[Operator Instructions] The next question is from the line of Harshvardhan Agrawal from Infina Finance.

Sir, wanted to understand, on Slide 34, we are sharing the SIP book now in the last quarter...

Mr. Agrawal, your audio is breaking, sir, from your line. Please check.

Yes. So can you hear me now?

Yes, sir. Please go ahead with your question.

So just wanted to on our SIP book, which is mentioned on Slide 34. So for the last 3 quarters, I'm seeing even the past numbers are getting reinstated. So any specific reason for that?

Yes. So see, what we have done is in order to give the appropriate disclosures, we have made the changes with the -- if you look at the footnote, these are the actual cash received. Earlier, what we used to report to AMFI was the actual commitment. And in the last quarter, what we put across was the how much the active folios, which used to be there. What we have done in terms of improving our disclosure, this time what we have put across is the actual cash received each quarter. And we'll continue to this disclosure going forward as well.

Okay. Okay. So sir, one last thing. If you can share your the SIP count for the quarter, which was at INR 3.5 million a quarter. And if you can share that number for this quarter.

This is the -- it is more or less flat. However, there's 2 set of datas, which we have -- we are working on. So overall, SIP registered with us is INR 3.2 billion -- INR 3.2 million.

INR 3.2 million.

Thank you.

The next question is from the line of Shreya Shivani from CLSA India Private Limited.

Yes this is Saikiran, CLSA. Just 2 questions. If you look at it broadly on the revenue yield, which if I look at in the last 6 quarters, have seen a sharp downward trend. How do you look this? Of course, some portion as you had highlighted recently -- in the one of the questions is that is being softer and some of the mix pace and the AUM also has changed. But where do you see this getting settled over a period of time? That's question number one. And question number two is that in terms of the cost, you had explained that 1/3 of the staff cost is typically available and then probably some sort of a PLI will shift into the ESOPs over a period of time. Does that mean that the cost rationalization primary is more or less done, probably we are at the bottom of the cost, both on the staff as well as the segment costs, which it has seen sharp downward movement? And question number three is that in terms of other income, you had mentioned that some sort of an MTM gains on ETFs and as well as the [ alternate investments ]. Can you just give us a broad breakup in terms of this investment [indiscernible]?

Okay. So in terms of the realization decline, last year, in April, we have seen the regulatory changes and due to which there has been revised guidelines by SEBI in terms of chargeability on the AUM on the equity side, which lead to certain decline. And now it is on a cumulative AUM, you have to charge fees on a declining basis. So that was the one trigger if you're talking about the long term, how this has changed. However, also earlier, from a distribution side, there used to be an upfront brokerage, which used to be paid out, which used to be paid out from the AMC and hence there was a higher realization because the trail fees corresponds would be lower. Now what has happened, the upfront has been banned. And since then, all the AMCs are now paying on a trailer basis. And hence, the overall realization has declined. But if you see for the last 2, 3 quarters, it has become more or less stable now. And now it has become more of a function of the asset mix, both equity and debt. And in debt also among various categories, like, of course, your propensity to charge where the investor earnings are higher is -- remains higher. So credit fund and duration fund is likely to yield higher realization as compared to the ultra short term and money market schemes. Coming to your next question on the employee cost.

As far as the employee cost is concerned, I think at this point of time, we feel -- I think we're adequately staffed. Firstly, I think -- and a lot of measures which we had to take on rationalization have been taken. I will not say that I think this is the rock bottom. I think -- but I think the way you'd able to see this is, clearly, we are adequately staffed. I think from a bandwidth point of view, as business grows, I think this cost will not go up. So I would like to put it the other way around. Employee cost as a part of -- as a percentage of total expenses, that might be rock bottom. But otherwise, I think clearly, from our perspective, as we grow business as incremental flows come, the employee cost, otherwise, as a percentage, will only go down.

Got it. And anything you would like to comment on admin costs as well?

Sorry?

Yes. On the admin cost, we continue to work. If you see the last 8 to 10 quarters, we have been working towards making our systems more efficient. And we'll continue to make this effort. However, in terms of the -- as we keep growing, the marginal decrease will be comparatively lower, but we'll keep our efforts on to further make our systems more efficient. Coming to your last question on MTM impact, as mentioned that the total other income for the first half year has been almost about INR 160 crores. And of that, close to about 80 -- 50% of it is because of the MTM on our investment in equity schemes. And rest is all returns, what we have generated on our debt scheme as well as other interest and et cetera on our other investments of FDs and preferentials, et cetera, bonds, et cetera.

The next question is from the line of Manoj Bahety from Carnelian Asset Advisors.

Just one question I had that if I see your overall yields, it has come down, which you have explained maybe because of change in product mix. But just taking forward the previous participant's question, like drop in employee benefit expenses from INR 85 crores to almost INR 68 crores Y-o-Y basis as well as other expenses from INR 56 crores to INR 44 crores, so just wanted to understand like what contributed to this kind of decline? Is there a headcount reduction? And the objective is that how do we see these expenses moving going forward with increase in the AUM and as we return to normal situation.

So Manoj, almost about 2 quarters back, also I mentioned, and I again repeat that, look, from our employee benefit expenses, we had 3 portions. One is the fixed cost. Second is the -- as Sundeep mentioned, variable cost, which is the PLI part of it. And third is the ESOP hit because, obviously, we use the Black-Scholes model to account for the ESOP cost. So that follows -- it tapers down. So it will be higher in the initial years, and it will keep coming down. So going forward, it will keep coming down. As far as the employee cost is concerned, we see another 5% to 10% decline due to the ESOP cost. And the PLI remains a function of our business. If the business does well, obviously, we'll put across a percentage of profit towards our PLI if business does not do well. So that gives us flexibility. Also, what -- as a company, as a policy, we are making more and more going forward, as Sundeep mentioned, more and more people who become part of the ESOP will continue to earn the money from the ESOP valuation and the dependency on the variable PLI will continue to go down for better alignment of the individual as well as versus the company. And as regards to the administration cost, we have been working very, very hard, given the feedback from the analysts and investors, and we've been bringing it down. However, the propensity going forward to further decline or larger decline remains muted, but we'll continue to put in efforts to further improve our operating margins.

Yes. Yes. Secondly, on yield part also, if you can cover it, this quarter is a aggression in terms of change in product mix. You expect yield to move back on upward trajectory? This kind of product mix you are expecting to be new normal.

No. So see, Manoj, if you -- what happens, let's say, if everything remains normal and just the market moves 20% up because of which equity proportion goes up, what you will see, the realization suddenly becoming better because the proportion of equity will become more in this one. However, let's say, if equity markets remain muted and more and more money comes in the liquid and overnight fund, then probably the realization would look slightly comparatively lower. So this is becoming more of a function of what kind of asset growth is happening in the industry. But in terms of realization, as Sundeep mentioned that, we remain committed to profitable growth, and we are not going to be paying excessive distribution fees to garner the assets.

And then also, I think even in fixed income, what we have seen in this quarter or the last 2 quarters, real risk aversion, people coming, I mean, moving towards short-term liquid funds. I mean that also cannot remain like that. I mean, we have seen human nature investor sentiment also keeps changing, and it changes very fast. So to the question that what Prateek mentioned, in equity, you could see, I mean, again, the mark-to-market with the valuations, the yield could get better. But in fixed income also, I think I expect this change happening faster. I think people will -- from complete risk aversion, where everybody has moved towards more fixed income -- sorry, liquid, ultra short term, floating, you'll see them move back to, again, long-term products.

I have one more question that is treasury allocation. Like if I see, overall INR 2,600 crores kind of treasury costs, sir, only INR 281 crore is in equity. So are we seeing because this money is there with us for long term and in today's ultra-low interest rate, is it -- and you are managing other equity? So just wanted to understand that are you looking for some kind of change in this allocation or it will remain like this?

No. So Manoj, again, to reiterate, last quarter also we mentioned that we are -- see, first of all, these investments were made only in our equity scheme to show the skin in the game. This was more of a comfort capital into our own schemes, both equity and ETF. However, looking at the volatility, what we have seen in the last quarter, based on that kind of volatility, which we do not want, we have started paring down our exposures in both in equity and ETF. And in the last 6 months, we have almost reduced our equity and ETF exposure by INR 80 crores.

The next question is from the line of Viraj from SiMPL.

I just had a question -- couple of questions. First is on the ETF presence. In the past, we used to have a much higher volume share and market share. And if you look at bulk of the industry is largely catered by 2 schemes, index schemes from the competing player. So in the past, we talked about us looking to scale up this business and have a higher share. So how are you going about with that?

So I think from our perspective, we remain, I think, one of the largest. If you exclude the ETF money which is invested by EPFO and given the 2 public sector mutual funds, we remain, by far, the largest player having almost 40% market share ex of EPFO money. We have 70% market share on the volumes of the stock exchange and 33% of the investors of ETF. Presently, we have 19 products spread across equity, both domestic and foreign, sectoral and also fixed income. We -- during this quarter, we -- I think are -- like we have mentioned earlier, our focus will remain that I think we are here to provide investor what he feels is right. I think we are one of the few asset management companies which will continue focus in both on active and have a very strong presence in both ETF and passive. So we launched this IT ETF, which was again in the last 15 days of the quarter, wherein was about INR 700 crores by the end of the quarter. And you'll see us continue launching, I mean new ETFs in this quarter also. ETF remains as a very important part of our strategy. We run it as a separate vertical, separate vertical. And we clearly believe I think there is a big market. And I think based on the liquidity that we -- and the tracking and the track record that we have, we are in a very dominant position in business as far as the ETFs are concerned.

Okay. My second question is on the use of surplus cash. So you in the early part of the call you mentioned about us looking at acquisitions. So what particular product areas we will be looking at? And what is the criteria internally you will be evaluating in terms of pursuing the acquisitions?

From our perspective, I think in 2017, when we came with an IPO, we had raised INR 580 crores, out of which certain amount -- it was for various heads, which included branch network, advertising, digital and acquisitions. We have already invested a certain amount in a couple of these heads. Last 12 to 18 months, I mean post the shareholding change and also post the -- in the 6 months of the lockdown, we are relooking at our strategy to how to deploy this money. We -- our approach will be very simple. Whatever we do has to be accretive, value accretive for the minority shareholders. We continue exploring acquisition or strategic partnerships over the next 1 to 2 years. But again, our approach will be very simple, as I mentioned earlier, it will not to do with AUM, but it will -- only it has to be shareholder accretive as well as add to the bottom line or has to complement our existing businesses, which is very similar to the ETF acquisition, which we had done of Goldman Sachs way back in 2016, and that helped us to create a very strong foundation. So our approach will be -- it will have nothing to do with AUM and will be only to do with either it gives us a competitive edge or a strategic advantage.

To put it differently, given our existing portfolio and segments, we are -- where do you see gaps? Or where do you see opportunities where we can pursue this kind of growth?

I think I may not be able to get into the exact details of this. But broadly, it will be either to do with getting something which complements what we have in the area of asset management. It does not necessarily be mutual fund. So I think, again, I'm saying it covers asset management. It covers strategic partnerships or anything that can help us in business. So I think we remain -- I think since there is nothing specific as of now to share, I will not be able to dwell too deep into it, but I think we'll keep you updated as we go ahead.

[Operator Instructions] The next question is from the line of Prayesh Jain from Yes Securities.

Yes. Congratulations on a great set of numbers. So firstly, I wanted to understand the strategy with regards to the B30 markets and there I understand is that IFAs play a much important role as compared to any other -- any other panel. So how do you think you would be able to maintain the confidence of the new IFAs and within promoters? And how is the strategy going there?

From our perspective, this has been one of our strong areas over the years, both IFAs and smaller cities and towns. And that is the reason in my address also I mentioned. Our market share as a percentage of total AUM in B30, industry average is 16%, and we are 18%. We clearly -- these are the markets -- they have a high entry barrier. And we'll continue, I think, with the strong execution capability that we have shown in the past and along with the new digital capabilities that we've built up. Both put together, this will remain a focus area for us. So if I was to look at the NFO that we launched, the multi asset, which happened just during the complete lockdown, the fact that we got investors from 380 locations in India tells you about our B30 strength.

Okay. Great. And sir, overall, how do you -- how would you strategize to improve your market share? Over the years, you've seen a condition fall in the equity market share, particularly on the equity side. So apart from this entry into B30 towns, so how do you see this -- what are the other strategies you will be implementing with your market share?

From our perspective, the key lies in execution. Let me again go back to last 12 months post the shareholding change. We have seen very good qualitative data points, whether it's to do with 600 new institutional investors, hundreds of family offices coming back. The fact that we have added about nearly 3 lakh investors in the quarter compared to the last full financial year, where we lost 2 lakh investors. Again, the inflow in fixed income has been faster. In the ETFs, again, we've been gaining, I think, both AUM as well as new investors. In equity, selectively, I think in certain schemes, we have been getting good flows. As I mentioned earlier, there have been 2 or 3 of our flagship schemes which have not done so well. But we are confident I think with the steps that we are taking there, which I mentioned earlier, I think we will see flows coming back into those categories also. But one thing remains constant for us, the fact that our focus remains on retail and smaller ticket size, that adds to the more stickiness of the assets. So I think we'll continue focusing. It may not get reflected in the market share directly, but it will -- it is going to get reflected in the stickiness of the assets. Also to add to it -- sorry, [indiscernible]. And also during this period, we saw our gold fund, the gold ETF and the gold fund doubling in size and also become the -- was the largest and continues to grow. So again, I think other than certain pockets of equity, I think we have seen good qualitative growth across all asset classes, all investment size and different investment categories.

Okay. I think performance will be a key to improve the market share. That would be a key drawdown from here?

Performance will be one of the important parameters, will not be the only -- with only performance without execution also cannot be done. It's a package, will be one of the important ones.

The next question is from the line of Nischint Chawathe from Kotak Securities. Mr. Chawathe, your line is in talk mode.

Yes. Am I audible?

Yes. You are audible, sir.

Yes. Okay. Sure. Just 2 things. One was if you could give some perspectives in terms of when the mix in the debt side sort of starts becoming a little bit more favorable as in when do you really see the credit funds picking up again? And the second question was really to understand, get a little bit of color on the distribution side. I believe some of your competitors are launching new funds and in which I think they are having incentive programs, et cetera, for distributors. So how do you really see that? How do you compete with them? Or do you see that more incentive programs are going to be the order of the day?

So I think I'll start with the second question first. I think as mentioned earlier, we do not believe growth in market share should happen by paying extra incentives. I think it has to be a package of product, uniqueness of product, performance and execution capability. Any product or relationship which is built up only on brokerage cannot be a long-term solution. So I think -- so we will never be getting into this race of paying higher brokerage to get AUM. So I think that is number one. As far as the second -- the earlier question, I think [ reports ] that I think we've been talking to us smaller branches and all. Clearly from a very, very high risk-averse environment in April and May, I think we are clearly seeing things are getting a little better. Very difficult to put a number to it by when I think you will see investors in especially fixed income or in equity becoming -- coming back to the normal. But things seem to be far better. I think we have always seen investor sentiment plays a big role. So I think the second question, I will not be able to give a defined date or this thing. But our on-ground person tells us things are much better compared to 2 months back.

That is just a bad episode behind us is what one can say.

I'm just -- I hope so. I mean I don't want to give you a feeling that thing -- I can read that, but like you, I also hope so.

The next question is from the line of Sanjay Shah from Alphaline Wealth Advisors.

You cited a very optimist view about the ETFs...

Mr. Shah, this is the operator. Sorry to interrupt you. Sir, the audio is not clear from your line. Please check.

Okay. One second. Yes. Can you hear me now?

Yes. Please go ahead with your question.

Is it okay? Is it audible? Yes. So sir, my question is regarding that you cited very optimist view about the growth on ETF side. So that ETF products are what are we marketing and right now launching, are the product approach of the investor nowadays or our product is in such a way developed that they are attracted towards that?

I think if I can -- if I get your question right, it's very difficult to -- from our perspective. See, again, I think we -- the way we see, we are a supermarket. I think we need to keep offering whatever different investors want. And at this point of time, as far as the ETFs are concerned, like if you were to look at the market, there will always be investors to the earlier question, which was around B30 or smaller locations, you have investors coming in smaller location who invested in the INR 500 SIP, they will always come and active. Whereas family offices who take a directional view on the market, for them, ETFs becomes an important thing. So I think the point what I'm -- your question is, it's -- I think our view is not optimistic. The way we see is that I think we need to provide what is there -- for whatever there is a need in the market. And there has been, I mean, investors have been certain investors, especially these savvy investors have been moving towards ETFs. And from our perspective, we are just trying to cater to their need. I think 1 of the 2 criterias, I think whenever anybody is investing in ETFs, which remains is basically is going to be the tracking error. The other one is going to be the liquidity. And because with liquidity comes the impact cost. Because I think the fact that different investor is coming into ETF to a low-cost ETF and if there is no liquidity in the market and he ends up paying an impact cost of 2%, I mean, the purpose is defeated. So liquidity plays an important role. So from our perspective, we remain nimble. I think we continue evaluating the opportunities. At this point of time also -- this quarter, we launched 1 ETF. We have already got SEBI approval for certain more ETFs. And I think we'll continue completing our suite.

Okay. Sir, my second question is now as we read much about the funds of the individual investors going towards individual selection of equity as far as the equity investment discussion and they are redeeming from the mutual funds that are not favoring the investment in AMCs, mutual funds. Is that correct? And if yes, then what is the trend? How you view like [indiscernible] develop the cult of mutual fund again in Indian investors?

So this is -- we have always seen that when these markets are volatile, you see the cyclical nature and investors do turn to towards equity. But if you see, in the past also, mutual -- once this volatility will die down and obviously people will return and go back to their offices, the bulk of their money, again, they will invest back to the professional investment manager to manage. So I think the good part is because of direct investing if new demat account has been opened, at least we are happy that more and more people have been exposed to the capital market. And some point of time, they will also start allocating towards mutual fund.

Because my point was more near to the SPIVA report latest that measures the fund could not even outperform the benchmark index. My worry was that is why the investors have shied away or what is the trend. That was I wanted to understand.

I think your point, I think the way we see is in different market cycles, I think we'll have -- there will be times when active funds will do well. There will be certain segments, passive do well. I think and from our point of view, like I said, I think we see these 2 different business lines within the AMC. And for us, I think we let investor make the choice.

So my last question is regarding our current stand, how we are encashing on it. What are the strategies to lure the world or the huge fund lying across the border? And what are the strategies of our fund to bring that fund to India?

On the lighter side, right now all borders are closed because of COVID. Nothing can come inside India and nothing can go outside India. So right now, for the next couple of quarters, we want to continue focusing on building up what is there. But I think clearly, as mentioned in the past, Nippon Life remains committed in helping the business and leveraging all the businesses on Nippon Life in getting both the flows into India and more than only the flows also some of the best practices and integrating the different businesses. So again, I mean, there's not much to talk about that in this quarter. But I'm sure this remains an important focus area for us. But I think in subsequent quarters, we will keep updating you on this.

Ladies and gentlemen, due to time constraint, we will take that as a last question. On behalf of B&K Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.

Thank you very much.