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 Q4 FY '22 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sameer Bhise from JM Financial. Thank you, and over to you, sir.

Thank you, Nirav. Good evening, everyone, and welcome to the 4Q FY '22 Earnings Conference Call of Nippon Life India Asset Management. With the -- from the management team of Nippon Life India Asset Management, we have Mr. Sundeep Sikka, Executive Director and CEO; Mr. Prateek Jain, the Chief Financial Officer; Mr. Aashwin Dugal, who is the Co-Chief Business Officer; Mr. Saugata Chatterjee, Co-Chief Business Officer; Mr. Saha, the Chief Digital Officer; and Mr. Hiroshi Fujikake, who is the Nominated Director from Nippon Life Insurance. I would like to hand over the floor now to Mr. Sikka for his opening comments, post which we can open the floor for Q&A. Over to you, sir. Thank you.

Thanks, Sameer. Good evening, and welcome to our FY '22 Earnings Conference Call. We have with us CFO Prateek Jain; Co-Chief Business Officer, Saugata Chatterjee and Aashwin Dugal; Chief Digital Officer, Arpan Saha; Head of [indiscernible] Group, Nitin Gupta and Fujikake-san, Nominee of Nippon Life Insurance from Japan. Overall, industry assets remained stable in Q4, driven the rise in passive and equity segments, offset by a decline in fixed income assets. The industry continued to see steady interest by retail and HNI investors. The industry's unique investor count grew by 10% to 34 million in Q4. The strong growth in investor base and overall assets indicate confidence by long-term investors in mutual funds. We expect the industry to maintain its growth momentum in future also. At Nippon India Mutual Fund, our priority is to be future ready and 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 with you the key performance highlights for this fiscal. NAM India recorded its highest ever profit of INR 7.4 billion in FY '22. Our overall mutual fund market share rose by 26 basis points to 7.38%. AUM increased by 24% to INR 2,833 billion. Along with the steady increase in AUM market share, Nippon India Mutual Fund added more than 7 million investors and has now the largest investor base in the industry. We increased our share of unique investor folios to 36% within -- with a base of 12 million investors. The growth was driven by superior fund performance, comprehensive product portfolio, strong bonus framework, robust presence in asset segment and granular distribution network. In line with our investor-first philosophy, we keep expanding our product suite to cater to the investors' varied and diverse needs. In FY '22, we launched several innovative and industry-first products. Across 7 NFOs, Nippon India Mutual Fund garnered assets over INR 40 billion from 275,000 investors. Other such unique offerings in the pipeline include S&P EV Index Fund, the innovation fund and the artificial intelligence fund of funds. In total, 11 schemes have been filed for regulatory approvals. These products will give investors more value-creative revenues to diversify risk and generate sustainable returns. Here, I would like to reiterate, even in the future, we will focus on strong asset growth, but never at the expense of profitability. With a keen retail focus, we have one of the largest retail AUMs in the industry at INR 764 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 28% compared to industry, which is 23%. We are amongst the leaders in Beyond 30 Cities category, the category contributed an AUM of INR 478 billion, 17.2% of the total assets were sourced from these locations against an industry average of 16.6%. As on 31st March 2022, 70% of the individual assets have a vintage of more than 12 months. The annualized systematic transaction book is at INR 88 billion. On a gross basis, systematic portfolio rose by INR 1.6 million in FY '22. Our systematic AUM rose by 30% to INR 514 billion. 48% of our SIP AUM has contributed to -- contributed for over 5 years vis-a-vis 21% of the industry. Also in volatile markets, folios with lower ticket size have demonstrated longer vintage and better stickiness. 12% of SIP folios have continued for more than 5 years against the industry average of 8%. Today, Nippon India Mutual Fund offers industries this suite of products in the passive category. With the strong growth in industry's passive growth, our ETF ecosystem is already in place and far ahead of its pace in terms of investor base and mind share. In this segment, we managed an AUM of INR 558 billion and have a market share of 14%. Excluding the EPFO allocation that goes to 2 specific mutual funds, we would be the largest ETF player in the country. The gold ETF is the biggest in this category with INR 66 billion in assets. Nippon India Mutual Fund share in industry ETF folios rose to 58%. In this fiscal, we added 6 million investors and accounted for nearly 70% of the total ETF folio addition in the industry for this quarter. Nippon India had 68% share of ETF volumes on NSE and BSE. Our ETF average daily volumes across key funds are higher than the rest of the industry. As a very diversified asset [indiscernible] company, we have begun to grow our non-mutual fund segments over the last few years. With the government mandates, we managed assets of INR 682 billion in non-mutual fund segments. The offshore business has assets of INR 114 billion under management and advisory. Leveraging Nippon Life's global network, we continue to ramp up our international presence. Multiple products, which are in approval stage in the regulator are a step in that direction. In our AIF business, we managed Category II and Category III AIFs across various asset classes. As of March '22, Nippon India AIF has raised commitments of INR 45 billion across all funds. Online and digital assets have become a strong source of investor acquisition and communication. Keeping our [indiscernible] investors in center, we are well up a 360-degree integrated framework for acquiring, onboarding, engaging and reengaging with such digital investors. [indiscernible] that has been created and improvised over time with digital powerhouses like Google Beta, Adobe suite of products. The focus is towards creating a digital experience that is friendly, futuristic and frictionless for our partners and investors. In FY '22, digital platforms contributed 58% of our total new purchase transactions. Over 3 million purchases were executed through digital assets and an increase of 63%. Nippon India Mutual Fund has a well-diversified and nimble distribution base. As on March '22, we have over 84,300 distributors in parallel with us. The MFD base rose to approximately 84,100, an addition of over 500 distributors during this quarter. Also, we have ongoing tariffs with 20 prominent digital partners. Direct channel contributed 56% of the mutual fund a year. On the distributed assets, the share of MFDs was 59%. 81% of distributed assets are contributed by individual investors. Nippon India Mutual Fund has a wide presence to 270 locations across the country. We continue to review our existing branch operations and future expansion plans. In recent quarters, our marketing efforts are increasingly focused more on digital channels, which are more cost-effective as in the offline advertising. Now on the financial performance. For the year ended March 31, 2022, profit after tax was INR 7.4 billion, an increase of 9%. Operating profit increased by 46% to INR 7.6 billion. Operating profit as a ratio of average assets under management rose by 25 basis points -- from 25 basis points in FY '21 to 28 basis points in FY '22. Our aim is to create sustainable value through growth across asset classes, cost optimization initiatives, resulting in expanding and favorable operating leverage. We continue to focus on increasing the diversity in our revenue streams. Towards this endeavor, I'm happy to state the revenue from non-mutual fund business rose by 19% in FY '22 and contributed 25% -- sorry, contributed 11% of the consolidated core profit. We continue to grow organically through physical and online channels. Additionally, we remain open to evaluate investments in strategic opportunities that add value to the profitability or complement the existing businesses and ultimately are in the interest of the minority shareholders. Board has approved a final dividend of INR 7.5 per share. This is in addition to the interim dividend of INR 3.5. With this -- this is the highest dividend paid by the company, a total of INR 11 during the financial year. As a signatory to UN PRI, the world's largest voluntary corporate sustainability initiative, NAM India aims to create and nurture a world-class performance-driven and socially responsible ecosystem. Integration of ESG aspects in the strategy, operations and risk management will help us outride the dynamic market and build long-term relationship with all stakeholders. We have introduced a formal ESG framework in FY '22. We intend to develop responsible investment strategies to build the resilient portfolio that will not only provide superior return to our investors but will also have a positive environmental and social impact. In line with the [indiscernible] responsibility, we continue to monitor and engage with all our investee companies and in the best interest of unitholders. In FY '22, Nippon India Mutual Fund voted [indiscernible] more than 620 resolutions in our investee companies [indiscernible] unitholders. To sum up, I would like to reiterate that our NAM India investor centricity remains the key theme. We strive to deliver a complete product suite customized to the investor needs, superior front performance, efficient client servicing based on a comprehensive digital ecosystem. We are confident to continue our trend of profitable growth in coming quarters. Before concluding, I would also like to welcome our 2 new board members from Nippon Life, Kimura-san and Yao-san. Kimura-san served as the Managing Executive Officer, Head of Global Business at Nippon Life. He has an extensive experience in asset management operation on a global scale. Yao-san is the regional CEO of Asia Pacific on Nippon Life, is an industry veteran with over 25 years of experience in insurance sector. We are sure with the induction of such esteemed individuals, we will strengthen our board and we will continuously gain from the valuable guidance specifically in the areas of planning, risk management, [indiscernible] and synergies with Nippon Life global operations. With these comments, we are happy to take any questions. Thank you very much.

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

Congratulations for a good set of numbers in such a challenging environment. I just have a couple of questions. First is, if you look at our B30 share as a share of our own AUM and if we compare it to the industry trend, the gap between us and the industry seems to be shrinking, and that's the trend which is evolving. And if I also look at the broader launch pipeline, which you shared in the presentation, most are in the active -- passive space. So you have ETF or Index Fund and not much in active equity space per se. So just trying to kind of understand how we are kind of looking at increasing our market share, especially in the active equity space, where we kind of -- will not want success in terms of gaining share, per se, for us. So just trying to understand the broader perspective there. And a related question to that is, if you look at a yield that we're further moderating. And if I look at last 15 days of March also, we have seen a very sharp fall in the yield. So would pricing be a major lever to drive the AUM growth? Just trying to understand the equation between -- or the interplay between pricing and market share especially in perspective with equity?

Thanks, Viraj. I'll take a part of -- some part of the question and for balance, I will invite Prateek. Firstly, I think let me take your question on B30. I think we continue focusing on execution and the facts that we have added nearly 70 lakh new investors is a testimony towards that. I think we -- while the gap that you talked is on the AUM, I think we clearly see, I think, we continue building on retail, and there may be a lag effect that there's new investors coming, and you'll see them topping up in times to come. Number two, your question on equity. Yes, I think we had, last 2 years, we had a little pressure on equity, I think. And as you would appreciate, as you can see, we had certain -- our equity performance has been improving. And normally, equity performance, whenever there's a 1-year and 3-year keeps improving, I think there is -- the flow starts increasing. Just to give -- put things in perspective, if I was to divide this entire financial year in 4 quarters, the first quarter in equity we had and because the redemptions were high, I think we had a negative number. But every quarter after that, the numbers kept improving and the net positive number for the quarter, Q4 was in excess of INR 2,000 crores. So I think the positive trend is already visible. And I think from our perspective, we'll continue to see -- keep focusing on execution. And I think we believe that like in fixed income and overall, the market share has gone up. In equity also, the trend seems to be positive. And the pulse that we get on ground tells us, I think, you will see with the lag effect in the next 3 to 4 quarters. The equity market shares also moving on. As far as the new products are concerned, which are in -- you mentioned were passive, I think we have always believed, I think to be more investor-centric and I've been trying to complete our products suite. I think that the approach is not to see whether it's active or a passive. I think continue to keep evaluating products, which can -- which add value to the investors, and they may happen to be active or passive. So I think we continue working on completing our products suite. As far as the realization is concerned, Prateek, if you could just throw a little light on that.

Yes. So the change in the last week of March is more to do the compliance part of it. I think we mentioned in the last year as well. What happens is that, look, we have to ensure that all the expenses for retaining to the scheme has to be accounted in the scheme. And we cannot measure it to the last year. Therefore, what happens is there is, in certain scheme where expenses are reduced or where expenses have increased, we need to just give these notices. And therefore, you see there is [indiscernible], but then those are reflected back in the first week of April itself. So those are just to make sure that we are fully compliant with the regulation that all expenses of the schemes are borne by the scheme. And therefore, you see there is some dip in the management fees, not the TR realization, just the management fees. So that's one thing. But if you look at the overall basis, if you see, our revenue realization stands at about 49 basis points as against 52 basis points, yes, of course, there has been pressure on the yields. Obviously, as I mentioned in my last call also, there are multiple reasons, including the mix, the size of the funds and the rates, which competition is offering, et cetera. And also because the lower -- or the old AUM is getting replaced with the new AUM. So there has been slight pressure on the yields. But if you see on a back to AUM basis or rather on the operating income basis, we have made about 20 bps -- 28 bps of realization as against 25 bps last year. So because of the -- this clearly demonstrate that despite a decline in the overall revenue to AUM yields, we have been able to improve our net yields. And therefore, our operating yields are better as compared to last year.

It's just 2 follow-ups. One is on the B30 strategy. Sometime back, we had put the physical expansion, the center expansion on [indiscernible] and our thinking was we will kind of wait and focus more on digital. Is there now a clarity in terms of what route we are taking in coming years regarding the B30 expansion strategy? Anything further you can elaborate in that sense and the kind of investments will be needed to support that. That is one. And second is why I talked about the yield part is because the competition intensity is still, by and large, the same. And there are players who kind of are willing to operate at a much more lower profit spread in order to gain share. Relatively, the performance has also been much better for them if I look at 1-, 3-, 5-year basis. So just trying to understand what will be your pricing strategy given that operating environment?

So Viraj, as I mentioned in my opening comments, I think our focus will be on profitable growth. We will -- I think we are very focused that we will not be doing any business at a loss. So I think we will not be swayed by even if competition is going to be charging this or paying more.

[Operator Instructions] The next question is from the line of Mohit Surana from CLSA India.

Sir, congratulations on the result. First question is in terms of dividend policy, this year, almost you paid out 90% kind of a payout on dividends. So what will be the policy in terms of dividend payout going forward? Secondly, in terms of revenues, revenues are now -- it looks like they're flat quarter-on-quarter, whereas if you see the markets as well as AUM, there's hardly any growth. So I'm just -- I just wanted to know if there is any lumpy revenue that's included in this quarter.

So for the second part, Mohit, you'll see what happens last year also, again, this question has come. This quarter has actually 2 days less as compared to the previous quarter. And the average AUM actually has fallen on the equity side because of the mark-to-market. So obviously, where equity contributes for a larger part of it. Therefore, you see there is a flat growth. But effectively, if you take the 2-day more revenue, you would have seen some improvement in the revenue as well. So that -- if you want answer for it. I'll ask Sundeep to talk on the dividend policy piece.

So Mohit, as we have demonstrated in the past, I think as per dividend policy, I think we have been rewarding the shareholders with a high dividend. This year on a stand-alone basis, it is 96%. Actually not 90%, 96% of the stand-alone profits have been given back as dividend. I think we'll continue similar policy of rewarding the shareholders with higher dividends. I think we, at this point of time, have adequate capital network, I think, to explore all M&A activities that we -- which is a continuous part of our journey, which we keep doing. So I think as far as the profits are concerned, broadly, 100% of the profits will be distributed as dividend going forward also.

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

Congrats on a good set of numbers. Firstly, just extending the point on the yield discussion. So you mentioned [indiscernible] that legacy assets to newer assets transition that has created an impact. So firstly, whether -- what would be our mix today in terms of share of those legacy assets in the portfolio, which would be earning the lower trade. And that would be helpful if you could give some color there. Secondly, do you think that the intensity of this transition would reduce going ahead given that bulk of the [indiscernible] activity will reduce going ahead, especially for the direct productive equity schemes. So that is one part. And secondly, on the other income business, we've seen a sequential increase in spite of the yields rising. Could you give some color that on the yields plan -- on the other income plan, sorry?

So in terms of aging, I couldn't understand that what your question is. But from the perspective, we do not disclose the exact composition of the aging. But if you see last few years, we have seen a significant amount of outflows. So all the assets which were now whatever we are remaining is the sticky assets. And the recent assets that we have got in the last 2 years have been the new assets. In terms of the -- overall, I would say that still, it would be in the range of closer to 50-50. But I do not see that the old assets to go out because most of them are now part of the SIP AUM, if you see. So -- and hence, that asset to continue. You're right that incrementally, whatever assets we gain, that will be on a lower yielding. But again, as I mentioned, that our focus remains on a path to total revenue, if you see. We are talking about 50% of profitability. So we'll try to manage around that. So the path to revenue would be about -- we'll try to maintain at a base of 50%.

Okay. So...

On this season whatever yield, the decline would be there, like the operating leverage will take care of it. So that's the whole thought process. And that is how we will be driving our pricing strategy as well to ensure that we have a sustainable growth. Most of the -- if you see 70% of the assets are more than 12 months. So obviously, there is -- this is like most of the assets that have come is already 1 year old now.

Got that. Got that. And on the question on the other income? Sequentially, the other income increased in spite of the fact that the yields had hardened. So what was the reason for the increase in the other income?

See, frankly speaking, most of our -- see, predominantly one could be the asset increase. And predominantly, if you see, most of our assets now is on the fixed income, our own fixed income mutual fund. We have brought down our equity exposures. And in terms of the fixed income also, broadly, most of our assets are in the 1- to 3-year category.

Okay. But still, I didn't understand the reason for the increase in the other income sequential, considering that the yields had hardened so much during the quarter.

No. So correspondingly, if you -- so it is about INR 34 crores versus INR 31 crores. So I don't [indiscernible] I think predominantly, it is the impact of mark-to-market and that [indiscernible], what is to see is that these numbers are -- this mark-to-market is on a last date. So we have to see as of 31st December versus 31st March.

Okay. Okay. And just slipping in one more question on the debt side. You've seen a lot of outflows for the industry in this year. How do you see the debt outflows going ahead for the industry as well as for Nippon?

I request Aashwin Dugal to take this question.

So I think this year, with the -- what we envisage overall that SIP yields will continue to harden, the Fed policy and central banks all over the world. Hence, we would see most of the flows that should come into the shorter end of the curve. So consequently, we could see some outflow from long-end category, and more consolidation in the liquid and ultra-short-term category. So overall levels, we don't see overall numbers going down on debt, but the construct of [indiscernible] could change. Because corporates and some other entities will continue to raise money. Hence, you could see money is coming in for more cash management purposes. And we could possibly see the long-term investments could possibly be postponed to end of this year or next financial year, depending on how the interest rate situation plays out.

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

So the question I asked on the B30 strategy in terms of physical [indiscernible] investments. I think I got missed. So just wanted to update on that.

So Viraj, I think broadly at this point of time, because we are present at 270 locations. And broadly, there will not be a lot more expansion, new branch expansion. And even if we do, it would be very minor. So there you cannot -- I think there will not be any major investment into that. But we'll continue investing in the digital space. We have already [indiscernible] in that. So I think that strategy there, investing in digital continues. With physical branches after 270 branches, I think we feel that -- I think at this point of time, we are in a debate. Maybe a few could be added, but it will not be any significant number.

And what kind of investments we're making in the digital [indiscernible] perspective?

I think we'll not be able to give a specific number on the investments in digital. But I think if the only investment that we are doing for [indiscernible] this point of time, I think [indiscernible] happening in the digital space, I think, because I think we are investing both in the ecosystem, creating a lot of our proprietary stuff, trying to also -- we have hired a few data scientists to work on a few things. So a lot of things that are difficult to put -- we'll not be able to do give an exact number. But I think it's -- clearly, this remains a very important focus area for us.

What I was trying to get at is, is there a lot of investment capital [indiscernible]?

I don't think that from a capital point of view at this point of view, I think it will not make a meaningful impact on the profitability in the years to come.

Just one last suggestion. Some of the ESOP plans we have, they have exercise price of somewhere around [ 370, 390 ]. The current price is [indiscernible] some of the days, it's actually even lower. Why don't we -- we just explore. I mean, possibly, we can look at buying shares from the market and meeting the ease of obligation. Just a suggestion. It's something we can think on that.

[Operator Instructions] Sir, you may go ahead.

Was my question. I mean, I'm not sure whether you...

I think we lost you after [indiscernible] after that we lost you.

Basically, some of the ESOP plans, they have exercise price of around [ 370, 390 ], and the current price is around [ 330 ] and some of the days, it's actually even lower. So since we're kind of setting on a sizable surplus cash, we can use some of that to kind of buy from the market and probably meet the ease of obligation, which we would have. So just a suggestion, something we can explore in that sense.

So no, Viraj, we've we have taken your suggestions and our Board will appropriately take this matter up in terms of -- because this is more to do with capital markets and shareholding. I think it is the prerogative of the Board as well as the shareholders. So we'll take your recommendations and we'll put it across the Board.

Sure. And the ESOP, is the bulk of it now done? I mean should we expect that to kind of trend moderate going forward? Or how should one look at it? .

Yes. So obviously, largely, if you see, most of this has been accounted because the last was given in 2019, and I think that has been accounted. So obviously, there will be more new [indiscernible] will be given in terms of which will be vesting in the next 4 years, but this will not be as significant as what we have given originally.

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

Congratulations on a good set of numbers. So I had probably 2 questions. One was on SIP market share. You did mention about that [indiscernible] but still our SIP market share continues to trend down. Any thoughts on that? And secondly, while you did talk about the fact that the falling yield on the equity would be taken care by the operating leverage that we will see in the business, whereas if you look at on an overall basis, the recent launches and the upcoming launches would be on the faster side of the business, right? So if one was to look at the overall yield on a 3- to 5-year perspective, how do one look at it? Like because, of course, the [ SIPs ] would have a lower realization, revenue realization. So how the overall realizations could look in the next 3 to 5 years on a structural basis? Because at one side, we will see the equity is coming down. And then the second side, we will see the share of assets going up, which again are lower [indiscernible]. These are 2 questions that I have.

So I'll request Saugata Chatterjee to take the first question. And after that, Prateek will come back and take the second question, please.

Yes, with regard to SIPs, as you mentioned, if you see the trend line this year, quarter-on-quarter, our SIP market share, both from the SIP activation point of view, which is the actual SIP numbers coming in and the SIP input value. Both have been -- seen an increasing trend. And as we speak, we also are tracking the market share, how much of market share growth we are getting in that space. Going forward, I think the way our trend line has been reflecting the last 2 to 3 quarters, it clearly shows that the market share growth now on the SIP side also will start happening because both are correlated, the equity gross sales, net sales growth and the SIP market share, they're all correlated. And like Sundeep mentioned earlier, the trend line clearly shows that going forward, with increasing SIP flows coming in into our funds, the retention improving, the net SIP market share also will start growing. So the trend line is clearly positive. And hence, we are optimistic about the flows going forward.

[indiscernible].

So in terms of the yield, I want you to factor in, from our business model perspective, obviously, due to this composition of ETFs or taxes rising share. Obviously, the overall yields will be under pressure. But I think we do not see it that way. What we do is we segment that. We see active versus passive differently and in active also equity, fixed income and other areas separately. So obviously, what we need to do is we need to keep working on each of these segments and ensure that we -- our yields remain -- from the yield perspective, we continue to grow on a -- sorry, so we continue to grow on the absolute basis. And so if you see that in the last 2, 3 years also, we have seen a compression of 2 to 3 basis points on the yield. But I think broadly, that is getting offsetted because of the growth. So that, I think, will continue. From the passive perspective, I think what -- wants to see that this is a new set of AUM, which is coming in and the recent growth is a classic example that assets have started growing much faster. And I think the asset growth will take care of the absolute profitability. I'm not saying on the realization piece. So going forward, you'll continue to see asset growth is faster than the revenue growth. So that will -- that is likely to happen.

Sure. I got it. And one last question if I can squeeze in is on the overall competitive situation in the market, like since we've seen some softness in the NFO on the active side and they were like, of course, 2 problems. One, the new assets were coming at a lower yield, but again, there was a lot of distribution commissions that were being paid out across the industry because of the NFO season. With that softening, are we seeing any normalization in the [indiscernible]?

So Kunal, as I mentioned earlier in my opening comments, I think every company will have a different strategy. I think our focus remains on profitable growth, and we will not be acquiring business, which is not profitable for us.

Sure. Got it. All the very best.

The next question is from the line of Jignesh Shial from InCred Capital.

Yes. Just wanted to reconfirm, did you see that in case if the yield softens further from here on, we'll be able to manage expenses. And accordingly, revenue to profit should be somewhere around 50%. Is that -- my understanding correct? Has that been the statement?

Yes. So in terms of the operating revenue or net operating revenue to the revenue is about 50%. So that is what I have mentioned. And -- so see, if you see the -- if assets keep growing, and there is no incremental cost. So whatever we are -- let's say, even if we earn an incremental asset, if I earn 25 basis points, and there is no incremental cost and operating revenue goes up by that much. So that -- so we have that much of flexibility at this point of time, given that asset growth will be more or less in line with the inflation and thereabouts, while asset growth would continue to be in excess of 20% to 25%. So even if you see the last decade, the industry has grown in excess of 20% CAGR. Despite the volatility in terms of COVID or if you see the geopolitical situation. Except for the 1 quarter, there was no decline in the industry AUM, which speaks volume. And also the SIP input value, which declined a bit in the first [indiscernible] quarters, But again, it has come back. So from INR 8,600 crores of total SIP book, which was in January, now it is close to about INR 12,300-odd crores. So I think both these things show that industry is on a secular trend. And given the fact that we are so underpenetrated, just about 18% of GDP, we have a long way to go. And if the asset growth remains at this pace and our cost remains more or less -- cost increment remains more or less, then I think we'll be able to manage these ratios.

Understood. So basically, operating leverage is going to play a good role [indiscernible]. Understood. Understood. Second, also from the debt and liquid fund side, is my understanding correct? What, I guess, one of [indiscernible] that the corporate would come up for managing money and all. So is our understanding correct that liquid will still see a flow or defer at least in near term, till the time we don't see [indiscernible] this interest rate [indiscernible] gets settled out, do you see a momentum in a liquid more compared to that. Is that understanding correct?

So to some extent, you're right. So in the near term, okay, so we're still in the first quarter -- first month of the first quarter or quarter of this FY. So -- but on the same, I would like to mention that a large part of the action that is anticipated by the Central Bank has already been built in into the yields, both in India and overseas, okay? So going forward, whatever action that does happen, okay? You would see a knee-jerk reaction. But from hereon, at least at the shorter -- for the next. let's say, 1 quarter -- 1, 2 or 2 quarters. You will see some inflows in the liquid plus ultra-short-term funds. But thereafter, I think as things start paying out, the trends might change. So...

Exactly. Yes.

Beyond the first 2 quarters.

Absolutely. And before I ask [indiscernible] strategic question to Sikka. I just want one number was, can I get the gold ETF number, if possible, gold ETF yield. Last time, I think it was somewhere around INR 6,500 crores?

[indiscernible] INR 6,700 crores, INR 6,800 crores, I don't remember it. It's about -- exact number will be little [indiscernible].

Understood. Now this is Sikka to you, this more like a strategy kind of a question that I had. One, obviously, we have analyzed, I'm glad to see that a couple of our schemes are really coming up pretty well. And then that is somewhere -- we are also building in that; we should see active equity should see a rise. Apart from this, anything specific you want to mention specifically on the marketing or on the sales side, how we are tackling it up as far as activate AUM share [indiscernible] AUM share is concerned. That is what you want to highlight something more on it? And number two, how do you see consolidation happening on the AMC industry in general? I mean we are definitely getting into a segment where our people in spite of -- despite having a lot of uncertainty with COVID, people kept on investing in AUM on the mutual fund, that's a very brighter kind of note that you have in it for this year. So how do you see overall period of next, I think in the next 3 years kind of view, if you have it, that do you see more consolidation happening, large players dominating more, or branded guys are able to dominate more. Just a couple of lines from your side would be really helpful.

So I think you've asked too many questions. I don't know how I'll be able to answer in this call. But I think I'll try to do just the next 2, 3 minutes, try to give this [indiscernible] from our perspective, I think, broadly, I think we have always mentioned this industry is a very simple industry. The key to the success is execution. I think and for us, I think we are going to continue executing. The most important part of the strategy is what to do and also what not to do. So I think from our perspective, I think one thing we have decided is that I think for us, retail remains a very, very important part because it is not very easy to execute, and we've been able to get that secret sauce right. The fact that within the year also 70 lakh new investors getting added, I think which is the thing if you look at the data, is equal to what has been added as more than investor base of any mutual funds in India, which have been there for more than 2 decades. So -- and I think we also clearly believe an investor which comes once, I think he will only keep topping it up as the -- in India, the per capita income goes up, other revenues to invest keep reducing, the money into capital markets through mutual funds will keep going -- coming -- increasing. To your other point, I think what has happened in the last 2, 3 years during COVID, we saw a lot of investors coming to capital market and also to the mutual fund industry. For us, I think we see both complement each other, anybody coming into the capital market, I think in one form or the other. I think this money eventually will also come into mutual funds because during these 2 years, work from home. After work from home is over, everyone has to go back to the day job. And I [indiscernible] to also the trading will go away, and people will have to invest for long term. And I think we clearly see, I think the investors coming into once you've been exposed to capital markets, you'll come into mutual funds. And finally, I think when we look at our own data, I think we have seen there is a conversion there -- there cross-pollination of -- we see ETF investors also move into active and active move into ETF. So from our perspective, we are very strong on both the sides. So I think I'm very excited about the next 3 years. So I think as far as the strategy you asked, I think the strategy remains exactly the same to execute. I think -- and execution is going to be the key. To your final question on consolidation, I think I clearly see, I think, in India can have many more asset management companies. I think at this point of time also, the percentage if you were to see, the unique investors is less than 3%, 4% of the population. But I think it is going to be -- the winners are going to be the one who can execute and execute in smaller cities and towns. That's will hold the key.

Really, really thankful. That's really helpful. And thank you, thank you and all the best.

The next question is from the line of Ronak Chheda from Awriga capital.

Yes. Just one question, sir. If I heard you correctly, did you say that the transition of the AUM to trail fee has been 50%? Is that what I picked up when you're answering to an earlier participant?

No, no, no. So I'm saying that, look, it is not transition because see we have also -- if you see our overall assets have grown. So in -- if you look at it as of March, we were like close to about 62 [indiscernible] INR 62,000 crores. Today, we are about INR [indiscernible] odd crores. So if you see, what I'm saying is that, from that perspective, there has been substantial market increase as well. So if I capture that number and see that look, there has been addition to the investments. And of course, there has been outflow happening also. So predominantly, I think at this point of time, the SIP-related AUM itself would be about -- in the old asset would be about [indiscernible] of the total assets -- total liquidity assets, I am sorry.

Got it. So just to get a sense qualitatively as well. So of the total AUM, what percentage or what share would be based on trail fee and what would be that number, not a specific one, just a ballpark?

No. All the -- as you see, today, 100% of the assets on trail, because [indiscernible] is not allowed at all. So 100% of the asset is on the trail model now.

On stock [indiscernible]?

Sorry?

Stock [indiscernible]

Yes, yes, yes. But those trails are as of what they were being driven at that point of time. So the trail has not been increased. The past trail remains the one what we have been committed at that point of time.

Sir, I'm asking more from the new trails, which in 2018, that transition happened. So I'm saying...

After 2018, it's only trail. The assets which were acquired earlier to 2018, they continue to get the trail, whatever was committed in those years to that. So let's say [indiscernible] those are round zero trail now.

So my question is, of the AUM as on March 31, what would be the percentage of AUM, which was on that earlier trial? And what would the [indiscernible]?

We do not disclose that data.

And qualitatively, also that would be helpful. I understand that cannot be 100%, but when we qualitatively, is it more than 50%, less than 50%?

No, we do not comment on that data. But we have taken your suggestion. We'll evaluate going forward if any additional disclosures required to this fact.

The next question is from the line of Siji Philip from Mirae Asset.

Congrats on a good set of numbers. So most of my questions have been answered. Just one question. So the company's passive fund strategy has been playing out quite well. So any proportional limit in mind for the passive fund as a percentage of the overall AUM?

So I think from our perspective, we see it in isolation, I think these are different business lines. I think the investors will decide. So I think we have not [indiscernible] what percentage can be passive and active. I think we clearly believe both the -- both active and passive are taking care of different [indiscernible] investors and have opportunity to grow multiple ex from here.

Next question is from the line of Prayesh Jain from Motilal Oswal.

Just a couple of questions on the cost front. So if I look at your other expenses, that is like at the lowest level for past many quarters. So are there any one-offs or this kind of run rate can sustain? Secondly, on the fees and commission expenses over at a significantly higher level, any one-offs there?

Sorry? Fee income and commission...

Yes, fee income and commission expenses are at INR 16 crores versus run rate for the rest of the year [indiscernible] at INR 16 crores in this quarter. Any one-offs there or -- and on the other expenses front where we are at a lower level, whether this run rate can continue?

Yes. So this is just for some -- on the PMS and AIF side, there is -- as in -- when we pay some expenses related to the acquisition of assets, those get accounted in here, whereas for all the mutual fund expenses, it is completely on trail model. So no expenses are accounted in this line item.

Okay. Got that. And on the other expenses, if I look -- we being continuously seeing us sustaining decline in this number and we are at INR [indiscernible] run rate for this quarter. So is this certainly sustainable?

No, no. So obviously, I've been mentioning it for the last 2 or 3 quarters now that, look, going forward, we'll try to reduce our expenses as much as possible. But given the headroom available now, it's very, very limited. Also, given the inflation around, I think expenses from here are likely to increase. But what we'll do is we'll keep looking at opportunities in terms of automation, in terms of outsourcing. Wherever possible, we'll try to bring our cost of operations down. But any kind of further decrease, a significant decrease from here, is not -- and we saw that at this moment.

[Operator Instructions] The next question is from the line of Ravin Kurwa from ICICI Securities.

I just wanted to confirm one thing, that the drop in yields in Q4 was purely because of managing the TR and the Q1 of next year, we are seeing better investment yields.

[indiscernible] So revenue, okay. So the revenue has declined because of the 2 days. So because the lesser -- so that is to -- TR change is to comply with the statutory regulations, where all the expenses of the scheme has to be began by the scheme itself. And therefore, what we do for the entire year, we keep reviewing it because whatever expense we are incurring. So there will be cases where there will be some deficit. There will be cases where there will be increase. So cases where we have a buffer, we'll take up the additional management fees. And cases where we have a deficit, we have to decline or reduce our management fee.

Got it. So sir, in Q1 FY '23 in the month of April, are we seeing some reversals on this number? .

That's right. Yes. If you go and see in terms of our disclosure, you will see that those are being restated back. So if you see October also, I think someone has asked this question in the month of October itself, that there has been some changes like that. So for certain schemes. And if you go and have a look at it because all of those communications are there in the public domain. If you look at it, they were restated back.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. [ Akshay Jain ] for closing comments. .

Thank you, everyone, for joining this call today, and thank you to the team, Nippon Life India Asset Management, for giving us this opportunity to host the call. Thank you, and goodbye.

Thank you, everyone. Thanks for joining.

Thank you very much. On behalf of JM Financial, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.