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

Ladies and gentlemen, good day, and welcome to Nippon Life India Asset Management Limited Q2 FY '22 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rushad Kapadia from ICICI Securities. Thank you, and over to you, sir.

Thank you, Margaret. Good evening, ladies and gentlemen, and welcome to the Q2 FY '22 Results Conference Call for Nippon Life India Asset Management Limited. We have with us from the management, Mr. Sundeep Sikka, ED and CEO; Mr. Prateek Jain, Chief Financial Officer; Mr. Saugata Chatterjee, Co-Chief Business Officer; Mr. Aashwin Dugal, Co-Chief Business Officer; Mr. Arpanarghya Saha, Chief Digital Officer; and Mr. Hiroshi Fujikake, Nominee, Nippon Life Insurance. So without further delay, I would now like to hand over to the management for their opening comments. Thank you, and over to you, sir.

Good evening, everyone, and welcome to our Q2 FY '22 earnings call. We have with us our CFO, Prateek Jain; Chief Business Officer, Saugata Chatterjee; Chief Digital Officer, Arpan Saha; Head, Elite Partners & Clients Group, Nitin Gupta; and Fujikake-san, Nominee from Nippon Life Insurance Japan. Overall, industry assets continued with positive momentum in the quarter driven by increase across asset classes. Also, the continued participation by individual segment indicates confidence by long-term investors in mutual funds. We expect the industry to maintain its growth trajectory in next 3 to 5 years. At Nippon India Mutual Fund, our priority is to be future-ready and to capture the long-term opportunity. As stated earlier, we are confident of regaining our market positioning as well as recreating and reinventing by continuously innovating and disrupting ourselves. Towards these goals, I'm happy to share that our market share rose by 21 basis points to 7.33% in H1 FY '22. AUM increased by 33% to INR 265 billion. The increase has been driven by improved fund performance, robust risk management and wide distribution networks. As stated in earlier interactions, consistent growth in assets is always preceded by improvement in qualitative parameters such as expansion of investor base. We increased our share of industry unique investors to 32% with an addition of 1.8 million unique investors as compared to [ 4 ] million for the industry in H1. Also, a share of industry retail folios grew from 10% as of September 2020 to 13% as on September 2021. In Q2, the [ MF ] of Nippon India Flexi Fund received an application of over 250,000 investors from approximately 2,400 cities. It is a huge testament to our superior brand recall, granular retail base and strong distributor connect. Also, I would like to reiterate that even in the future, we will focus on strong asset growth, but never at the expense of profitability. In line with our investor first philosophy, we expect to launch several innovative products in the future. For example, the Taiwan Equity Fund has received this approval this month. It is the first fund in collaboration with Taiwan's largest asset manager, Cathay SITE. Through this fund, Indian investors can access the dynamic and growth-oriented Taiwanese market. Other such offerings in the pipeline include S&P EV index fund and Nifty ETF. In total, we have filed 8 streams for regulatory approvals. These products will provide investors more value creative avenues to diversify risk and generate sustainable returns. Driven by keen retail focus, we have one of the largest retail AUM in the industry at INR 777 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 28% as compared to the industry which is 23%. We are amongst the leaders in the Beyond Top 30 cities category. The category contributed an AUM of INR 488 billion. 18% of the assets are sourced from these locations has engaged 16% for the industry. As on September 30, 2021, 68% of the individual assets have a vintage of more than 12 months. The annualized systematic transaction book is at INR 78 billion. On a gross basis, the systematic folios rose more than 436,000 in Q2. In volatile markets, folios with lower ticket size have demonstrated longer vintage and better stickiness. Today, Nippon India Mutual Fund offers industry best use in passive category. With strong growth in industries passive assets, our ETF ecosystem is already in place and far ahead of its pace in terms of investor base and in mind share. In this segment, we manage an AUM of INR 448 billion and have a market share of 13%. Excluding the EPFO allocation, which goes to 2 PSU mutual funds, we have the largest -- we are the largest ETF player in the country. The gold ETF is the biggest fund in the category, with assets in excess of INR 60 billion. Nippon India Mutual fund share in industry's ETF folio rose to 58%. In Q2, we added 1.7 million investors and accounted for 79% of the total folio addition in the industry in this quarter. NI has 70% share of ETF volumes on both National Stock Exchange and Bombay Stock Exchange. Our ETF average daily volume across all funds is far higher than the rest of the industry. As a diversified asset management company, we have begun to grow non-mutual fund business segments over the years. 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 117 billion under management and advisory. Leverage Nippon Life's Japan's global network, we continue to ramp up our international presence. As mentioned earlier, the [ Taran ] Equity Fund is a step in that direction. In our AIF business, we managed category 2 and category 3 areas across various asset classes. We have received approval from seasoned authorities for setting up AIF in GIFT City. As of September 2021, Nippon India AI has raised commitments of INR 40 billion across all funds. Online and digital assets have become a strong source of investor acquisition and communication. Our strong digital acquisition and engagement framework with targeted focus-oriented campaign is driven through cutting-edge tools like Adobe Campaign Management. These initiatives have helped fuel consistent growth on a strong -- on our own store front and various other conflicts. The focus is towards creating a digital experience that is friendly, futuristic and frictionless for our partners as well as our investors. In Q2, the additional platforms contributed to 50% -- 53% of our total purchase transactions. Over 700,000 purchases were executed through digital assets, an increase of 55%. Nippon India Mutual Fund has a diversified and nimble distribution base. As on September 2021, we have approximately 82,000 distributors in panel with us. The mutual fund distributor base rose by over 81,700 with an addition of 2,000 in this quarter. We have an ongoing tie to 20 prominent digital partners. The direct channel contributed 54% of the mutual fund AUM. Of the distributed assets, share of MFPs was 57%. 82% of the distributed assets are contributed by individual investors. NIMF has a wide presence through 270 locations across the country. We continue to review our existing branch network and future expansion plan. Given the new normal, our marketing efforts are increasing more on the digital channels, which are more cost-effective as against offline advertising. Now on our financial performance. For the quarter ended September 30, 2021, the profit after tax was INR 2.1 billion, an increase of 41% -- 47%. Operating profit increased by 46% to INR 1.9 billion. Operating profit as a ratio of average assets under management rose from 25 basis points in Q2 FY '21 to 28 basis points in Q2 FY '22. Our aim is to create sustainable value through growth across asset classes, cost optimization initiatives, resulting in expanding favorable operating leverage. We continue to grow organically through physical and online channels. Additionally, we remain open to evaluate investments in strategic opportunities to add to the profitability or complement our existing businesses. In today's meeting, the Board of Directors approved an interim dividend of INR 3.5 per share. As a signatory to UN-PRI, world's largest voluntary sustainability initiative, we are in process of incorporating ESG principles across all facets of business. Also, we have taken several initiatives to ensure long-term health and safety of our employees. Dedicated camps, hospital types for a range of vaccination of employees and their dependents. A comprehensive family plan, both in terms of financial as well as the emotional support is in place for affected employees. Apart from ongoing measures on climate conservation, we take regular steps to enhance data protection, a lot of cyber risk effectively towards making our overall risk control and bonus more robust. A larger impact of digitization on a CRM favor has helped us to improve customer experience. In this quarter itself, 74% of our noncommercial customer transactions were handled without any human intervention. To sum it up, I would like to reiterate that at NAM India, investor centricity remains a key theme. We strive to deliver complete product suite customized to the investor needs, superior fund performance and effective servicing based on the comprehensive digital ecosystem. We are confident to continue our trend of profitable growth in the coming quarters. With these comments, we are happy to take your questions. Thank you very much.

[Operator Instructions] The first question is from the line of Kunal Thanvi from Banyan Tree Advisors.

Congrats on a good set of numbers. So I had 2 broad questions. One was we've been trying to understand this for a while. When we see improvement in the equity mix in the overall AUM. However, at the same time, we are seeing a drop -- a slight drop in the realization. Can you explain us how should one look into it? Is it because of the new NFOs that realizations are opening? Or is it because of the -- what is the -- broadly the reason for the drop in yield? That is question number one. Second is on the overall environment in terms of what we have been hearing is that there's a lot of discounting or very high commissions going to the distributors for the new NFOs? And can you help us understand what is the situation? Is this -- how sustainable is that in this environment to come up with a lot of NFOs for the industry and I mean, as in the opening remarks, you had mentioned that we have lined up like some 8 new NFOs, right? So in an environment where our commissioning has been very high for the entire industry. How does that move from the realization and profitability perspective?

So I'll take the second question first, then I'll request my colleague, Prateek, to talk on the realization. I think from our perspective, I think as you mentioned, I think about the NFOs in my opening comments, I think our strategy remains that I think we will not be launching NFOs for the sake of [ value intent ]. Our approach remains we will continue launching products which we feel there is a need in the investor portfolio. Out of the 8 products that I talked about, 7 are ETFs, where there is no distribution fee. So I think our approach remains being customer centric, launch products which we believe there is an appetite in the -- presently or in future. Having said that, we also remain as you've been hearing consistently, our approach will be between growth and profitability, our focus will remain on profitability. With that, I'll request Prateek to talk about the realization.

Yes. So as mentioned by Sundeep, you are partly right that look, the new NFOs which have contributed to almost 50% of the new flows in the equity this year, in the first 6 months. Most of them have come at a very high expense, and we have remained away from such raising of assets. And also, as Sundeep mentioned that, look, we continue to remain focused on our profitable growth. And in line with this, that there is -- we have been saying that, look, there will be a marginal decline in the yield over a period of time due to 2 or 3 reasons. One, because obviously, as the asset size grows, our realization is likely to grow down. Also, the fact that new assets what we raised are competitively at a higher or a full trail commission as compared to the old assets. And the third aspect is that, of course, there has been an increased competition within the distributor fraternity in terms of the brokerage being offered by the competition. So all 3 have been working in it. But I think we have been balancing it out, and we'll continue to do that. We are not going to grow at any cost. For us, sustainable profitable growth remains a key mantra.

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

Congrats on a great set of numbers. Firstly, the first question that I have was on the ETF market and the passive that basically you're planning to launch around 7 or 8 ETF on index fund. So overall, what would be the yielf of these products in a sense, I would rather ask the question from, say, 1 year perspective, when all these will be launched. What will the overall yield be of this basket? That would be my first question. Second is more on ESOP costs in this quarter, we had some INR 47 million of ESOP costs coming in during the quarter. How do you see that trending? And lastly, the reason for the surge in other income? These are my 3 questions.

I'd request Prateek to take these 3 questions.

So in terms of the ETF basket, we have been maintaining that ex of CPSE and ex of gold, we have close to about 15 to 17 basis point of earnings. It all depends on what kind of product we're launching and also the competition. And as Sundeep mentioned, that depending on the overall yield expectation, what is right for the customer, we will be pricing our ETF accordingly. As you are aware that ETF actually means 3 things. One is the overall return being generated for the customer, the tracking around the expense ratio. And the last bit is the liquidity. Our focus remains to provide ample liquidity and provide unique as well as new products to our investors. So that's where we are. But overall, as I mentioned, that ex of CPSE and gold, our overall realization remains in the range of 15 to 17 basis points. In terms of ESOP cost, if you see there has been marginal increase compared to the last year, if you look at the overall -- the salary increment is concerned, so for the year, Board has approved 5,800,000 kind of shares, which is contributing to 4.6 crores kind of a hit for the quarter. So that would be -- again, as you are aware that in the initial quarters, the hit remains slightly higher and then it keeps going down from the second year onwards. So this is where we are. We do not expect these numbers to significantly grow from here and also that the past ESOP cost over the period would be declining.

I think also on the ETF, I'd like to just touch upon, Unlike other parts of mutual fund, in ETF, the pressure on pricing will not be there because effectively, as Prateek mentioned, even if somebody was to offer an ETF at 10 basis point lower cost, the liquidity -- if the liquidity is not there, the impact cost for the customer is very high. So we clearly believe we are in a strong position because of the liquidity, and if you were to go to the Slide 22 of our presentation that gives you a comparative statement of all the liquidity of all the ETFs in the industry. So the revenue pressure in ETFs will not be there, rather will be in a position -- we will be in a better position going forward.

Yes. Just my last question was on the sort of other income that we've seen in the quarter?

Yes. So again, we have been -- again, this quarter as well positively surprised by the buoyancy in the market. And as mentioned that there is a part of the seed capital in our equity funds. And also, we have put higher amounts as part of the comfort capital to a lot of our ETF as well as the equity streams. And so that has led to that mark-to-market kind of an increase. However, from the -- from March 2020, the kind of exposure we have in ETF, we have fared out our equity exposure substantially. So we do not expect much volatility in that. And the other income will remain range bound going forward unless we see significant increase in the markets.

You're saying the bulk of the jump in other income is because of equity MTM in the quarter, is that correct?

That's right.

Okay. Because if I look at your slide number -- breakdown of the assets, 49th slide, where you have just shown that equity share is just around 8%, right? So -- and that contributes to certain meaningful jump in MTM?

So this quarter, again, we have further realized our investments. We have harvested some of our equity investments. So obviously -- so you are looking at the amount as of September date, but during the quarter also, we have redeemed some of our equity funds AUM.

[Operator Instructions] The next question is from the line of Madhukar Ladha from Elara Capital.

Just following up on the other income jump. See, last quarter, roughly about -- at the end of the quarter, roughly about 7% of the financial assets were in equity, right? And normally, there is mark-to-market accounting. So realizing that gain shouldn't really make that much of a difference in your this quarter's P&L. Because it's not that you're realizing. Although you might be realizing a few quarters or a few years of gains at one point of time, but you've already mark-to-market it until the end of the last quarter. So it seems that there is some gap in that explanation. And...

Madhukar, I just want to -- sorry, this one I just want to add that on the fixed income side, also, we had an elevated yield because if you see some of our streams where we had invested and we have continued to remain investor on the credit side have -- for this quarter has given a comparatively better yield. So that also has got mark-to-market impact into our financials, especially on the corporate debt and the credit funds.

Right. Has there been any recovery in the credit risk funds?

Yes, yes. So that is -- which we have intimated as well in the past. There has been a recovery on some of these stressed assets and which has also resulted in that elevated yields.

Yes. Got it. Got it. That clears things up. Yes. And the admin and other OpEx has jumped a little bit this quarter. Anything unusual there?

No, nothing significant, Madhukar. As we had mentioned that once the mobility comes to normal, there will be a slight uptick in the expenses. And if you see the last quarter was -- we were completely working from offices across geographies. And obviously, so there is marginal increase. And also, if you would have seen there has been some increased elevated expense on the marketing side. And also, we had one new fund offerings. So all those contributed to some marginal increase, which you have seen on the admin side.

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

Congratulations for good set of numbers. I have a couple of questions. First, just coming back to the question on the yield part, the revenue yield. Now if you look at our owned key flagship equity stream products, TERs, see and compare that for September versus, say, August, we have seen a sharp cut in TERs. So the cut has from, say, 7 basis points to even 19 basis points in some of the funds. And if we just go back to your reasoning in terms of the drop in yield, there is no major change in -- I mean the trail has been going on, the ship to the trail has been going on for quite some time. And same has been the case for -- there has not been any major change in this stream even for each of these streams. So it's not back that the stream has changed to a different slabs all together. So I'm just trying to understand that what is prompting us? I mean, is the competition intensity too high for us to drive this sharp cuts. So is this a one-off? Or do we see this -- this has more of a sustainable base going forward. So something you can comment on that.

So there are 2 parts to this one. See, in this year, what we have done is that some of the stream-related expenses relating to transaction costs, et cetera, also as part of better disclosure and governance, we will be debiting into the stream itself. That's one which we have decided as part of the Board deliberation. Because of that, we would have carried out some adjustment to those expenses. But on the net yield, it is not going to impact. It is just that on the gross realization basis, we might have done -- there will be some impact. Also technically at times to push some of our streams, we do make necessary changes. On some streams, we increase our TER and in some streams we decrease. So this is more of a tactical thing, which we keep doing it actively in consultation with our sales team. But predominantly, some of it, you will see that our expenses, which we used to have it as part of our admin expenses will be more and more transferred to -- and also the allocation will be changing as per the -- for our better disclosure.

To understand just a little better, the change in the gross yield which you also report in the fact sheet and other materials. How much of that impact will be pertaining to this change in accounting which you are talking about? And when you say tactical, is it just a promotion stream onetime in nature? Or this is like a more sustainable trend going forward?

No, no, these are like, as we say, that we sometimes run contest for a quarter and sometimes for months. So it is all depend on that. So if you see that in some of the streams where we are seeing -- or there are flows coming in and performance is good, we do these changes, which is allowed for law. And this is, again, keeping the focus on overall profitability. We just -- and also, we are balancing the growth versus profitability, we keep making these changes. However, at the same time, we try and ensure that the overall yields are not materially impacted.

And on the change in accounting, which is driving this impact on the gross, how much would that impact be? Because it's not just 1 or 2 stream. Major equity product flagship streams have seen a sharp cut in yield. So that gives a materially different picture than what you see?

It would be about 1 basis point on -- maximum about 1 basis point in the equity streams for that transaction cut, what we're talking about.

Okay. So the majority of the cut is basically to drive volumes on to deal with the competition landscape basically? Second question...

Combination of factors. One is the drive what we are doing it, the increase in the AUM, wherever it is there. And the third part is that because of the churn, let's say, if fresh flows have come at a higher cost, and there has been sized of the old asset is getting churned. So it is a combination of all these factors.

Understood. Second question, which I just want to understand, if you can give some color on market share, especially in equity segment. In T30 versus B30. So how has that changed, say, 6 months, 1 year or 2 years back versus now? And added to that, just 2 more elements is if you can also dwell down on how is our market share behaving in retail, HNI or corporate level -- and any distributors we have added in T30?

Yes. So I will take that one. So broadly, if you were to look at our market share, overall market share has gone up by about 22 basis points, and we have added about last 1 year, about 24 lakh new investors, majority of them are retail. As you are aware, I think over the last 1 year, our equity fund performance has also been improving. And today is in a quartile. The most difficult part of customer acquisition, which is getting retail investors, which are most sticky, that part is already into action and motion. And I'm very confident now the market share will also come with the lag as the performance comes, the top up comes, the more sit comes. Even if you were to look at in our own presentation, Slide #30, if you see on a quarterly -- on a month-on-month basis, asset book for the July was INR 600 crores, then it became INR 630 crores, than it became INR 650 crores. So directionally, we are going in that direction. I think, but at the same time, in line with what Prateek also mentioned earlier, we want to grow, I think our assets in smaller citizen towns, smaller ticket size because they are sticky, and we want to also be very conscious of the cost of acquisition because we don't want to go overboard there. So I'll leave it at that in if there are any further questions. But broadly, one thing you'll see is from our perspective, at this point of time, the majority of -- also to your question, the 22 basis point increase in market share that has happened has majority happened in higher debt, equity has been flat. Equity has been flat. But as mentioned earlier, since the investors have started coming in, we expect the AUM also to go over the lag effect.

But any perspective you can drill into in terms of T30 position because I think that's where we come up short because of the issues the group related fund promoter. So just trying to get a perspective, especially how is that market share or positioning change? Any new large or institutional distributor you would have added or we have now in -- been in panel now?

We have added about 2,000 new distributors during this period, and majority of the 24 lakh investors which have come, while I will not have the often breakup. But broadly, a very high percentage of that will be -- majority would be from Beyond 30 Cities. That is number one. Number two, the fact that recently, even our NFO, the fact that investors almost are nearly 2.5 lakh to 3 lakh investors came from 2,500 cities and towns gives the story that the investor has accepted the new brand and the distributors, the relationship which were over the years, I think it remains very strong. And I think I'm very confident in coming quarters, as I mentioned, with the new investor base increasing and the market share increase of retail folios by 2% in last 12 months, that will clearly have a lag -- positive lag effect on the AUM and the market share of equity also.

Okay. Just last question. You talked in the earlier part of the call you talked about rethinking on the network expansion which you are already planning post COVID, we're kind of rethinking about this. So just trying to understand, in the presentation also, we kind of gave a slide we're showing an improvement in profitability for brands, for employee. And similarly, in terms of AUM for brand, so what is your kind of throughput you think the existing branches can kind of cater to before you alluded to add either employee or further expand in those particular geographies. That's one. And relatively, how should one understand the existing cost base? So to what AUM this existing cost base, not just -- overall operating cost base, which we can cater to considering this change in our orientation or network expansion?

A very good question. I think from our perspective, as -- with reference to something else on the financial data, there was a question to Prateek, on the cost, and we mentioned at the last quarter, I think all the offices have opened. I think during the COVID period, there was the offices were closed, everything was digital I think, but I mean this thought always came to our mind, should we cut down or should we relook at expanding because everything the world was working on digital. But I think what we realized, especially in the last 3 to 6 months is I think both digital and physical are going to coexist. I think it's never going to be a case when you go to the smaller cities and towns, I think investors are not as heavy as we think that I think everybody will go to the net and do it because still this requires a little bit of push. And to your earlier question of adding distributors because distributors also like to be, I think, serviced. I mean, the remote servicing doesn't work with distributors in smaller cities and towns. So at this stage, we are closely monitoring, and we have not taken any decision to either cut down branches or expand rapidly. But at the same time, digitally, we'll continue focusing investing. Branch network, our assessment at this point of time is at least in India for the next 10 to 15 years, you'll need both very strong digital and physical infrastructure to succeed in small cities and towns.

So the current cost base which we have in operating cost of the employee and other headwind and all, what kind of an AUM that can be catered I mean before us looking to further -- make further investments?

No, I think it is the way we see it. I don't want to see it from a quarterly basis how it works out...

I'm not looking at quarter -- I'm just looking over the next 3, 5 years, what -- so even if it keeps on growing.

I think we are present in nearly maybe about 270 cities. We believe even if we have to add, let's take a scenario where we have to expand our branch network. I think it will be not more than 50 to 100 more. But that also, there's no decision taken at this point of time. Right now, we want to focus on digital and our 270 branches are good enough to take care to service on a hub-and-spoke model, more than 1,000 cities and towns in India.

Okay. Last question, if I can squeeze in.

Please.

On the international business, so I understand there was COVID in between, the related to COVID in between. And therefore, the whole process in terms of integration with [ Perin ] and capitalizing kind of went on a slow track. But it doesn't -- now some time still, we haven't seen the kind of leverage or the delta we -- one would have kind of hoped in terms of flows from international business, that has not really materialized for us. So just trying to understand where has been the limitation? What stage of that evolution we are now in?

So again, from our perspective, I agree with you, and I think in my last quarterly results also I mentioned, whether because of COVID or various reasons, there is lot -- less to show there compared to the way the domestic recovery has started. We do not want to give a futuristic statement, but there's a lot of work in progress. And you'll see us in the coming quarters. I think as things materialize because unlike retail, which is basically a complete machinery work, a lot of international mandates are binary into one. I think they need to close. But the fact that I think today, I think when you talked about Taiwan, if you see our LOI with the Cathay, I think it is not only restricted to launching the Taiwan fund in India but vice versa also. So I think you will see some action on it. I think I completely agree with you, your observation, which I had myself mentioned, I think it's taken a little more time because last 2 years were, the world was grappling a very different issue. Every country was grappling this issue in their own country, you will see some progress. I think maybe in the next 3 to 4 quarters, you will see some positive developments there also.

The next question is from the line of Ravin Kurwa from ICICI Securities.

Just 2 questions from my side. So 1 will be on the new age partnerships, so partners like [ Croda ] and everyone. How is the distribution model working over there? I mean does it get clubbed under direct or in the regular AUM? And my second question will be, what will be the AUM contribution as from today? And one more question will be on new products, which we have filed on the services -- SEBI, what will be their cost to us? I mean it seems that in mutual cases, these products are typically expensive. So will they be like profitable products in the initial phase? Or it will take time when sale comes in, they turn out to be profitable?

So I think all the new age distributors, I think that is Zerodha and , I think we continue working with them. we clearly see all of them as an important partner, but not only for the mutual fund distribution, but also playing a very important role in the expansion of the Indian capital markets and deepening getting the investors. While I think it will be not appropriate for us to give an individual market share of who's contributing how much. But I think the fact that I think, as we mentioned, about 60% of all the new ETF folios which have come to the industry have come to Nippon, is a testimony to the fact that I think during this period, the entire ecosystem of Zerodha and [ equivalents ] as they were opening new demand accounts, we were one of the beneficiaries of that. So I think it's -- I think we see all these partnerships very important. And from our perspective, very clearly, anything -- any distributor, any partner, any player in capital market who's getting an investor to the capital market is going to be helping the mutual fund industry, and we believe we are in a very strong position to capitalize from that. To your second question on launching new products, I think, again, most of the products that we are launching, I think there is no significant cost involved in it. But again, having said that, I think, when we launch a product, we launched it from the perspective of the 5, 10 years, not seeing it how it works out in immediately in the 1 quarter because there's going to be a buildup to -- let's take an example. -- we were one of the first ones to launch the [ IT ] there, nothing various other ETFs. Today, these funds are about INR 2,000 crores. Having said that, we continue launching new products. There will be things where we will be investing for future, and we will be willing to -- I mean, we will not look at the cost for the 1 or 2 quarters. But none of the products or none of the initiatives that we'll do will be done with the objective to just gain market share at the cost of profitability.

And one more question. So when we say that for the ETF, when we have the earnings in the range of 15 to 17 bps, this was ex CPSE and gold, right?

Yes.

Yes.

So if we see that if you want to say that ex CPSE, what will be the realization for the ballpark number, any?

Sorry, sorry, again?

Individually, every ETF has, I think it is a published number. So broadly it could be. Some it is as high as 100 basis points and for some, it could be as low as 10 basis point. I think, again, I would like to highlight the fact, when we talk about ETF, cost, many times, we give too much focus on -- we focus on cost. But cost is not the USP when you sell ETF. I mean, an investor will incur an impact cost of 2% to 3% if the liquidity is not there. So I think it's a very important part. I think it is cost is -- as one of the cost -- one of the factors, not the deciding factor. And when you have volumes, you are in a position to actually be in a stronger position to drive up the cost also.

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

I just have one bookkeeping question. Can you give me the category-wise closing in the AUM for the quarter?

Yes, sure. So that is, I think, should be available in the NI website as well. But we can ask Abishek to give you offline if it's okay, Madhukar?.

Yes, that's right.

Any other question, Mr. Ladha?

No. That's it for me.

The next question is from the line of Nikhil from SIMPL.

Congrats on good set of numbers. Yes. My question was on the customer acquisition, which we do through the new age platforms like the gross or the Zerodha and all. Do you sense the behavior of this customer being more finically in terms of a higher churn? Why I'm coming -- saying this is because the way these platforms are basically advertised is the ease with which you can trade and transact. And if the customer is seeing that somewhere else is getting better, NAV or something of that sort, you can churn easily, which is what they pitch on the product, which is. So do you see that the churn is relatively higher in customers who are coming from these platforms or is the churn equivalent to what we've always seen through the offline or the distributor model?

It's too early to comment on that because a lot of these has just started coming in, a lot of this. But I think one thing we can clearly see is I think you have to differentiate investors into categories. There are going to be investors. I mean, you talked of Zerodha and these broking platforms. I think there, I think majority of the investors come in ETF. [indiscernible] does not matter even if somebody was to trade, does not matter. If he trades in one, then moves to something else. They will move him from small case in a different color basket, it's not very different. But overall, I think what we have seen, irrespective whether it is investor coming retail, online or offline. Smaller the ticket size and the ship investor is the most sticky investor, that's something universally we have seen till now.

Okay. Because where I'm coming from is if the ease with which the movement happens becomes easier, the strength of the brand does get diluted. So if he comes through your own platform versus he comes through Zerodha or PayTM. So the platform would make a difference, right, in terms of the stickiness or would you say it will be remaining...

I think you have a very valid point. If someone is coming directly to our property. It is key, brand stickiness is higher. But at the same time, it more than the brand, I think you have to understand, I think ultimately the investor, whatever is good for the investor, he'll do that. So I think today, I think even if he's coming to our platforms through Zerodha or others, I mean, if you see the ETF liquidity is highest in the form, from their income here. So that does not matter, that's what we take out. The investors coming online are a little more savvy, they know what is good for them. And from our perspective, I think, again, I'd repeat, smaller the ticket size, the ship investor is the most sticky investor and that's exactly as we, Prateek and myself, we replied in one of our earlier questions. Our focus remains on small cities and towns because we strongly believe the fact that the 24 lakh investors that we have acquired in the last 12 months. I think to talk them up, to take them up. I mean that's a very sticky business rather than trying to acquire only HNI investors.

Sure. And just one last question. I don't know if it's relevant or not, but if someone comes through an ETF platform and is seeing that the Nippon AMC funds are giving higher liquidity, does it provide an opportunity to cross sell him into our front line or the active fund? Or do you think that's not the case because he is purely coming from ETF for a specific reason. And when he's moving to an active fund, he would look in a different way, is there a cross-sell opportunity or not?

I think I will not say a cross-sell opportunity, but there is an opportunity for a higher wallet share because what happens when somebody comes into a mutual fund, typically, you go and invest in 5 different mutual funds. But if he has to buy a Nifty ETF, I think he will only come to one. He does not want to divide it in 5 mutual funds because underlying is already the same. So I would more than cross-sell, I think the moment you get an ETF investor, your market share, your wallet share is much higher in that case because the investor does not want to overdiversify just like in case of mutual funds.

And that helps you cover the low yield on the product over a lifetime?

I think I think from our perspective, the objective remains that I think we continue offering what is good for the investor, and we leave that choice for them because there are going to be investors who would do themselves. I think he's mature enough to understand where there is liquidity, how to ignore that 5 basis point cost and look at the impact cost of 2% or 3% which can have a far more -- far-reaching impact on his portfolio.

One last question, sorry to dig on this. Is the type of customer who is coming into ETF versus on active -- is it different like the way in a debt market, if someone is coming, they would be more from an institutionalized or a larger site? So in ETF, is it a similar way or in ETF, the mix of retail and institutional would be similar to active funds?

So I think in ETF, the debt portion is more HNI institutional, but the equity and the gold, I think because as I mentioned earlier, gold is one of the largest -- the largest -- is the largest in there. I think it's primarily a retail. So again, this keeps changing. It's not one size fit all. If it is a multidimensional thing, segment, there could be ETFs in retail, which are very, very sectoral funds. I mean that is very more in terms of retail, but more of HNIs in the IT, pharma, all these banking ETF, you have more people who want to take a sectoral call, tactical call compared to normal ETF, it's a very different process. So it's not one size fit all, but one thing is for sure, ETF and fixed income are more dominated by HNIs and corporates.

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

Firstly, [indiscernible] was around [ INR 5,200 crores ] in the medium NFO. And that is one of the largest distributors, if I look at the commission paid out and I think they contributed around 4% of your AUM. So does it any impact your distribution in any sense, your thoughts on that would be helpful. Secondly, could you give some light on your customer base up to how many streams of Nippon will they own on an average, whether it's around 2 streams or 1.2 or 1.5, where they are? And last question would be on the equity side with the market share trajectory has not been impacted because of lower share in close or higher trend in outflows.

So I'll take the last question first. I think equity, as I mentioned earlier, this question has already come. So I think we clearly -- I think with the good fund performance over the last 1 year, we are starting to see inflows. Having said that, because as the markets -- when the markets run up, in the last -- past 2, 3 years, we were getting lower inflows. However, from the base, there was a redemption because as the markets go up and be resistant to redeem. So I think, again, if you were to say because the early inflows are not there. Our inflows have started again. And I think that's why I mentioned earlier in one of the -- addressing one of the questions. You will see the equity market share also going up in times to come. To your other question on MJ, as I mentioned earlier, I think from our perspective, the way we see the entire mutual fund industry from a long-term quarter, we'll have to do what is good for the investor. We'll have to keep the investor in the center. And also to the earlier question before this, I mentioned that in mutual fund, normally, mutual fund investor is already diversifying to multiple streams, multiple streams and multiple [indiscernible], unlike ETF. So I think definitely, in MJ doing it, can impact the distribution scenario in India, but we clearly believe the kind of brand and the reach that we have I think we continue getting our market share.

Okay. And I had asked one question about the average holding of Nippon stream with your customer base?

Yes, we'll not be able to give the exact number. It is [indiscernible] less than 2.

Less than 2.

The last question, we'll come back to the exact number because this would be a little.

The next question is from the line of Viraj Kacharia from Security Investment Management.

The opportunity again. I just wanted to go back on the yield part. Not just for us, but if I look at other large incumbent players also in the last 2, 3 months, we are seeing them being quite aggressive in terms of giving higher commission payouts to the distributors. So is it that the comparison at especially, say, from the funds who have launch and seeded and scale up in the last 5, 7 or 10 years. And the threat of them becoming even larger and taking more higher share is now even more severe hence this is the reason why we are kind of seeing this kind of cut in the yields for those larger increment players, including us?

If you see -- and I was just looking at data. Today, we have 45 players. And way back in 2012, also we have 45 players. In between, 20 AMCs have actually changed hands in terms of overall numbers. And today, if you see 30 of them are less than 1% market share. So this is like -- you will see this flickering -- this happened in 2006, '07 as well, and we've been in there for almost now 2.5 decades. We have decided to stay away from these assets, augmentation by paying higher commission. For us, profitable growth remains the key focus and we'll continue to do that. And I'm sure there are reasons for new incumbents or some of the existing incumbents to garner higher market share on the expense of profitability. That's their call, but I think we'll remain focused. And also, if you see on an overall basis, that in the last 10 years, the industry has grown 5x, and the larger players have continued to dominate that. And I think if we remain focused and keep doing our work, I do not see there is any reason for us to sell out higher commission to grow our market share. So that is what I would like to comment. Beyond that, I won't be able to comment on the competition strategy.

I think, Viraj just to add to what Prateek mentioned. I think we strongly believe any business model, by paying higher brokerage to a distributor or by charging lower fees on a product is not sustainable from a long-term point of view. So we will continue our profitable growth. I think we will not be from our perspective. We see the volumes can double, triple and multiple times can go multiple times from here, and our focus will remain not to get into any price war.

So the background to this is if you -- I mean, I agree that broadly the top 10 or the top 15 market share is, by and large, been stable or they have actually consolidated in this industry. But if you look at the composition of the top 5 to top 10, that has materially changed. So the guys who have, say, not there at all. And 10 years back, they now have a sizable market share. Some of them are even ahead of us in terms of market share. And it's even more using because you're operating in an environment right now where flows are quite healthy. The market is also quite favorable and players are engaging in this kind of yield or increased payout. So -- and we have also seen fairly that bid in our own flagship streams. 15% to 20% cut is not a small cut by any means. So hence, I'm just trying to understand, is this kind of a -- what is driving this change in behavior when everything is going with you in terms of the industry environment and flows?

I think as mentioned earlier, every player will have a different strategy. From our point of view, this I think 15 basis points on any fee stream. I think Abishek will come back to you offline. There seems to be a little bit of something, I think, missing here. Having said that, like I mentioned, our focus will remain. I think we see a big opportunity for the volumes to double, triple from here. And we will not be doing anything where we lose money. I think even if -- at the cost of market share. I think I'd like to reiterate our philosophy going forward.

Thank you. Ladies and gentlemen, due to time constraints, this was the last question for today. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect.