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 Q1 FY '22 Earnings Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ansuman Deb from ICICI Securities. Thank you, and over to you, sir.

Thanks, Rio. Good evening, ladies and gentlemen. It's an honor and great privilege to host Nippon Life India Asset Management Limited Earnings Conference Call for Q1 FY '22. I now hand over the call to Mr. Sundeep Sikka, ED and CEO. Over to you, sir.

Thanks, Ansuman. Good evening, and welcome to our Q1 FY '22 Earnings Conference Call. We have with us Prateek Jain, Chief Financial Officer; Saugata Chatterjee, Co-Chief Business Officer; Aashwin Dugal, Co-Chief Business Officer; Arpan Saha, Chief Digital Officer; Fujikake-san, nominee from Nippon Life Japan. Overall, industry assets continue the positive momentum in the quarter driven by higher equity and ETF assets. The increased participation by individual investors indicate confidence by long-term investors in mutual funds. We expect the industry to maintain its growth trajectory over the next 3 to 5 years. At Nippon India Mutual Fund, our priority is to be future-ready and capture the long-term opportunity. I'm happy to share Nippon India Mutual Fund. Q1 market share rose by 13 basis points to 7.25%. AUM increased by 33% to INR 2,404 billion. We increased our share of industry's unique investors to 31% with addition of 6 lakh unique investors as compared to 11 lakh for the industry. Improved short- and medium-term fund performance has had a favorable impact on the asset flows and disproportionately higher accretion in investor base. We have one of the largest retail AUMs in the industry at INR 696 billion. The contribution of retail AUM to total AUM is the strongest -- is amongst the highest in the industry at 28% compared to 23% for the industry. We are amongst the market leaders in beyond-30-cities category. This category contributes AUM of INR 472 billion, 19% of the total assets are sourced from these locations against an industry average of 16%. As on June 30, 2021, 69% of the individual assets have a vintage of more than 12 months. The annualized systematic transaction book is at INR 70 billion. On a gross basis, systematic folios rose by more than INR 314,000 in Q1. The new digital SIP registration grew by 59%. In volatile markets, folios with lower ticket size have demonstrated longer vintage and better stickiness. Today, Nippon India Mutual Fund offers the industry's best use of passive category. With strong growth in industries' passive assets, our ETF ecosystem is already in place and far ahead of peers in terms of investor base and mind share. In this segment, we managed AUM of INR 402 billion and have a market share of 13%. Excluding EPFO allocations, which go to 2 PSU-owned mutual funds, we would be the largest ETF player in the country. The Gold ETF is the biggest in the category with over INR 60 billion in assets. Nippon India Mutual Fund's share in industries' ETF folios rose to 51%. In Q1, we added 1.4 million investors against a similar addition in the previous financial year. Nippon India Mutual Fund's additions represent 82% of the total folios added by the industry in Q1. Nippon India Mutual Fund has 73% share of ETF volumes on NSE and BSE stock exchanges. Our ETF's average daily volume across key funds are far higher than rest of the industry. As a well-diversified asset management company, we have created our presence in new business segment over the years. Along with government mandates, we manage assets of INR 1.3 trillion in non-mutual fund segment. The offshore business has assets of INR 101 billion under management and advisory. Leveraging Nippon Life global network, we continue to ramp up our international presence. As part of collaboration with Cathay SITE in Taiwan, we have already filed Taiwan equity fund for regulatory approvals. The fund will provide Indian investments access to dynamic and growth-oriented Taiwanese market. We will continue to offer domestic and foreign investors more value-accretive revenues to diversified risk and generate returns. In our AIF business, we manage Category 2 and Category 3 AIFs across various asset classes. Nippon India Digital Innovation Fund has committed funds of USD 100 million and has initiated investment activities. As on June 2021, Nippon India AIF raised commitments of INR 38 billion across all funds. Online and digital assets have become a key source for investor acquisition and communication. Nippon India Mutual Fund's digital business has grown at a rapid pace, driven by robust strategy encompassing sharp business-focused relentless partner engagement and innovative transformation endeavors. Our strong digital acquisition and engagement framework with targeted performance-oriented campaigns is driven through cutting-edge tools like Adobe Campaign Manager. These initiatives have helped fuel consistent growth in our storefront and in various other conclaves. Our strong collaboration backed by years of fund management experience have -- help us to cement our position as a partner of choice for distributors. Our focus on perpetual innovation and persistent digital reengineering has ensured that a digital experience is always friendly, futuristic and frictionless for its partners and investors. With an inherent DNA to consistently pivot and innovate in diverse digital ecosystem, we aspire to learn, invent and grow and stay ahead of the curve in the BFSI space. In Q1, digital platform contributed to 58% of our new purchases -- purchase transactions. Approximately 600,000 purchases were executed through digital assets, an increase of 28%. Nippon India Mutual Fund has well-diversified and nimble distribution base. As on June 2021, we have approximately 80,000 distributors impaneled with us. The MFD base rose to over 79,700. Also, we have ongoing tie-ups with over 20 prominent digital partners. Digital channel contributed 55% of the MF AUM. Of the distributed assets, share of MFD was 58%, 83% of the distributed assets are contributed by individual investors. Nippon India Mutual Fund has a strong presence through approximately 280 locations across the country. We continue to review our existing branch network and future branch expansion. Given the new normal, our marketing efforts are increasingly focused more on digital channels, which are cost effective as against offline advertising. Now on our financial performance. For the quarter ended June 30, 2021, Profit after tax was INR 1.8 billion, an increase of 16%. Operating profit increased by 75% to INR 1.7 billion. Operating profit as a ratio of average assets under management rose from 21 basis points in Q1 FY '21 to 28 basis points in Q1 FY '22. Our aim is to create sustainable value through growth across asset classes, cost optimization initiatives, resulting in an expanding and favorable operating leverage. We continue to grow organically through our physical and online channels. Additionally, we remain open to evaluate investments and strategic opportunities that add to the profitability and complement our existing businesses. In June, we took a very important step in our journey towards becoming a responsible corporate citizen. NAM India became a signatory to UN-PRI, world's largest voluntary corporate sustainability initiative. We are in process of incorporating UN-PRI's ESG principles across all facets of business, including investment management, climate conservation and social contribution. We will continue to enhance capabilities across -- our capabilities towards successful execution of social responsibility and give voice to minority investors. Also with the integration of formal ESG principles into NAM India's investment management framework, we will -- we also look forward to launch new ESG-integrated offerings in near term. To sum up, I would like to reiterate at NAM India investor centricity remains a key theme. We strive to deliver a complete product suite to the investors, superior fund performance, efficient client servicing based on a comprehensive digital ecosystem. We are confident to continue our trend of profitable growth in coming quarters. 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 Management.

Just have 4 specific questions. First is on the yield. If I look -- if I just for the mix impact in AUM, have you taken some cut in TER in either equity or debt? Because the drop in yield sequentially is higher even if I adjust for the mix. So any perspective you can share? And incrementally, how should I look at yield moving pause? So that's one.

So what is the second question? You want to continue with all the questions, then we can...

Yes. Second is, so despite the jump in the AUMs, our cost base has largely been flat year-on-year. So have we restrained from A&P spends in the quarter and incrementally should -- we should see this moving up for us? Because if I look at FY '21, the major drivers between lower OpEx was cut in A&P and travel and convenience, while IT expenses had moved quite sharply above. So just want to understand the cost part. Third is largely on the distribution and the market share. So if I look at our overall mix in terms of distribution -- source of distribution by AUM between, say, retail, bank and national distributors and direct and all. The share of bank and national distributor has been relatively weak for us. And that has not really picked up despite us seeing some improvement in our overall performance. So I just want to see how is the overall market share for us -- move for us in, say, equity, debt in B30 cities. And a related question is same has been for the SIP flows. For the industry, we're seeing a pickup, but for us it's still relatively subdued. So any perspective you can share with that? And last was on the NPS business. Any thoughts of reentering because PFRDA has made changes to yield -- is looking at a wider participation in terms of competition in the space.

Yes. So, Viraj, this is Prateek here. So see, I'll take questions as you asked. So in terms of market share, we continue to be a leader in our retail segment. That has been our forte. And like almost in terms of the overall -- if you see the breakup, 55% of our AUM assets comes directly; out of the 45%, which is distributed, 60% comes from mutual fund or the MFDs and 21% from bank and 21% from ND. This is -- again, if you look at the other composition, which is the retail versus the HNI segment, while our share of retail is about 28% as compared to the industry of 23%, we have been -- because of the erstwhile issues, we've been slightly -- we have been a lower market share on the HNI sector, which is predominantly supported by the banks. So this is -- one by design, we have been focusing on B30 cities, working closely with the distributors to keep improve or rather to maintain our profitability and to grow our business more profitably. So that is 1 reason. And secondly, our share of HNI has been lower and which is also resulting in lower share from the bank's distributors. That was one. Secondly, in terms of B30 cities, I think we have a market share of about -- or our AUM composition, 19% comes from B30 cities, which is healthier as compared to the industry of 16%. As regard to the SIP flows, this has been marginally subdued, and we have seen some decline. We had not so good run in terms of our performance. But in the recent times, our performance has been good. Most of our schemes have been in quartile 1 and 2. And generally, we see the flows coming in after a lag. So we are expected to do better going forward in terms of the SIP flows. As far as the cost base is concerned, we have mentioned that we'll keep working towards improving our operating efficiencies, and we have mentioned that with the AUM growth the expense will not grow in the same linear proportion. And that is where the operating leverage will come in play. However, as you rightly said, that partial decline can also be attributed towards the lower mobility expenses, et cetera. But if you look at the last 16-odd quarters, we have been maintaining lower cost-to-income ratios, and we've been trying to manage our costs better. So we'll continue to do so. And also, let's say, if the assets grow double from here, we do not see a significant increase in our expenses because most of the expenses are fixed in nature. Coming to the last yield part of it, I would say that -- see, basically, the yield -- the net profit yield or PAT to AUM is composition of 3 or 4 factors. And importantly, it will all depends on how the asset mix is, how -- within the asset class how the product mix has been changing. We have maintained that. In terms of the fixed income also, most of the money has been coming on the ultra-short-term and the low duration funds, where our realization is marginally lower. Further in terms of increase in size of the assets of equity, that also bring down the realization. And again, there are other 2 factors, which is the new assets, which we are raising. Typically, there is no upfront, so they are coming at a higher trailer piece and the older assets which get replaced with the new assets, that again, the realization because of the full trail model is slightly lower. So these are the 4 or 5 factors which contribute towards the declining yield. But I think our yield has been broadly flattish if you see the last 2 or 3 quarters. I think we have clocked about 45 to 46 basis points. I hope I have answered all your questions.

No, on the PFRDA, NPS business.

Sure.

I think we will continue to keep evaluating it. Last time, we had to exit it because there was the constraint of the 49% foreign shareholder, but we remain open to explore going forward.

Okay. Just a follow-up on the market share in B30. So if I look at the -- one of the distributors, like say, the wealth management arms or other national distributors in B30. Has there been any progress in terms of us getting -- I mean, are we able to kind of break in, in terms of either getting our core products impaneled? Or are we seeing any traction there? Because as you said earlier the performance issue was there, and therefore, there was some hesitancy in terms of onboarding our products in the impanels.

I think we have seen a lot of green shoots. Part then could be fact that I think the market share, which has increased -- by 13 basis points, is a subset of all the categories. We clearly see more and more banks impaneling our products across -- over the last 16 months, we have seen a lot of family offices and new corporate investors joining. So I think the numbers will come with the lag effect, but we can see on ground there's a lot of positivity. And you will see going forward, all these categories, whether through banks, HNIs, I think the performance and the brand getting established, you will see the market share going up.

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

And congratulations on good set of numbers. Probably I had 2 questions. One was on the distribution side. So in the annual report we have been talking about digital aggregators, and we're seeing the phenomena happening in the entire industry, where the incremental assets, especially in the SIP side of the business, the digital aggregators are becoming an important source. Can you throw some light how this space has been evolving in last 1 year in terms of total assets managed by these digital aggregators? And as plan how much -- you had mentioned in your opening remarks that we work with 20 such aggregate like digital partners. How much of our AUM, like incremental AUM would be coming through these digital aggregators? And what would be the unit economics there, like, with the AMCs? Because what we understand is that they don't charge through the customers, how -- can you throw some light on the entire value chain in that space?

I think I'm going to be requesting my colleague, Arpan, the Chief Digital Officer, to be talking a lot about it. But I think before that, I will just say Slide #13, 14 and -- 14 to 17 gives a lot of details about our digital initiatives. I think we clearly see ourselves as a company playing an important role, both, I think, with the digital aggregators as in whom we see will complement our growth and also the offline business. So from our perspective, both the channels will throw big opportunity in times to come. I think from -- we as an organization are taking both the channels very seriously. We are not in the camp that would believe that it is going to be one versus the other. We believe over the next 10, 15 years, taking into account the 2% penetration that we have, both the channels, online and offline will play a very big role. But specific questions on digital, I think Arpan, if you could add some data points on it, please?

Sure. Thank you, Kunal, for your questions. At Nippon, we've always believed that a great digital story comes out from a great digital ecosystem. So for us, our left-hand and right-hand are firmly embedded in the digital chassis where fintechs and RIAs as an aggregator community are a part of it. And therefore, as Sundeep was pointing out, we have a great equitable focus on all digital facets. Now coming specifically to the digital distributors or aggregators in place, let me tell you that in the last financial year, digital partners in the nonliquid space, and I'm going to talk about the nonliquid space grew by 200%, while we, at digital business from Nippon across RIAs grew by 270%. Now this comes because of our ability to understand where people who invest in Nippon India Mutual Fund products would look across common platforms and invest accordingly. And therefore, there's a lot of tech knowledge, know-how and share that we do with our partners to ensure that the consumer's journey is, again, on the 3F principle, which is friendly, futuristic and frictionless. Even on the SIP piece, as we have pointed out, digital SIP registration's contribution was around 59%. And we grew by a quarter-on-quarter growth of 34%. This is our inherent ability to educate our set of investors when they're across the Internet space to understand the importance of doing an SIP and the real importance of doing one with Nippon Indian Mutual Fund. We are a very progressive company, and our focus has always been on the millennials. So I think aggregator space is just a platform where the right-minded people come in to get the right product, which is on the Nippon India Mutual Fund. That's all from my side.

So, Kunal, we'll be happy to take any questions specifically in detail offline on this. But digital remains a very foreign focus area for us. And as I mentioned in my opening comments, 20 integrated partners, I think, are the -- one of the significant ones, and there are -- a lot more work is happening. We continue working with our strategic partners, which is IBM and Adobe to strengthen our digital business.

Sure, I'll get back offline to understand more about it. The second question was on the market share in the equity side. As you mentioned, as Prateek mentioned in his remarks that we have seen the improvement, and there's a lag generally when the flows come back. Now if you look at both the SIP market share and the equity market share, it has been trending down even on the improved performance, which, of course, our flows had been slower than the industry. Now just wanted a sense, are we still looking at outflows? Or is it our inflows are slower than the industry? Any indicative idea on that would be helpful.

No. So see, Kunal, as I mentioned earlier that, look, we have seen a marginal decline in terms of the SIP value as well as in terms of our total -- we have been lagging in terms of the industry growth as compared to our equity. But predominantly, what we have seen is that, look, we are coming out of a slightly bad patch when it comes to performance. But when you see it today, most of our schemes are in quartile 1 and quartile 2, okay? And typically, once the performance come back, the investors -- comes with a kind of a lag. And we are very confident that we will be able to garner higher assets. And just to let you know that -- see, we had mentioned in the past that first one to come will be the fixed income assets. So this quarter, I can share with you that, look, while industry was negative INR 1,500 crores. And we have added almost about INR 4,000-odd crores of assets on the fixed income side alone -- ex of liquid. So I think it is a function of performance and also the confidence coming back. And on the institutional side, also, we have seen, as Sundeep was mentioning in the con call, the good amount of flows when it comes to the direct investor into our ETFs or institutional investors coming on our ETF and the fixed income side. We are sure with performance back, I think we'll be able to resurrect or gain back our lost market share on the equities. But at the same time, I want to share that on a Y-o-Y basis, our SIP folios are up 10%. So on the folio side, we are -- our incremental addition side, we are doing well, but it is the lower ticket size and also the HNI share, which we are lagging. I think that needs to be worked upon.

Kunal, this is Saugata Chatterjee, this side. Just to add to what Prateek and Sundeep bhai has mentioned. I think on the equity side, it always comes with a lag. So in terms of SIPs, our incremental SIP numbers have started increasing. The SIP book is an aggregate for the monthly SIP accretion, which keeps happening. So as we go head quarter-on-quarter, we this -- in the last 3 to 6 months, what incremental new SIPs have come to us, it will start adding to the SIP volumes. Likewise, similar trends we are seeing in equity. From a lump sum perspective, the net sales have started now moving into positive zone. So we are flattish. So that is the trend line we'll see going forward. Once the base is getting created now on top of that, the incremental sales will start adding market share for us.

[Operator Instructions] The next question is from the line of Anush Kumar from B&K Securities.

My question is on the other income side. Why does the other income not move further despite decent moves in debt and equity markets in FY -- Q1 FY '22?

No. So we -- see, we have almost about INR 61 crores of other income as compared to INR 55 crores last year -- or last quarter, I'm saying sequential quarter. See, the corresponding quarter of April to June, if you see, there was a sharp reversal because the market fell on 16th and 23rd of March, respectively, in 2020 because of the COVID-related lockdown. But in the first quarter, it bounced back. The first bounce back happened, and the significant bounce back has led to a mark-to-market gain. There was a INR 100 crore mark-to-market loss, if you recollect, we booked in the fourth quarter. We gained almost that same amount in the first quarter. However, this was more of a -- this time around, this has more rationalized. Also, as mentioned in the past, we have pared down our exposure to the equity-related mutual fund. So in the last -- from the last 1 year perspective, we have reduced our exposure to our own equity schemes.

We take the next question from the line of Harshit Toshniwal from Premji Invest.

Am I Audible?

Yes, yes, yes.

Yes. So a few questions, sir, on the market share piece itself. So in terms of folios, we have -- when you look at our folio market share, then we are right now 33%. It used to be a 30% market share last quarter. So clearly we have done a great job over there. But I'm just trying to see that -- is it that our market share in B30 increasing, but our market share in C30, that is something which is remaining weak. And when we look at the SNIA category, can you throw some more color on what needs to happen for us to again gain back that market share? Is it the fund performance only which matters? Or we need to take some additional steps to regain the market share in the top 30 SNIA segment because of which our overall equity market share is not improving?

I think let me then give some initial comments, then I'll request my colleague, Aashwin Dugal, to also touch upon it. So I think you're right. I think the new retail folio numbers have been increasing, have added about 14 lakh investors in the last 12 months and continues to increase. And 33% of the industry folios are with us. So I think that is a good thing. And I've always believed retail execution is always more difficult. And the fact that the retail investors have started coming back, we take it as a very big positive. Now I think the key lies in -- I think the retail investors -- also we have to understand the fact that I think in a bull market going on a retail investor is someone whose SIP definition is less than INR 2 lakh and our own definition is a SIP of INR 2,400 that cannot match up with HNIs. So that's the reason when it has -- when you see from the increase in folio does not match up with the market share increase in the same manner. But I think it's a question of it to catch up. Coming to your question on what do we have to do in retail and HNI. I think it's also important to understand -- I think within the HNIs also, clearly, I mean, these -- as we have seen the increase in market share in fixed income and ETF. It's a matter of time, you will see that also happening on the equity active side. The fact remains that while our overall market share for HNI as a company is about 7.5%, for HNI it is 5%. But within ETF HNI market share is 18%. So what will happen is...

Sir, the reason I'm saying that because ETF and fixed income on retail does not play a big role, and clearly since we are market...

I think the point what I am trying to say these are not mutually exclusive. So what will happen is, I think investors will keep moving to different asset classes. We have already touched upon the fact that we are -- I think over the last 2 years we have implemented a lot of factor analysis and various styles in our fund management work. A lot of proprietary tools from Nippon Life Japan have been -- wherein I think our fund management team has been working very closely with that. And the fund performance also if you see most of our schemes are in quartile 1 and 2. I don't want to go individual name by name. But whether you see -- the top 5 funds that we have in the size of AUM, whether it's large-cap, mid-cap, growth, small-cap, all these funds come in the quartile 1 now. So it's a matter of time. The point I was trying to make is when the same investor, HNI, has started coming, which was not looking us for fixed income. They have started coming in fixed income and started coming in ETF. It's a matter of time. I think he will also -- he or she will also start -- the family offices will start looking at our active fund management also. So I think the point I'm trying to make is I think we remain happy on one part; the retail, which is more difficult to execute and more stable, that has been going very well; and H&I, directionally, we're going in the right direction. Specifically, your question on equity, it may -- it has taken a little more time, but I think the fact that they have come back in ETF and HNI, it's a matter of time they will become active also.

Just 1 additional follow-up on this. So when it comes to HNI, you think that our relationships with, maybe, the larger distributors like, for example, Essel Wealth or the larger bank houses, which are there present. Do we need to push back a lot for the HNI category because possibly they will not be going on to the digital route given the intuitive nature of that? And secondly, is launching more new fund offers at this point of time, when we had the performance for the last 6 months in favor of us. So launching a few new NFOs to gather the market share over there. Do you think that can also be an additional approach? And if you are planning anything on that?

So I think coming to -- I'll take your first question. I think from our perspective, we have a multibrand strategy. We continue working with all distributors and advisors, family offices and RIAs who are the gatekeepers for various family offices and HNIs. And clearly, the approach is, I think, to work closely with them, and we have seen initial success. To your question, a lot of these HNIs and family offices for them uniqueness of product also plays a very big role. I think from our perspective we are trying to see wherever there is a vacuum in our portfolio. I think we launch -- keep launching new product. But on the large part, will we launch NFOs just for the sake of garnering market share, answer is no. Our focus remains on profitable growth. We will only launch schemes which we believe have scope in our portfolio and are long-term sustainable and scalable. So let me give you an example. In the last 2 quarters, earlier, we launched IT ETF, then we launched basically the pharma ETF, now we have launched -- filed with SEBI for Taiwan fund, which will be the first Taiwan fund from India. So I think clearly seeing the shortage of semiconductors in the world, I think we see that as an opportunity. So I think we are trying to -- this is a market where you have to -- it's a market -- within market there are micro markets, the approach has to be very different. It is not one push thing. So I think we are -- I think what gives me satisfaction is the team is working in the right direction. And all -- whether it's HNI, retail and corporates, they have started coming back. The lead product for them -- category could be different, but all of them have started coming back.

The next question is from the line of Prayesh Jain from Yes Securities.

Congratulations on a good set of numbers. Firstly, on the yields that you spoke, you gave some qualitative comments as to why it has come down. Could you give some quantitative flavor as well in terms of whether the equity yields would have been down by, say, around 2 or 3 basis points over the past 12 months or something like that? So to -- whether that is the quantum that we've seen in the past 12 or 14 months?

So, Prayesh, we do not talk about the individual product pricing. But on an overall basis, the yields have been broadly flat. And also as mentioned to you, that from our side, having a larger proportion of shares coming from mutual fund distributors as against banks and NDs and also a large amount of money coming from B30 that -- and as Sundeep mentioned that if we are able to raise further assets, you will see there is an uptick in terms of the overall realization. Also, we believe that over a period of time, there will be a shift in the fixed income side. Today, large part of the money has been in the asset class, which is the low duration, our ultra-short-term category. The moment it starts chasing yields and we move towards the credit and the higher duration, our propensity to earn there will improve. Also, I think what one has to start seeing this business is not from the yield perspective because what I think we are missing is if you see today, let's say, I think there were some industry reports which says that, look, even if the industry grow at about 12% to 13%, the industry will be about 3x the size where we are. And I think that's an understatement because given the under penetration and also given the 20% growth in the last 5 years. I think if we continue that kind of a growth pace, then let's say, even if we take a conservatively the total asset grows 3x and our revenue grows at the same levels become 3x the expenses are not going to be increasing by 25% to 50% because they are largely in the fixed nature. And therefore, you'll see a 10 basis point improvement in PAT to AUM or PAT to revenue basis. So I think -- that is where I think we should see because the end of the day, the overall growth will come from the growth in the total assets under management, the change in the mix, and also the last bit is the realization.

Got that. Just to extending that point a bit, so the regulatory assets versus our newer assets, how much time do you think will continue to impact our company, Nippon AMC?

No. So see, this is -- I would say this is ongoing, but that you have to understand that it will keep tapering off. So it's a kind of a telescopic thing where it keeps reducing, right? So it's like a railway fare, as the distance grows the price or the ticket price does not go as much. So today, what we have seen is -- the large part of the fluid money with the banks and NDs and the money which was to move out has already moved out. And this is -- the large part is with the smaller investors, and this is -- we have seen that these are more sticky. So what we believe is that whatever in terms of the old asset movement was to happen, largely that has happened, and we'll not be impacted by that. And as far as the new asset is concerned, it will all depends on our strategy, which is more towards the MFD and the smaller cities and town and also vis-a-vis the competition because in the marketplace we have to compete, so what is the competition is giving. So we have to align our strategy balancing both the sides.

Thirdly, on the -- when you talk about your distribution strategies, you've been telling about growth in terms of B30 towns and thereabouts. So now what we have understood is that these -- the customers in this area would want -- would search online, but eventually depend a lot on MFDs. So -- and so from an equity brand standpoint, do you think that we are back to the levels we were, say, possibly 5 years back, where the other brand name was very strong, Makena. Now Nippon as a brand is growing up the ranks.

I'll take this one. So broadly, if you were to look at the fact that 14 lakh new investors have been added. Now I mean if I was to go with the same analogy of their searching online. And these people, 14 lakh investors, 50% of the investors in the industry have been added by Nippon. Is it estimate to fact that both the brand and the execution, both are going in the right direction? So I think, again, I think it's always going to be -- it's a journey and also with increased fund -- better fund performance. And also, I think because it was a new brand in India, but the good thing was it was for the same old team. So the 14 lakh investors for me give me a lot of satisfaction and confidence that I think the -- this base will keep increasing. And from our perspective, we have always believed for us the business has to be very granular. The long-term stickiness of assets come from smaller investors. So I think we'll continue focusing on more and more retail investors from a long-term point of view because there's a lot more scope for further top-ups I think when you get smaller ticket size. So I think to your question, I mean I'll leave it to you to gauge 50% of the investors in the last 15 months have been added by Nippon, both the brand and the execution are going in the right direction.

Just a last question. Any outlook that you would like to share on the foreign funds that we are planning to increase.

Nothing specific to share at this point of time. A lot of things are happening. I think as we go ahead, I think, the one that we had to discuss was basically our MOU with Cathay, Taiwan, where I think the intent will be both to give an access to Indian investors to invest in Taiwan and vice-versa give an opportunity for Taiwanese investors to come into India. A lot of things are happening. So I think rather than sharing at this point of time, I think we'll share the moment I think it is closed.

The next question is from the line of Madhukar Ladha from Elara Capital.

I've joined a little late, so maybe this is a repeat. But I see that there's a very big drop in yields. Now can you explain that? Is it because of very high churn in equity and the legacy assets? Or is there a mix change within the equity only that we've gone to sort of larger schemes as a result of which that has happened or maybe some of the other asset classes? Has there been any sort of major change over there to explain it?

No. So Madhukar, I had mentioned in my comment earlier as well that actually the yields can be attributed towards the 5 factors. One is, of course, the change in the asset mix. We have seen higher growth in terms of ETFs versus the equity. And also -- within the asset class also how the product mix is behaving, especially on the fixed income side. How the -- in terms of the overall investment growth has been coming predominantly on the ultra short-term and the low duration kind of fund where our realization is lower. Further, the size -- increase in size, whether it is M2M or with new flows, also lead to a decline in the realization. Further, as we -- there is a part of the churn, as you rightly mentioned, that the older assets getting replaced with the higher asset because the old assets were with a lower trail and higher fixed, but the new assets are being replaced at a full trail model. So yes, of course, so these are the combination of factors, which has resulted in a decline -- marginal decline in the yield. But compared to the last quarter, we still -- or even on a Y-o-Y basis, we are marginally lower or an almost flattish at 45 basis points.

Yes. But, sir, if I look at it, your equity proportion in this quarter has actually increased, right? And while ETFs have increased in share, that's largely from liquid. So again, sort of they are compensatory. Maybe you could probably do a little bit more analysis on this and get back to us that will be more helpful. Second, on the HNI segment, sir, maybe you can elaborate a little bit more because the share there still sort of lags. And what are we doing? And what is sort of the timeline that we see where we can -- how we can improve our market share at the end of the day?

Thanks for your question. This is Aashwin here. So first thing first, may not -- as Sundeep also mentioned in his earlier comment, that in the HNI segment, market share today is about 5.3% versus our organization's market share at 7.3%. So our first objective, obviously, is to try and build and take it closer to that number. But the nature of business is such that we may not be able to assign an exact timeline. And there are many efforts. So one, of course, is that in the last 1.5 years, we have seen a large number of HNI and family office participation in the ETF business. And there, our share in the HNI AUM of ETF is 18% versus the industry percentage of 2%. Now as the performance on the equity side continues to improve, if you look at our flagship equity schemes last 1 year, most of the schemes are in quartile 1 and quartile 2. And again, as the nature of the businesses that the impact in terms of flows will be seen sequentially with a lag. So we already are seeing uptick in market share over the last 3 to 4 months in the HNI category already. But we will really dwell on it once we see a more linear increase in share. On the other hand, we are with the support of our performance of the schemes. And on the fixed income also we've seen robust flows -- our impanelment with large wealth counters and private banks, that is, again, work in progress. So we have seen some success, and we are seeing regular impanelment of those schemes with these banks. So it's a 2-pronged strategy direct into interface with large family offices and through these large channels reach out to the HNI fraternity in general.

Right. And what does it take in terms of -- do you need to add manpower? What else does -- what do these efforts sort of require in terms of resources? Do we have that? Or we'll be looking to add more people? How are we going to do this? So, yes.

Madhukar, I think, we feel -- I think we have all the elements. I think it's just a question of execution. And the initial numbers, the spellcheck tells us, I think we're moving in the right direction.

[Operator Instructions] The next question is from the line of Viraj from Securities Investment Management.

I just had 1 question. On the surplus cash -- so if we look at our annual report, we also talked about last year, there was a lot of uncertainty and we were not really looking any -- for any acquisitions. But given the environment now, is there any rethink in terms of use of surplus cash?

No. So Sundeep in his con call speech also has mentioned that we remain committed to both organic growth and also keep evaluating the inorganic opportunity, which will come by. But what we believe is that growing this business organically is much cheaper. So unless we get something which is at reasonably priced or add to -- synergistically add to our values and ethos that is only where we look at acquisition. But having said that, we are open for any kind of inorganic growth opportunity, which come by.

And, Viraj, I think it's not only going to be in the mutual fund space, I think, for us, I think as we've been highlighting, I think our long-term approach is to be a true asset management company. We will also continue looking at opportunities in asset management, it could be in non-mutual fund space also.

Sir, but even if you consider potentially for those kind of opportunities, the cash will keep on building up. I mean, currently, we pay somewhere between 60% to 90% in terms of payout. So is there any thought process in terms of increasing the payout or probably giving a onetime special dividend? Because cash at the books is having suboptimal usage, just a thought.

No, no. So, Viraj, see, we are completely mindful of that. And therefore, if you see, we are sharing 85% of our profit year-on-year basis as dividend. INR 2,700 crores have been paid out in the last 7 years. So I think we'll continue to do so. As regards the balance amount on our cash, as Sundeep mentioned, that we'll keep evaluating the various options. And at the same time, we'll keep paying higher dividend. At this point of time, obviously, this is a Board as well as shareholders' prerogative to give any kind of onetime dividend. But I think having a good amount of net worth and keep the dry powder ready for any opportunity I think it's a better strategy at this point of time. So to -- I would say, to a certain extent, we'll keep this amount available with us in cash.

The next question is from the line of Mohit Surana from CLSA.

I just wanted to understand 2 things. First is, if there is any one-offs in the other income part because I think it has risen close to 10%, 11% quarter-on-quarter? So is there any one-offs in the other income?

No. So, Mohit, see, almost 80% of our investment is in our own mutual fund scheme, which is into fixed income, equity and ETF. We have been reducing our exposure to equity and that -- every quarter. So this predominantly is part of our equity assets as well as the ETF mark-to-market, we have had this thing. There is no one-off. The -- of the total 100% of our cash availability, almost 80-plus percentage in our own mutual fund scheme, almost 12% is on FDs, and I think 3% or 4% in our tax-free bonds, et cetera. All of them are fairly liquid and are mark-to-market on a daily basis and for our accounting purposes on a monthly basis. So there are no one-offs. It is just the MTM impact as per the Ind AS.

Okay. Got it. And sir, you mentioned that you can assume maybe a flattish trajectory on maybe OpEx going forward. So if you want to break it up between staff costs and other OpEx. Staff cost, I understand that a large part of your ESOP has been expensed out in prior 2 years. So -- but it has risen quarter-on-quarter. So was there maybe a hike in employee salaries this quarter, which has resulted in higher staff cost? And also, I just wanted to understand the fall in other OpEx from last quarter.

Yes. So see, from a year-on basis, there is a 2% decline on the contrary and from the -- which is because of the -- attributed towards the ESOP, as you mentioned. But on a quarter-on-quarter basis also, if you see, there is a 7% increase, which is, of course -- is part of because -- we have a cycle of increments and bonuses of April to March, and that is a reflection of that increments which have been provided to the employees.

Okay. And if you can just comment on the other expenses part, do you expect it to remain flattish from here on?

So see, we have been mentioning there are 2 parts to the expenses. One is the fixed expenses or the semi-fixed expenses, which are more operating in nature. We are working hard to keep bringing it down. Then there are 2 or 3 set of other expenses which we mentioned, which is to keep ourselves future ready, which is in terms of any kind of technology for the IT purposes. On the digital side, to keep ourselves cutting edge in terms of our acquisition strategy on the digital space. And the third is the marketing space. Obviously, from our brand-building perspective, et cetera. So these are the 3 areas where it is not a linear expenses. So based on the market cycle, based on our fund launches, and based on the traction and fund performance, we'll keep looking at these expenses. And as and when these expenses are incurred, which will be accounted, but they are not going to be coming into 1 quarter together. And also, they are not going to be significantly higher. So I think you have to build in some 10% to 20% kind of expense towards these kind of elements on a quarter basis, which may come in 1 or 2 quarters. But predominantly the fixed expenses part will remain in this range.

Thank you very much. That was the last question in queue. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.

Thank you.

Thank you.