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

Ladies and gentlemen, good day, and welcome to the Nippon India Asset Management Limited Q4 FY '21 Earnings Conference Call, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this call is being recorded. I would now like to hand the conference over to Mr. Jignesh Shial, Research Analyst of Emkay Global. Thank you, and over to you, sir.

Yes. Thank you, Rituja, and good evening, everyone, and thanks for attending this call. On behalf of Emkay Global, I would like to welcome the management of Nippon Life India Asset Management, and we thank you for giving us this opportunity. We have along with us, Mr. Sundeep Sikka, who is an ED and CEO; Mr. Prateek Jain, CFO; Mr. Saugata Chatterjee, Co-Chief Business Officer, Distribution; Mr. Aashwin Dugal, Co-Chief Business Officer for Institutional; Mr. Arpanarghya Saha, Chief Digital Officer; and Mr. Hiroshi Fujikake, who is Nominee of Nippon Life Insurance Director with us. Thank you very much, gentlemen, for giving us this opportunity. I will now hand it over to Mr. Sundeep Sikka, ED and CEO, for his opening comments. Over to you, sir.

Thanks a lot. Good evening, and welcome to our Q4 FY '21 earnings conference call. We have with us Prateek Jain, Chief Financial Officer; Saugata Chatterjee, Chief Business Officer; Aashwin Dugal, Chief Business Officer; Arpan Saha, Chief Digital Officer; and Fujikake-san, Nominee of Nippon Life Insurance from Japan. Overall industry assets grew at a strong pace in financial year '21, driven by rise in equity markets and increased retail participation. We expect the industry to maintain the positive momentum in the next 3 to 5 years. Despite the challenging microenvironment, I'm happy to state NAM India recorded its highest ever profit of INR 6.8 billion in FY '21. At Nippon India Mutual Fund, our priority is to be future-ready and capture long-term opportunity. We continue to focus on 4 pillars to execute our profitable growth strategy with the Investor-First philosophy at its core. The focus areas include: Superior fund management, comprehensive product offerings, business derisking through higher share of non-mutual fund segments and robust digitech architecture that provides wide reach and best-in-class customer service. In FY '21, we added over 9 lakh unique investors as compared to 20 lakh for the industry and increased our market share to 30%. SIP and STP folios rose by more than 1.1 million on a gross basis. Also, measures taken in the past quarters have had a very favorable impact on the short-term fund performance. We expect to raise the bar for ourselves in the future. Today, Nippon India Mutual Fund offers the best industry suite of products in the passive category. We consolidated our portfolio through the launch of 8 NFOs in FY '21, including 5 in Q4. With the passive assets gradually gaining prominence, Nippon India Mutual Fund is ready with its ecosystem in this segment and is far ahead of the industry in terms of investor base [indiscernible]. Post consolidation in the last few years, we expect to grow our existing funds and expand into new categories of AIF and PMS. Along with the government mandates, we manage assets of INR 1.3 trillion in non-mutual fund segments. The offshore business has assets of INR 103 billion under assets under management and advisory. Leveraging Nippon Life's global network, we continue to ramp up our international presence. During this month, we signed a letter of intent for an exclusive strategic collaboration with Cathay, Taiwan's largest asset manager. We are the only asset management company to offer investment opportunities to Indian investors into Japan, Hong Kong and Taiwan. We will continue to create such extra space and offer domestic and foreign investors more value accretive avenues to diversify risk and generate sustainable returns. Our continuous and a consistent pursuit of digital-ready environment and robust infrastructure enabled Nippon India Mutual Fund to come out of COVID-19 crisis as stronger and tougher digital business entity. From being a digital leader in AMC space, Nippon India Mutual Fund is now moving towards being a Digitech incubator. The goal is to drive class-lending (sic) [ class-leading ] digital innovation to create competitive advantage and disrupt the investment space and -- with solutions that keep today's digital savvy millennial consumers at heart. Nippon India Mutual Fund's mature digital framework catering to various segments and business lines has not only helped to achieve robust and steady growth, but also helped drive many new age industry-first pioneering solutions for our investors and partners. Nippon India Mutual Fund has 3 proprietary applications and seamless integration with over 100 partners, including fintech players, traditional brokers who use our APIs for investor onboarding and transactions. With IBM being our strategic technology partner and tie-ups with other best-in-class service providers, we have a strong digital ecosystem in place. In FY '21, we onboarded 350 institutional investors. We continue to have one of the largest retail AUMs in the country at INR 643 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 28% compared to 22% for the industry. We continue to be amongst the leaders in the beyond top 30 cities category. This category contributed an AUM of INR 413 billion, 18% of the assets are sourced from these locations as against 16% for the industry. As on March 31, 2021, 66% of our individual assets have a vintage of greater than 12 months. The analyzed systematic transaction book is at INR 79 billion. During Q4, new digital SIP registrations grew by 46%. In volatile markets, folios with low ticket size have demonstrated higher vintage and better stickiness. As it is abundantly clear from 9 NFOs this year, including the largest digital NFO of Nippon India Multi-Asset Fund, online and digital assets have become a key source for investor acquisition and communication. Digital assets contribute to 53% of our total new purchase transactions. 1.8 million purchases were executed through the digital assets, an increase of 31%. In the ETF segment, we are one of the largest players with a market share of 13%. In this segment, Nippon India Mutual Fund manages assets of INR 373 billion. Excluding ETF allocation, which go to 2 PSU-owned mutual funds, we would be the largest ETF player in the country. The gold ETF is the largest fund in the category in excess of INR 54 billion in assets. Nippon India's share in industry's ETF folio stands at 42%. In FY '21, we added 1.4 million investors in this segment against 97,000 in the previous year. Nippon India ETF has 72% share on ETF -- of ETF volumes on the stock exchanges. Nippon India ETF average daily volumes across key categories are by far the highest in the industry. In our AIF business, we manage Category 2 and Category 3 AIF across various asset classes. Nippon India Digital Innovation Fund has committed funds in -- of USD 100 million and has initiated investment activities. As on March '21, Nippon India AIF has raised commitments in excess of INR 37 billion across all funds. Nippon India Mutual Fund has a diversified nimble distribution base. As on March '21, we have approximately 78,400 distributors empaneled with us. The mutual fund distributors base rose to over 78,100. Also, we have ongoing tie-ups with more than -- over 20 prominent digital partners. Direct channel contributed to 54% of the MF AUM. Of the distributed asset, share of mutual fund distributors was 57%. 83% of the distributed assets are contributed by individual investors. Nippon India Mutual Fund with a wide presence through approximately 290 locations 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 more on digital channels which are more cost-effective as against off-line. Now on our financial performance. For the year ended March 31, 2021, profit after tax was INR 6.8 billion, an increase of 64%. As on March 31, '21, AUM was INR 2,218 billion, an increase of 36% against March '20. Overall, operating expenses decreased by 14% to INR 5.4 billion. Consistent focus on cost optimization and rationalization over the last 2 years has resulted in reduction in cost across all segments. Operating expenses as a ratio of average assets under management reduced from 30 basis points in FY '20 to 26 basis points in FY '21. We continue to grow organically through our physical and online channels in active, passive and non-mutual fund segments. Additionally, we remain open to evaluate investments in our inorganic -- for inorganic opportunities and strategic partnerships to enhance our capability across mutual funds, alternate segments and distribution. Due to nonavailability of inorganic opportunities at the appropriate valuations and which could not complement NAM's existing business [indiscernible] no actual acquisition could be done during the last year. Also, the non-mutual fund segment saw slow growth, highlighting by slower economic growth and COVID. Given the situation, we will not push into expanding the available resources unless and unless we see an opportunity to add profitability and complement our existing businesses. And ultimately, we'll be -- and ultimately, it is an interest of the minority shareholders. Board proposed a final dividend of INR 5 per share, including the interim dividend of INR 3. This is the highest ever dividend payout announced by the company. NAM India has initiated the process to become a signatory to PRI, world's largest voluntary corporate sustainability initiative and adopt ESG processing across investment funds in the company as a whole. As a responsible asset manager, we will continue to enhance capabilities to carry out a stewardship responsibilities and give voice to minority shareholders who participate in our mutual funds. At NAM India, investor centricity remains our key theme. We strive to deliver a complete product of suite customized to investor needs, superior fund performance and efficient client services based on comprehensive digital ecosystem. We are confident to continue our trend of profitable growth in the coming quarters. Before concluding, I would like to also welcome our new Board members, Mr. B. Sriram, who is the banking and financial services veteran, having a rich experience of 37 years; and Ideguchi-san, member of Board of Directors of Nippon Life Japan. We are sure with the induction of such esteemed individuals will strengthen our Board and we will continue to gain from the valuable guidance, specifically in the areas of finance, risk management, governance and business growth. With these comments, we are happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of Viraj from Securities Investment Managers.

Just had a couple of questions. But just before that, I just had a humble suggestion. I mean if you can keep a day's gap between the results release and the con call, I think that would be a little more helpful in terms of going through the staffing, making a more quality contribution. So just a humble suggestion. On the question, just first question is, if you look at our past and, say, last year, we locked an average AUM around to INR 2.5 crores. And even after that, our overall operating profitability was around INR 160 crores, INR 170 crores kind of a range. I'm talking about operating profit EBITDA. Now if you look at this year, despite of higher AUM, we still are in [indiscernible] So if you look at the other expenses and other times, by what stage will you see gains from operating leverage kind of kicking in for us? And in this quarter also, we've seen some kind of spike in other expenses. So is there any one-off in this or any color you can provide? So that is one. Second is, if you can just provide some color in terms of market share, both on absolute and incremental basis in B30 cities for us? So yes, that is second.

I will take the first one. See, in terms of the overall revenue from the operations, this year, the average equity AUMs were lower, as you know, because last year, we started with a lower base. And therefore, there was a -- if you look at the overall equity average annual AUM, it was down by about 10% to 12%. And correspondingly, that revenue was accordingly down by about 8% to 10%. But if you see from an operating profit perspective, from an expenses, last year, we were at INR 633 crore. This year, it is INR 542 crore. The few -- in the last quarter, there has been marginal increase, but these are one-off expenses. Otherwise, from a basis point if you see, expenses used to be 30 basis points of our AUM. Today, it stands at 26 basis points. And in terms of the overall realization also, we are at about 52 basis point of the net operating revenue. So we are in line with the industry.

Okay. Just coming on to operating profit. The reason I'm asking is, if I compare to, say, March quarter of last year, right, there an overall equity and if I combine hybrid as well, somewhere around INR 67,000 crores kind of AUM. This year, we clocked somewhere close to around INR 90,000 crore kind of AUM around equity and balance. So one would think that the operating profitability from the...

So Viraj, then you have to just compare the quarter-on-quarter. So if you see quarter-on-quarter, then we are -- operating income wise, we are INR 152 crore versus INR 150 crore last year. See, when you'll try to compare this AUM -- quarterly average AUM with an annual results, probably it may not give you the right result. So for the comparative quarters, we have a revenue of INR 280 crores versus INR 255 crores and a profit of INR 152 crore versus INR 150 crore.

Okay. And the one-off expenses and other expenses, what are these for?

Yes. So as mentioned that during this COVID times, what we've been doing is we've been investing into our digital and technology infrastructure. So the marginal increase is towards that one-off expenses. And also, we have transitioned out from our earlier Reliance Capital environment and we have created our own data center as well as our own infrastructure. So there has been some costs associated with these 2 elements.

Okay. And on the market share, if you can talk about it?

Yes. So if you see, we have seen -- we have actually arrested that -- there was a corresponding decline which we have seen over the past 1.5, 2 years, predominantly started with the group related issues, but I think the decline has been broadly arrested. And also, we have seen in terms of our performance coming back sharply, I think the last quarter, we were broadly flat in terms of our market share. And I think we look forward to improve our performance from here onwards.

Okay. Second question is, if you want to better understand the concept of AUM growth in the domestic Mutual Fund business over next 3 to 5 years, the growth would largely be coming for largely in terms of higher incremental share in flows than the industry? Or is it largely from existing team size getting better? So why I'm asking this question is we have already seen other the large mutual funds where there's a sanity in terms of growth, especially in major flagship schemes. And at the same time, there's underperformance as well. So when we say in our domestic mutual fund business, how are we looking to drive growth over 3 to 5 years ?

So as I mentioned to you earlier, and also Sundeep in his initial comments mentioned that this year was a good year for us that we added almost 9 lakh unique investors compared to 20 lakh in the industry, which means that exactly that 9 lakh is not part of the 20 lakh. What we are saying is that 9 lakh is unique to us, right? So these are new to us. So basically, the one investor who have left us or new investors who have added, so which means from -- we have added 9 lakh new investors, which speaks that, look, we are getting investor coming back to us.

I think it's actually a mix of both.

If I look at the last 6 to 7 months, the [indiscernible] flows into markets in India has been based on. But when you look at flows of book scale in our international business, it's been relatively lower. So I just want to understand why is that? I mean, one of the feedbacks we just wanted to give is that that some of the agility aggression in terms of leveraging parent network or launching new products to tap flows seems to be slightly less. So in the last 1 year, we've seen several new products being launched in passive, active space by other funds, which would have naturally come to us. So what are we doing on that front?

I'll take that one. See again, coming to leveraging the parent. I think there are a lot of [indiscernible] lasted 18 months after the name change. I think after the 18 months, 12 months have been a lockdown COVID scenario. And I think the focus has been a lot more to regain and to reestablish ourselves. I think we clearly have been trying to leverage the parent on various things which would be beyond only the products and the AUM. Having said that, I think we have launched 2 real estate funds in Japan. We have the digital innovation fund that I talked about. Our recent tie-up with Cathay is also, I think, because of the parent. And I think you will see a lot more happening. The last 12 months across the global asset managers and across all asset owners have been going through a different challenge. So the last 12 months should not be seen as benchmark. I think there's a lot that is happening and we'll continuously be updated on a lot of initiatives that we are driving in the international markets and leveraging the strength of our parent to get new things into India.

[Operator Instructions] The next question is from the line of Amit Nanavati from Nomura.

Just had a question on OpEx. If I look at operating expense for the full year and just try and knock off the one-offs that were sitting in the base or either the new regulations kind of netting off in the revenue itself now. It seems like employee cost and other expenses are more or less flattish on a Y-o-Y basis. Basically, your employee cost is down, but largely, we had a INR 50 crore of ESOP sitting in the base and probably the outsourced expenses and the brokerage and incentives now netting off in the revenue. Just adjusting for that, it looks more like a flattish OpEx. Is that a fair way to look at it?

Yes, yes, you're right. You're right, Amit.

So all the adjustments that needed to be done either because of the whole regulatory changes or because of whatever one-offs we had in the base is largely behind? And what one should expect from here on is more a normalized trend in OpEx. That's the way we look at it, right?

Yes, absolutely.

Okay. Okay. And second thing, I just wanted to check on the ETF front, right? So just wanted to understand, broadly, we've been more active in terms of -- and much more focused in terms of building a large ETF product suite. Just wanted to understand what are the yield gaps between, say, more liquid ETF versus a relatively illiquid ETF? The reason I'm asking is basically just wanted to understand if liquidity becomes the right to win in this product? And to that extent, the profitability trends could be meaningfully different, while it may still be much more lower than the active funds, but the profitability versus, say, liquid ETF for us versus an illiquid ETF for someone else may be very different?

I'll take that one, Amit. So Amit, if you were to go to Slide 22 of our presentation, I think that will tell you about the volumes and the liquidity. And for a minute if we forget, I mean, the profitability, let's not see from our point of view, let's see from investors' point of view. For the investor, the investor is coming into ETF, I mean if there is no liquidity, there's an impact cost which could be as high as 2% to 3% [indiscernible] and that defeats the objective of coming into ETF. So I will not say liquidity is the only thing that is required to win, but the liquidity is a prerequisite. So if you were to look at the Slide 22, you were to look at some of the ETFs by name which are there. I mean if somebody wants to invest even INR 1 crore in some other ETF, the bid ask, the difference can go to 3% to 5%. So I think it's liquidity is a prerequisite for this. And this is one segment where, I think, the volumes will drive volumes. So today, I mean, if you have to provide INR 1 crore of ETF and the total liquidity available is INR 5 lakh, you can't do anything. So I mean from our perspective, I think we are happy to share. If you look at the Nifty ETF, ex Nippon ETF, we are 41x the industrial. If you say, look at the banking ETF, we are -- ex Nippon, we are 27x the industry, gold we are 11x the industry and liquid ETF we are 56x the industry. So I think it's a very big advantage.

But just wanted to understand if that can lead to any pricing differential, say, versus what a competitor with the low liquidity may be charging versus what you would be charging on a like-for-like product?

I think I've always believed, I think we have to see -- to win this game, I think you have to see the investor first. I think for us -- I think when you can -- whether the few basis point plus/minus fee, will it make a difference? I think the ETF is ultimately going to be volume game, and how do you build up volume is more important. So I mean rather than getting an advantage of 1 or 2 basis points in ETF, I mean you can charge more, I think the key is can you multiply it 10x. I think that's the way we see it. And from our perspective, an ETF even of INR 37 crores and a blended yield of, I think, Prateek, it's about 19 basis points?

Yes, ex of ETF.

Ex of ETF, 19 basis points. I mean, I think if I was to link it with the earlier question, the first question that came, the blended yield. Today, if you were to look at it, this is a segment which adds about INR 50 crores to the profitability. If you see the blended yield, you might say that the realization has come down. But if you see in isolation, this is a segment which is adding INR 50 crores of the profitability. If it was not there, it wouldn't -- the profit would not be there. So -- and from our perspective, we have maintained we will be launching products not thinking what is good for the balance sheet. We will be launching what things are in the product categories which are good for the investors. And in due course of time, it becomes good for all the stakeholders, including the shareholders.

Understood. Understood. Last thing, just on the distribution mix. I see Banca is coming off meaningfully, right, in the last 3, 4 quarters. Any reason specifically why is that happening, 28%, 30% to now 22%?

So I'll take this one. So see, what is happening, Amit, is that on one side, obviously, from a bank perspective, there is not much left from their fee base become, and therefore, they are trying to push other products where their revenue realization is higher per product or per SKU. And on the other side, many of these investors have become smarter and they are coming into the direct. So if you see, last year our average was about 15% of direct in the equity alone. Now that has gone up to about 17% to 18%. So what is happening, many of these investors are now also coming direct. And also the advent of the investor advisers, RIAs, this will also -- it will eat up going forward into the bank augmented assets.

The next question is from the line of Kashyap Jhaveri from Emkay Investment Management.

I have just one question on the market share which has discussed earlier. If you look at even particularly this quarter at AUM of roughly about INR 2,286-odd billion and versus the market -- or, let's say, industry AUM of about INR 32-odd trillion, I mean, still we lost about 5 basis points market share even in this quarter versus the previous one. And over the last couple of quarters, you have been highlighting that it would be plateauing out and probably we would get back to getting some market share. In terms of quantitative number, if you could highlight as to what's the strategy in place in terms of probably distributor, RIAs or products which would help us do this. If you can give any quantifiable number on this that would be really helpful. And that also continues on the equity side also where now probably we would be less than about 7% market share now?

So from a quantitative perspective, it's very difficult to put across, but what -- if you see the trend in the decline, that has plateaued, which is, obviously, last 2 years actually bought by both some bit of underperformance from our side as well as the group-related issues. We saw -- especially on the debt side, we saw a lot of assets moving out of our [indiscernible]. But what you've seen is, in some of the categories, especially with respect to the ultra short-term and short-term category, we have started getting back the traction. And our market share has improved while in the areas of liquid as well as some of our flagship equity schemes, I think this is slightly lower, but I think the recent improvement in performance. We see that we'll see -- going forward, we'll see some improvement in our market share.

And in terms of unique customers, you gave, I think what you mentioned was -- the number was about 9 million unique customers, I think that is the number that you mentioned. That was over what period? The 9 lakh customers.

So this is in the last 1 year. In last 1 year, we added 9 lakh new unique customer versus overall industry added 20 lakh unique customers.

Okay. Okay. Okay. So that number is unique for the differential -- sorry, I sort of missed that conversation. The last sentence you mentioned was?

What I am saying is, yes, I have added 9 lakh new investors as well as industry added 20 lakh new investors, but the unique customers for us and them could be different. It's not exactly same. But what we are saying is that, look, if overall industry has added 20 lakhs, we alone have added 9 lakhs. That's the -- so which means that investors are coming back to us.

It's actually a question on market share. I think it's always the retail execution is always more difficult. And I think the 9 -- almost 40% of the new incremental industry investors coming is a very positive. And I think, clearly, we expect, I think, after the downfall, which has been arrested over the last few quarters and retail coming back, then we clearly see the growth trajectory will plateau.

And in terms of market share, if you were to split up between, let's say, industry and retail, would the numbers be -- I'm not saying the percentages. But the reduction, which has plateaued out in overall AUM as well as the equity AUM, would it be the same behavior in both segments in industry as well as retail or one would have probably been better than the other?

Normally, industry is never an equity -- too much an equity, but I think...

No I think overall AUM?

Overall AUM point of view, normally, the institutional investors are the first one to come. I think you've seen the fact that 2 or 3 about 350 new traditional investors, some of the most market names in the country come back. That is what has happened. Number two, coming back to retail and HNI, I think we have really seen a segment which we were -- we had one of the lowest market share for HNI. I think we have seen a lot of that recovery started and especially coming back to the passive products. And retail, we have already shared the numbers with you. So I think it's across the board. I think we are seeing green shoots. And I think maybe I think the next 3 to 4 quarters, I think you'll see -- I mean, a lot of these things that are happening -- have a lag effect as far as the market share is concerned. And I think you will see a positive lag effect on the market share.

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

Congratulations on a good set of numbers. So I had 2 questions. One was on -- if you look at the market share, when you look at the AUM data, it has 2 components. One is your flow data and one is the stock. Stock, I understand, will, of course, be impacted by the market performance as well. So wanted to understand any color on flows? How we have been looking at it? The reason I ask this question is because when we look at the SIP number, right, vis-à-vis the industry for this quarter, we have ceded market share. We continue to cede market share there. So any color on what's happening there on the flow side, both in terms of SIP and overall? And the second question is slightly from a longer-term perspective. So if you look at the bank at AMC, right, so they have been growing like very rapidly. In fact, this year also we saw them doing exceptionally well. So how do we look at that? And what do we think is the counter strategy to arrest the lost opportunity because we are not affiliated to bank in the mutual fund business?

Let me take the second question first. I think not affiliated to the bank, I think we may not be sponsored by a bank, but we don't see that as any disadvantage. I think we take it -- I think we have one of the most diversified distribution setup. And again, I think this is what I mentioned earlier when we were talking about the ETF and products and other thing. Ultimately, what is good for the investor is going to be good for the -- all the stakeholders. You cannot have a situation that you have one bank -- I mean a bank as a sponsor and it can only push your products. Beyond a point, it has to be a customer-centric approach. So I think I don't see the advantage of being a bank can be there for perpetual -- forever. I think we rather would like to have a more diversified distribution coverage. And from our perspective, while we have -- we have presented all the private sector banks, public sector banks and foreign banks, but IFAs for us remain one of our strongest. And we believe, I think, today, to have a diversified and derisked distribution model is more important than having one primary distributor, whether it's a parent or anybody else, which can be good in short term. But from a long-term point of view, we don't see any added advantage of that because this is a different -- this business is very different from insurance. I think what you have to understand the Banca may have a very big advantage in insurance, but cannot have a long-term sustainable advantage as far as the mutual funds are concerned because you'll have to have investor-centric approach, and no portfolio can be created by just one fund.

Sure. I understand that and I appreciate it. And what -- when we look at the bank like AMC, right, it is not just about the distribution, right? It is also about the preconceived brand or the trust that investors -- new investors typically would have over a stand-alone AMC [indiscernible] That's how they enter the market. That is the target audience for us, right? So from that perspective, over a longer term, how does that impact? I understand that -- and that is a trend that is seen across the industry for a longer period of time -- like from the brand and perception perspective, how do we look at it?

So clearly, I think, I mean, the advantage for the brand can be there for some time. But like I said, I think, I mean, if it's a new startup AMC, I mean, the gap is too high. I think for established AMCs with scale and size that we are, I mean, and the parentage of Nippon, I think we don't see as a very big differentiator. I mean I will not be able to comment on behalf of the entire industry and for other asset managers. But I think for the scale size and the brand and the parentage that we have, we don't see that as any way a big differentiator, may be positive for somebody else or negative for us.

Sure, sure. My question on SIP and flows?

Well, I think on the SIP -- I think as far as SIPs are concerned, there have been -- over the last 2, 3 months, there have been a little bit of data. I mean how the data has been coming from AMC and I mean -- earlier, it used to be life SIPs, then it was the in cash -- SIPs in cash, then there was also a period when I think there were last quarter -- there were 2 holidays in the starting of the month. I mean the data got a little changed. But I think from our point of view, I think we have remained consistent. We are roughly having about nearly a flow of 6.6, nearly about INR 8,000 crores per annum analyzed SIPs, about 35 lakh SIPs we are having. I think, again, from our perspective, one of the biggest advantage that we have SIP size is lower than the size of the industry, which adds to the stickiness. And I think for us, I think, because I think we remain very active in smaller cities and towns, the stickiness will play out, I think, especially even more during the volatile markets. And that's what we saw, especially in the last 2, 3 years, even when there were some one of the promoter group issues or during the volatility, the stickiness of our SIPs was very good.

The next question is from the line of Ajox Frederick from B&K Securities.

Sir, my question is with respect to your ETF philosophy. Obviously, we are very clear on the direction. So from a customer perspective and distribution perspective, so my question is, let's say, incremental one HNI is coming back to us and it is put in [indiscernible] So do we see ourselves in a position where you'll place probably INR 50 in our retail and there's the other INR 50 in the competitors' active fund given the fact that we are pushing ourselves to be very good in ETFs and let's say a competitor is [indiscernible] very strong and active. Do you -- of course, I understand the incremental benefit that's coming from ETFs, but the delta -- is there any possibly of that scenario playing up that, let's say, what scenario is playing out?

No, I think I'd like to just clarify. I think for us it is not ETF versus active. I think the approach that we are taking is it's a customer-centric approach. Let the investor decide what he wants to do. For us, active funds remain our bread and butter, and we continue pushing. And even today, 90% of revenue comes from active funds. I think the ETF is a part of a being future ready. I think as investors behavior can change, I think we take pride in the fact that we are one of the few asset management companies or maybe the only one which is in the state of readiness if the investors were to move towards ETF. So I think, first, I want to just try to address that it is not active versus ETF. Coming to #2, as far as ETFs are concerned, unlike active funds, where an investor normally like to diversify between 4 to 5 months, in ETF, he does not do that. I mean because the underlying is the same. So if he's coming in Nifty ETF, he's not going to be going to 4 ETFs and dividing it. He'll typically come to 1, and that's exactly the reason the size and the volume, I think, I mean, what I mentioned earlier on the Slide 22, that tells you the story. So I think from our perspective, like I said, I think we are very clear that I think active remains our core, but we do not want to say we will only push active even if the investor wants ETF. So we let this choice to be made by the investor, and we want to be in a state of readiness if he decides wants to go to ETF. I think I think from our perspective we are a supermarket and we'll be ready with that.

Just to add, Ajox, to what Sundeep said in terms of data. See, the developed market has about 40% of the money in the ETFs while in India it is 10%. So one is that there's growth what Sundeep is mentioning. The other important data one has to understand is that in India of the 10%, 85% comes from the institutional investors. So the point in here is that, look, it is not -- one say that, look, not every retail investor is gearing up for ETF. The ETF growth has come from the predominantly from the institutional side. So once that trend changes, which is the 40% in U.S., and that is what we are saying is that we are future ready, but that change to happen.

So I mean if you were to [indiscernible] today, I think yesterday's [indiscernible] wealth, the large cap, 3 out of the 5 -- top 5 are ETFs. So I think we'll let the investors choose. We are not here to push what we want, what we feel is good for us. I think it's the investor to make that call.

Got it, sir. And sir, from a distributor's angle, let's say, an IFA, again, same ETF philosophy, I mean, we see [indiscernible] given the fact that okay now that a lot of new launches are happening and things happening on the ETF side or passive side, where again compared to the competitor is launching an active fund, will a distributor -- I mean have you faced that question -- that kind of question and you do multiple calls with [indiscernible]

I would like to phrase this, I think -- when you talk ETF strategy, I would like to phrase it as a passive strategy. I would not like to only restrict it to ETF. So I think there will be a set of investors who like to come for ETF. I think there are a different set of advisers, distributors who will prefer ETF. And for our conventional distributors, we have launched passive funds. So technically speaking, the underlying is going to be an ETF, but actually it's a passive fund. So I think we are -- I think, like I said, I think it is not A versus B or A or B. I think both will coexist. I mean the way, I think, from our perspective, whether it's active and passive, both will coexist. I think we need to be present in both. Similarly, both online, off-line, both will coexist. I think -- so I think from our perspective, we are being where the investor is, but what investor an wants.

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

Great set of numbers. Firstly -- first, clarification on the OpEx. When you say that we had exceptional items or one-off items in I Q4, do we mean that the run rate for Q2 and Q3 should be the ideal number that we should look at or from a sustained -- sustainable trajectory point of view?

Yes. Prayesh. Let see, on an overall basis, we have -- our OpEx is down by about INR 90 crores compared to the last year. So we keep working on improving our operating efficiencies. But we don't look at, per se, quarter-on-quarter numbers as much. For us, this was one-off investment what we did in terms of our technology and digital ecosystem to make it more robust given the current scenario. And hence, the numbers are slightly elevated. But broadly, we have seen further reduction in the normal run rate expenses and which we'll continue to do so.

Okay. And second question is slightly also of longer-term nature. How do you see the market share trajectory in B30 and your share of assets in the B30? And what would be your strategy to grow that segment in the next 3 to 5 years?

So I think very difficult to put the number to it. I think from our perspective, I think one of the biggest trends has been execution in smaller cities and towns, if you were to see over the last 15 years. That's what we've been doing. Last 2, 3 years, you had a slippage to whatever reason. And the fact that, I think, today, I think the -- we talked about 9 lakh new investor folios coming to us. That tells you, I think, the retail, I mean, whether retail is in B30 or is in top 20 does not matter? I think it's the retail which is the most critical part, and we'll continue focusing. One thing remains that I think it is very easy to replicate the institutional, it is very easy to replicate other strategies. But retail, it's not very easy. The entry barrier is too high. I think to go to the small cities and towns, IFAs, relationship, everything plays a very big role. So I think we are very confident, I think that retail, small cities and towns and with further digital ecosystem that we have built up. And also, I think in the presentation, we have also -- a lot of things that we keep doing with small IFAs, geo tagging, different campaigns, which are one of a different type. I think we are trying to support these distributors, advisers, smaller markets. We are trying to have a very interesting mix of physical presence, physical relationships, digital infrastructure. So I think I'm very confident. I think next 2, 3 years, you'll see us gaining market share there. And these markets are all about execution. I think it is nothing about, I think, strategy, and I think the execution will hold the key here.

[Operator Instructions] The next question is from the line of Dhruv Shah from Ambika Fincap.

I just have one question on your SIP flows. We have seen industry growing on quarter-on-quarter basis, almost close to 9%, but we have been flat. We have reduced our market share in SIPs, and we normally are very strong on retail side. So can you just elaborate on the same? Why have been SIP flow on quarter-quarter basis flat?

Sundeep, you want to take it?

Yes. So if you can -- this is [indiscernible] category. Now when it comes to SIPs, it's very directly correlated to the equity performance. And if one has observed in the last 4 quarters, our performance has started improving from Q3 onwards, the near-term performance of our schemes. And the reason why the flows of SIPs have now started plateauing in the last 2 to 3 months and which is the clear indication that henceforth as the performance sustains, the new SIPs will come with higher longevity and higher stickiness and the old SIPs will continue to remain with us for long periods of time. So it has a direct correlation to the performance. And now on the other side, we are getting very deep into retailing with our [indiscernible] focus. That will also lead us to get in more and more incremental SIPs coming into our forte. The third part is the digital piece. I think we have really gone strong on digital acquisition as well as increasing the digital footprint. We are finding a very, very strong traction of equity investors coming through our digital assets, which will again add to the volumes as we go ahead. So it's a combination of 3, 4 factors which will now lead us to start getting the SIP book retained as well as [indiscernible] growth from hereon.

Next question is from the lining of Krunal Shah from Enam Investments.

Congratulations on a good set of numbers. I have 2 questions. The first is on the revenue. Is there any one-off in the revenue line item for Q4?

No, no. In revenue, you cannot because see, the way we have structured is that the majority of our fees come from mutual fund and typically, most of it is accrued on a daily basis. So per se, there is no -- but what makes you think there is one off?

So the thought was regarding carry. So we had this following fund mandate. So I thought if there was some carryover there that revenue would effect in the revenue, that carry would retain the revenue?

No, no. no. As of now, there is nothing while we do have, but if it will ever come, we will make it an appropriate disclosure to that.

Sure. Sure. Okay. The second question is regarding ETFs. Sundeep mentioned that 19 basis points kind of yield we do. Can you share the OpEx in terms of ETFs? How is it versus the company average broadly something?

No. So see, there -- frankly speaking, most of the expenses have to be borne by the scheme itself. That is the new SEBI regulation. So per se, besides the team what we have and their related administrative expenses, there are no expenses. So what we are talking about the net yield we get is in the range of about 11 to 12 basis points.

The next question will be from the line of Kashyap Jhaveri from Emkay Investment Managers.

Just one question. In terms of your -- so you mentioned about 9 lakh unique investors being invested -- sorry, acquired versus about 2 million for the industry. If I look at on quarter-on-quarter basis, that implies about 7 lakh customers out of 1.3 million with the industry added. Anything unique that would have happened in this quarter because that run rate is significantly higher than what we have seen in the past for us as well as industry?

This is not for the quarter. This is for the financial year, 9 lakhs.

Yes, yes. I understand it's for financial year, but I mean, you give that data on quarterly basis also, right. So I'm just reducing quarter 4 -- sorry, quarter 3 number of the total customers that we had, which is 6.2 million, and now we have about 6.9 million and versus 21.5 for industry, it is about 22.8 This is versus quarter 3, which implies an addition of 7 lakh in the fourth quarter itself?

Okay. I think from our perspective, the digital infrastructure that we are building up, things are falling in place. I mean very difficult to attribute any one particular reason. But I think it's a mix of multiple things which are happening.

Ladies and gentlemen, due to time constraint, this was the last question for today. I would now like to hand the conference over to Mr. Jignesh Shial of Emkay Global for closing comments.

Yes. Thanks a lot once again to the entire management of NAM India and also thank you very much all of you for participating in this call. Thanks once again, and have a nice day. Thank you.

Thank you.

Thank you. Thank you, everyone.

Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.