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

Ladies and gentlemen, good day, and welcome to the Nippon Life India Asset Management Limited Q2 FY '24 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. Ansuman Deb from ICICI Securities Limited. Thank you, and over to you, sir.

Good evening, ladies and gentlemen. On behalf of ICICI Securities, it is our privilege to host the Q2 FY '24 Results Conference Call of Nippon Life India Asset Management. We will have an initial management commentary followed by Q&A. Without further ado, I now hand over the call to Mr. Sundeep Sikka, Executive Director and CEO. Over to you, sir.

Thanks, Ansuman. Good evening, and welcome to our Q2 FY '24 Earnings Conference Call. We have with us our Chief Financial Officer, Prateek Jain; Chief Business Officer, Saugata Chatterjee, Chief Distribution Officer, Arpanarghya Saha; Head of Product and IR, Arun Sundaresan and Maisan nominee of Lipari Japan. Our detailed investor presentation and press release have been uploaded on the exchanges as well as on our website. I will break my comments in 3 parts. First, industry overview; second, our performance; and third, the way forward. Starting off with the market, equity market to FY '24 show divergent performance. While the SC50 increased only 2%, we see mid-cap and less rose by 13% or 15%, respectively. Our healthy repo is steady at 6.5%, while Italia GST increased by 10 basis points quarter-on-quarter to 7.2%. Coming to the data on mutual fund industry. The industry grew by 9% quarter-on-quarter in Q2 FY '24 to INR 47 billion. This is the highest quarterly growth since Q2 FY '22. On a RML basis, the quarterly average again grew by 20.3%. Now moving to inflows. The Equity category, excluding Indian Arbitrage witnessed a gross inflow of INR 1.55 billion and a net inflow of INR 492 billion. Both gross and net loss were higher on a quarter-on-quarter basis. Strong inflows were witnessed in sectoral, thematic, small cap, flexi and mid-cap capital. Investor interest in investing through systematic investment plans has further increased with the SIP contribution to the quarter being INR 471 billion, 25% higher than Q2 FY '23 and 9% higher than Q1 FY '24. Monthly SIP flows. In September 2023 stood at INR 160 billion, which was an all-time high. SIP flows increased 7% quarter-on-quarter to INR 71.3 million. Arbitrage funds also with strong inflows of INR 297 billion. The fixed income category that is debt as we could witness a net outflow of INR 594 million after a large inflow we witnessed in Q1 FY '24. EPS flow was rated at INR 49 billion. At the end of the quarter, unique investors in the mutual fund industry increased to INR 40.4 million, while the industry folios increased to INR 137.1 million. Increasing financialization, higher awareness, better reach to new age platforms and distribution networks should see continued growth for the industry going forward. Now moving to our business performance. We closed the quarter with assets under management of INR 4.35 trillion. This includes mutual funds, managed accounts and offshore funds. Our mutual fund quarterly average AUM grew 12% quarter-on-quarter and 23% year-on-year to reach an INR of 3.51 trillion. I would now like to share a few highlights for the quarter. Starting with the market share. Our market share increased 18 basis points quarter-on-quarter to 7.46% with a market share increase across all asset categories. During the quarter, we moved up one position to fifth in terms of total equity AUM. Our equity share also continues to grow. It has increased from a low of 6.18% to 6.53% of which there was a 26% -- 26 basis point improvement in Q2 FY '24. It is important to note that this market share improvement has happened even after we stopped launched some inflows into a small cap fund in July 2023 in the interest -- in investors' interest. Apart from equity, we also gained market share in other segments, including 33 basis points quarter-on-quarter improvement in liquid segment and 16 basis points quarter-on-quarter improvement in ETF segment. We continue with the balanced growth, both in terms of asset class as well as the investor categories. On segmentory front, our individual AUM, which consists of retail, HNIEM saw a market share improvement for the seventh straight quarter. Individual AUM grew 14% quarter-on-quarter to INR 2,094 billion. Market share increased 29 basis points quarter-on-quarter to 7.45. Our B30 grew 13.9% quarter-on-quarter to INR 790 billion, which keeps us amongst the fastest-growing large ASCs in B30 locations. Our market share improved 25 basis points quarter-on-quarter to 8.58%. This segment forms 20% of our Indian versus industry 18% for the industry. Performance of our large equity schemes remain strong, and this, along with our distribution network, digital capability and strong risk management help us deliver a double-digit market share in net sales in equity plus hybrid segment in Q2 FY '24. We added 1.2 million investor [ pores ] in the quarter and continue to have the largest base in the mutual fund industry with 14.6 million unique investors. We are humbled to have 1 out of 3 mutual fund investors in India. During the quarter, we also completed the LF of Nippon India Innovation Fund. As at the end of the quarter, the AUM in this fund stood at INR 9.6 billion. I would also like to touch upon the important aspects of our systematic book. The systematic flows are a stable and a key driver for the industry's long-term equity flows. I'm happy to share that there has been a continued uptick in our systematic flows over the last 9 quarters, which has led to increase in our market share. Our monthly systematic book rose by 42% to INR 17.3 billion of September 2023 over June 2023. This resulted in an analyzed systematic book of INR 208 billion. Unique number of systematic transactions for the quarter increased by 20% quarter-on-quarter to more than INR 248 million. 64% of our SIP AUM has continued for over 5 years versus 26% for the industry. This bodes well for the volatile markets with folios with lower ticket size have demonstrated longer vintage and better stickiness. 16% of our set volumes have continued for more than 5 years against an industry average of 12%. Moving on briefly to the ETF segment. At Nippon India Mutual Fund we offer an industry best suite of asset funds with an ETF ecosystem, which is already in place and far ahead of the peers in terms of investor base and mindshare. We continue to be one of the largest ETF sales with an AUM of INR 808 billion and a market share of 14%. The gold ETF fund is the largest in the category, having a sense of INR 78 billion. Our share in industry ETF portfolios is 61%. We have 67% volume of -- 67% share of ETF volumes on NSE and DSG. Our ETF average daily volumes across key funds remains far higher than the rest of the industry. Last quarter, NAM India was appointed as 1 of the 4 ranges for managing EPF for Corporate Investments. These investments commenced in the beginning of July 2023, and we are seeing approximately also of the incremental EPO flows going forward. Moving on to our strong distribution franchise. Our digital strategy remains focused towards enabling better reach and regulating technology advancements to provide section less experience. As digital and technological landscape is continuously evolving. The perceptional data thought process has led to constantly strengthening our digital ecosystem and enable simple and easy investment experience across the ecosystem for our investors and partners. Digital transactions rose to 2.55 million in H1 FY '24, up 64% year-on-year. We have witnessed close to 50% jump in Q2 FY '24 compared to -- compared over Q1 FY '24. The digital channel contributed 56% of the total new purchase transactions for H1 FY '24. Our physical distribution base is well diversified and with a Vice President in excess of 265 locations across the country. We have over 95,600 distributors in total and added roughly 2,600 new distributors during this quarter. Now I would like to briefly update you on our subsidiaries, namely AIF and Singapore subsidiary. Starting with the Nippon India AIF. As mentioned in the past, ATS continues to be an important focus area for non-India. Last quarter, we appointed new head of business, Mr. Ashish Chugani. This quarter further to strengthen AIF business. We have internally moved our senior resource Mr. Aashwin Dugal as Deputy Head of business. Under the refund India AIF, we offer category 2 and category 3 alternate investment funds and have a commitment of INR 578 billion across key. We had launched our tech fund of fund in 2020, which was anchored by large Japanese institutional and corporate investors. The fund is in an advanced stage of deployment. The company has started getting into multiple business lines. Towards this end, we have recently launched our credit AIF and a long-only equity area for which the fundraising is in progress. On the offshore front, we continue to -- we will continue to focus on fundraising some international markets looking at business opportunities with subsidiaries, associates and large network of Nippon Life Japan. Nippon Life Japan remains committed in supporting NAM India's offshore business. We continue to see interest for India, not only from the conventional market but are also getting initial costive inflows on interest from later markets. In terms of regulatory environment, not much has changed since the prior quarter. SEBI had come up with a consultation paper in May 2023 regarding the review of the year charged by the MC. We continue to abate details regarding revised paper post incorporating industry feedback. Now on our financial performance. For Q2 FY '24, revenue stood at INR 3.97 billion, up 20% year-on-year. Other income stood at INR 0.78 billion, down 5% year-on-year. Operating profit stood at INR 2.33 billion, up 25% year-on-year and 20% quarter-on-quarter. Profit after tax stood at INR 2.44 billion, an increase of 19% year-on-year and 4% quarter-on-quarter. As a part of our capital allocation strategy, we would like to reiterate that we have a stated dividend policy to distribute 60% to 90% of our profits to our shareholders. In FY '23, we distributed 100% of our profits. Further, the Board of Directors have declared an interim dividend of INR 5.5 per share along with the Q2 FY '24 results today. In addition, we also remain open to evaluate investments in strategic opportunities that can add profitability or complement our existing businesses. Briefly moving on to ESG. As a submitted to USPI, we are integrating ESG spec into various aspects of planning, operations, fund management, risk and government. Our ESG ratings are amongst the best in the financial services industry with NAM-India now rated low risk as per index. As a responsible investment manager, we are building a resilient portfolio that will provide sustainable returns to our investors and have a positive environmental and social impact. In conclusion, we remain excited about the business opportunities going forward. This includes both domestic markets where mutual funds have become a preferred investment group as well as global market where we will be aided by the network of Nippon Life. We continue to focus on sustainable profitable growth for our shareholders in the backup of our distribution network, institutionalized processes and strong risk management. With these comments, we are happy to take your questions. Thank you.

[Operator Instructions] First question is from the line of Swarnabha Mukherjee from B&K Securities.

So my first question is related to the yields. I just wanted to understand that, sir, when I look at the stand-alone business, I see that there is no like sequential dilution is on a consolidated level, there has been exclusionary levels. So if you could highlight that a tenth retail business because of where a slight index the one business, we are seeing higher agency. And that would be my first question. Secondly, in terms of gross in local highlight how our market share is sitting up because that this number be one compares to the industry. I think we have seen a very strong expansion in the loan market share is coming close to 10%. So how are we in terms of gross flows given that we have stopped lumpsum investments in those small funds. So how is that sitting overall? And the second question, probably in terms of the ETF for inflows. So if you could highlight what is on closing in every month or every quarter. And how -- what is the economic in terms of how are the realizations and how much of that is the bottom line? And how should we think about the from this perspective, given that this is significantly lower margin product compared for our other products. So how should we think about that going forward?

I think you have 3 questions. I think I'll request Prateek to take the question on the yields and then Saugata Chatterjee on the gross flows. But I would like to just touch on the last part on what we talked about the EPFO. Broadly, the way you should see EPFO will be, I think, I think we'll be investing roughly about INR 15,000 crores roughly approximately per annum for AMC. This is going to be coming into existing funds. So there is not going to be at whatever is the fees that we've been charging and before the EPS or mandate that will continue. It is right now coming in the life. And I think we are at this point of time, charging 4 basis points. The basis to your question, the blended yield will come down going forward. I would request you not to see as a blended yield because this you will see separately the EPF or money that will be coming separately and you should not mix it up with the overall yield of active because that may not give you the right picture. So broadly from our perspective, if you do the rough calculation, EPFO mandate will give us and our top line of about approximately INR 15,000 crores per annum, and the bottom line of net about INR 5 to INR 6 crore per annum. I think Prateek, you should take the question of yields.

Yes. So in terms of the mutual claims, broadly, it has remained the same, as we have mentioned in the last quarter. And also that the reason that despite the mix has slightly improved. But overall, our size of the equity AUM has grown. And what we have seen is our growth in the quarter-on-quarter basis is almost 17% on a half yearly basis, 25%. This has both because of the higher inflows, which I'll ask Chatterjee to share with you both in SIP as well as on the lump-sum basis. But also in terms of the total new increase of the assets, what you see, this year itself, what we have seen is our run rate net sales for this quarter was almost 3x of what we have done in the entire last financial year. Therefore, our assets have been growing much faster. And because of the semi-related formula, there has been some compression out there. And therefore, if you see the yields have not moved up. But the thing is that on an average basis, we are at the same realization, what it was the last quarter. In terms of our other lines of businesses, as we mentioned that those businesses, we operate more from a profitability perspective. And those rates are more lined in line or better than the competition. There are various asset classes where we are present, and is very, very different. But more importantly, there, the net yields are in the range of 66 basis to 100 basis points.

So just one follow-up on this. If you could call out the category yield share of the time and also for equity strong versus growth?

Yes. So we don't give the yield on the net new flows. But on the segment-wise yield in terms of our book, we are almost about 70-odd basis points on the equity. Debt would be in the range of 25 to 30 basis points, liquid in the range of 20 to 15 basis points and ETF in the range of 15 to 20 basis points. This includes those. So yes.

So just to continue on the question on flows. For this quarter, what we find is our gross flows in the range of 7.5% and from a net perspective, we are roughly around 11%. If you take the quarterly last quarter flows, it keeps wearing every month, but we are in the double-digit net sales every month. So what happens is if our net sales is better than the market share, we tend to grow our market share. And that's the trend is being seen for the last now 3 quarters. Even on the SIP side, our market share definitely is higher when it comes to the number of SIPs and the contribution in the net incremental book, which is happening in the industry. So both of them -- both these components add up to the overall net sales growth in equity.

So this flows, this is part of equity category, right?

Yes, overall equity heading.

Next question is from the line of Madhukar Ladha from Nuvama Wealth Management.

Just wanted to get a sense on a quarter-over-quarter basis, has there been any significant movement in the yields across categories. So that is one thing I just want to get a sense from that, yes.

Well, so as mentioned, that there has not been a significant movement on the side of it. The overall yield have remained about 41 basis points. And on the segmental one, as I mentioned to you that because of the size impact and because of the new flow impact on the equity, there has been some kind of a decline in terms of the overall equity realization. This is because this is given more by the semi formula because if you see the quarter 2 itself, our annualized net sales is 3x of what we did in FY '23. So we are getting a very disproportionate high share of net sales. And also, the overall AUM has also grown about 17.5%. So both of this has accounted the higher AUM and getting into the newer slab. And hence, because of the new slab rates, the yields are lower. However, from our perspective, we have not made any changes to our distribution commission or in terms of payout, et cetera.

Got it. This is very helpful. Just wanted to also understand what has driven other income this quarter?

Okay. So see, this is purely mark-to-market of our total investor surplus. As you are aware that the company has a total net capital of about INR 3,500 crores, which has been deployed in our own mutual fund schemes broadly almost about 85% of that has been invested in our own mutual fund scheme. There are another into FDs and tax-saving bonds. And this is entirely basically mark-to-market impact on these investments. 92% of this network is invested in 2 financials or other financial investments, which is the our own schemes as well as MTs and bonds.

There's no unusual element, right? No one off?

No.

Okay. Perfect. That answers my question.

Next question is from the line of Lalit Deo from Equirus Securities.

So I just had just one question on the distribution side. So we mentioned that we are seeing like about 7.5% market share on the gross lost. So but other channels, could you give us more color like where we are seeing the highest pickup in disclose and which are the segments where we're going to see more pickup in this distribution channel.

Well, broadly, I think it's across the growth. I think we are seeing the increase in market share. But I think the way we like to see, I think from our point of view, we have always articulated our strength lies in retail and it also makes economic sense because retail flows are more sticky. So we continue focusing on segments which can give us sticky assets. And typically, what we have seen smaller ticket size and ships have been more sticky. But broadly, I think our market share increase has been across all these segments, it's been equal.

Sure. And so there's 2 later questions. So like as you mentioned that this quarter, we have a net relation of 70 basis points on the equity. So like what was it during the last quarter, could you quantify it?

Yes. So it was in the range of about 70 to 75 basis points. So because as I said, because of the size issue, we have -- and because of the inflows issues, we have seen some contraction in terms of the yield.

And sir, like, what would be the new SIP registrations during the quarter?

For us, roughly, we are doing on an average 3.5 lakh fit every month. So about 10 lakh next fix, we're getting every month. 10 lakh is the quarterly net fix.

Next question is from the line of Abhijeet Sakhare.

The first question is, is it possible to give some color on the mix of the SIP book in terms of how spread out it is compared to your overall portfolio mix. Just asking this in the context of last few months or quarters seeing extraordinary activity on the small and mid-cap fund categories as such?

So the good part is, in our case, we have more or less equal distribution amongst the 5 market caps, large cap, multi cap, mid cap, small cap and the Flexi category. So we have quite equal spread because what we have seen is our fund performance in the last 1 to 2 years has been across market caps. And hence, the derisking of our business is quite visible from the onset flows, which are coming into our funds.

Got it. And just again, from the perspective of loss, I think the observation is that are the representation or market share in some of the larger categories such as large car balance advantage, we are sort of a little bit underrepresented. So just any thoughts on improving share of those schemes across different distribution counters as well?

I think it's -- as a money manager, I think our focus is to continue delivering best quality -- producing best quality returns. And let the investors decide. I think from our perspective, I think large cap, multi cap, long cap growth, I think all are doing very well. Balance hybrids, I think it's a growing category and every supplier company has found a different niche that they want to grow. But to your question, I think we like to be presented equally. I think wherever we see our market share is a little compared to come back that is lower, I think we will continue building up on that.

Got it. Last one, just a question on OpEx. Like this quarter, we had the benefit of strong operating leverage despite double-digit expense growth. But looking ahead, do you see any possibilities of cutting back on expense line if the AUM growth turns out to be a little more volatile for the next 12 months, -- and subsequently, any guidance or indication on projected cost growth.

So obviously, if you look at it from a quarter-on-quarter perspective, it is quite flat. If you look at our employee expenses for the last 5 years, it has been pretty flattish. And it's just that I mentioned that last quarter, we have our investments for the future -- as I mentioned last time around that to future-proof askers, we have upped our investment into 3 or 4 areas, special marketing spend, you would have seen we are more visible in terms of our marketing. We have increased our spend in terms of IT. We mentioned that we are working on developing a data lake around which entire artificial intelligence will work on. The third part is that, look, we have been to further improve we have been outsourcing some of our processes and some of our other additional because, as you said, look, we have been keeping quite tame on our employee cost. Therefore, there is some spillover of that is on to our other outsource or other consultant costs. So these are the 3 areas which has contributed largely this increase, which are predominantly, I would say that, that can be sited on a tap. If things are not moving right, if the market corrects sharply, then these are the ones which are more discretionary and which can be switched off on tap. And then there have been a few one-off expenses. Last quarter, we had some few one-offs and this also we have some runoff cases, which also are very discretionary. Those costs can be -- again, we would -- as and when we do -- don't want to spend them, we can cut it off. So I would say that largely, the increase what we are saying is on the discretionary spend. We are very conscious of increasing any kind of figure expenses, including our employee costs that, as we have mentioned in the past.

Next question is from the line of Shreya Shivani from CLSA.

Sir, I have a question on -- following up to the last question. On the employee expense, employee count. So probably if you can help us understand, there's been a reduction in the employee count. And any -- is it correct that the outsourcing of the process that you're talking about has led to the reduction in employee count? Just a clarification on that.

So it is not -- there has not been a significant reduction. If you see from this peak, we were almost about 1,200-odd people. It was in 2018, '19. We are now about 985. 15, 20 people here and there. So that is really largely from last year to now. But -- so we have not have any significant increase or decrease in our total employees. When it comes to the outsourcing, I am saying that, look, more or less, what we are saying is that any kind of noncore work. Instead of hiring people if we can put it out and give it to an outsource agency to carry out. That is how we have been working on. So it is not related to -- it does not relate to any significant reduction in that cost. Further perspective, I think there's not been any purchase effort to reduce headcount, rather we continue investing in our people. There's a lot of digitalization that has taken place across and leveraging technology, definitely at the back end, there have been certain processes which are more efficient with the more higher user technology. So definitely, the reduction in numbers is more, which is one of the reasons which is also helping us to increase our operating leverage.

So I'm just clarifying that the reduction in employee count is also the outsourcing of the processes and also the digitalization which reduces the need for people, right, need for manpower.

That's right.

Next question is from the line of Mohit from BOB Capital.

Sir, just to reiterate, I mean I was seeing a presentation and now you are present in 265 locations versus 275 last year in Q2 and 270. So this is also a result of digitalization or is something else?

I think it continuously whereby we keep changing. That could be the sort process of anywhere moving to a bigger location, where something those things keep happening. So I think there's no change in strategy. I think we have articulated in past as we strongly believe both digital and physical will remain our strength going forward. We do not want to believe -- we do not want to have a strategy of only digital. We believe physical is going to support our digital business. So I think you continue seeing in the fine, it could be whatever reason, clubbing of base there could also be going to a bigger -- having multiple branches in North City and putting them together. So there will be different reasons for that. But broadly, the strategy remains happened physical part remains a very important of our onto strategy.

My next question is towards the unique investors. I think we have good 36% market share over there. So in your experience, just wanted to understand how is the behavior of these customers? Are they very sticky? And I mean what age group they are. I mean if you could just throw some light on that, that would be very helpful.

I think as Prateek mentioned, we are investing a lot on data lake. I've been trying to understand the behavior of the investor. I think one of the earlier question, which was where the expense going up because roughly we are investing a lot on data science, understanding the behavior of people who won't be able to touch to but because have been industry is unique. But I said broadly, I think what we have seen is the young investors who are coming in, I think they are seeing basically the starting point for them is systematic investment plan. The other part is basically what we have seen is on the ticket side, most sticky it is. But at this point of time, we will not be able to share with you a lot of analytics that we are working on a data because today the fact remains it's having 2 or 20 billion investors that had us for some of the investors, we have a history of more than 10, 15, 20 years. So I think we are trying to see, and this is going to be a very important part of our strategy going forward. How do we put this data to use.

Next question is from the line of Jignesh Shial from InCred Capital.

I just had one more like the macro kind of a question. There has been a change in tax forms for this insurance companies and thereby the non-par, which is a savings product and been a inactivation or typical FDs would be. Are you seeing flows shifting broad level? Do you see that kind of flows that will be shifting or the investor minds are shifting or getting more linear towards long-term mutual fund investments and all -- just as your thoughts, if you have any, that's the only thing I wanted to...

No. So Jignesh, if you go by the initial assessment, since this has come in, I think industry has not witnessed too much money coming into the debt segment, while ultra-short term and liquid has seen some money coming in, but on the longer tailor, the money is not coming. So yet they are understanding and grappling it because the tax break has been taken away. But on the other side, if you would have seen that there is a good amount of money which has gone into the senior savings scheme. So obviously, I think as Sundeep mentioned, that this is also to be seen in a longer-term contract rather than just on a short view. But what we understand is in the past 6 months, also, you see that money getting into the hybrid funds category. From an industry perspective, it would be both from a realization. From investors long-term benefit perspective, it is much better that he comes into a hybrid category and take the advantage of indexation as well. Therefore, you will see some diversification happening. However, HNI as well as the -- what you'll see the senior citizens beyond the -- their investment into FD, they will keep coming in into the longer tera. Also market has been a bit volatile. Therefore, industry is also not going and pushing that hard. So this is a combination of all of these things.

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

Couple of questions. Firstly on the -- can you give some outlook on an show the equity will move from here in second half, especially do you have steady kind of market scenario. Secondly, on the cost poor commission, how are you in the market related? And what is your product lineup for the second half?

I think if I've understood the Prayesh question because your voice was not very clear. Outlook on the October and the other one is our own pipeline for typically what are the...

So see, as regards to the -- I would say that the competitive pressure, which was there once the yields have largely reduced and we are seeing higher revenue on the new NFOs -- like these are in excess of our current book as well, what we are earning on the new NFOs. Also with regards to the trajectory going forward, it will be a bit difficult because we see continue to get this kind of significant flows, then obviously, the yield compression can be as high as what we have seen in the last quarter. But I'm sure this will not remain as I -- and I could say jokingly that look, last 1 month has been something where market has corrected. Once the AUM goes down, we start earning slightly higher. So I would say that looks very difficult to predict per se. But if you go in a longer term, as we said that, look, there would be some 2 to 3 basis point yield compression, which will happen on an average basis on an every-year basis. This will continue for the next 3 to 4 years before the years get stabilized. In terms of product lineup, we have been consciously not been coming out with large new NFOs as undefined conversation as mentioned last and also that we will only bring in NFOs when we believe that it is a very good opportunity for an investor. And also, it is something which is unique. Hence, per say, we do not have too many product lineup, but with recast, if you want to add something.

Can I just slip in one more. So just on the international flows into Nippon Life support to the AMG what kind of bid would be preferred existent refer or direct investment record? What is the outlook there? When can we expect a coming there?

So I think probably to answer that very difficult to specify which route will be preferred. Just to clarify, we are not talking about Nippon Life investing in India. What we are highlighting is Nippon Life helping us to get flows from other investors across the globe and also Nippon Life, other companies, associates, example like I think we have launched with the company in Europe, we have launched the India bond fund. We have a couple of funds in Japan. So some are advisory, some are coming to all funds are institutions are different, and then they are taking a different route to come to India. Again, I'd like to clarify so that it's not misunderstood. Now we are in the discussion, we mentioned Nippon Life investing. It is Nippon Life helping NAM India to get a global distribution strategy. To get flows from different companies where they have invested or where they have strong relationships.

Next question is from the line of Gorro [indiscernible] from ICICI Prudential Mutual Fund.

Just a follow-up on the previous question around systematic flows. When we say it is equally spread, do we mean it is equally spread across the 5 schemes of large, mid small multi cap fund? And second, given it is a 38% quarter-on-quarter growth on systematic lost, is there an element of small-cap lump-sum having moved and this number expected to see a dip eventually if people decide stocks boater. And also, if you can help us understand the SIP STP.

While we cannot give individual the same, the top size funds are getting 80% of the sales. I think we will not try to get into the individual category, which is coming on not. And as you have seen in our business model, whether it is as an investor, whether it is a fund level, if there's a previous business model where we do not want any city, any distributor any particular fund to get disproportionate shares. So as a broadly, we can say as mentioned, top 5 funds get 80% of assets.

So stopped in July, but despite that, this quarter, overall systematic flows have been strong, which we have noted. That's number one. Second, apart from small cap, the other strategies like mid cap, large cap, multi-cap, some of the hybrids are also getting close. Yes, historically, small cap been the larger contributor, but over a period is trailing across other funds as well.

Next question is from the line of Saurabh Patwa from Quest Investment Advisors Private Limited.

As on industry-linked question. Basically, the last few quarters have seen the larger bank led -- and banks, you're the only one who has been doing exceptionally well in terms of performance. And with the merger of one of your players with a parent bank, which was not the case historically, how do you see the competitive intensity moving on?

So I think broadly, the way we see, I think we have never been sponsored by our bank. And I think we have always lived at but it's all about execution. It's a reality. We are not sponsored by the bank, but that's also a positive for us. We have an over architecture with all the banks in the country. So all the banks tell us. I think this is very granular IFA network. So I think I'll -- the competitive environment, ultimately, first, I think I would like to say, even right now, Indian industry is very highly underpenetrated. While we have about now roughly about 50 players, I think they could scope for another 50 or 100. And ultimately, it's not about what whether you're a sponsored or you're part of the bank because there have also been some bank led as per AMCs, which could not scale up. The key lies in the execution and our focus will continue to be on execution and execution for profitable growth.

And second question going on the passes. I think we've been the leader in that due to liquidity. But how are you seeing the other AMCs coming into that. And it's like no differentiated or is a bit more broader universe. How do you see that panning out.

Is exactly similar to this also at execution I think as and when regulations allow, I think we will also continue spending our product suite in EPS. The only difference I'd like to give you is I think just seeing the global trend. Unlike active wherein I think you have always a lot of segmented players. Globally, if you need to see the passive business, typically the top 2, 3 have a very high substantial market share. And then there is a very long pace. So it's -- we need to see how it works out. But ultimately, like any business, it is going to be the execution and we will -- and the key is to keep this coming to the needs of listed. And I think as and when we differentiated products are owed by the regulator, we will also continue to continue to focusing on that.

Next question is from the line of [indiscernible] from Quest Investment Advisors Private Limited.

In earlier question when replying to faster on the yield -- decline in yield. So you said that -- so is it fair understanding that increase in revenue because of new net inflow as well as increases due to the market-related activity also.

You're right. Absolutely.

Okay. So in that lead. So at what were we are, I mean, when you are saying that it will prefer will remain for 5 years. So which clearly, I mean, if you can I suppose our inflow increased substantially, then the decrease in the yield will be much faster?

See if you look at it, that every INR 1,000 crores of AUM increase, you lose 1 basis point. And till the time your particular scheme reaches INR 1 lakh crore, you will keep losing it. That is how it works. And now this was both. And first of all, it works on your book -- total book. So your book is at x, and then it suddenly becomes x plus INR 1,000, you will lose out on one. And that it will be impacted on the entire value -- entire basket. So that is one. So secondly, if the schemes going up, the reason for going up could be either your net new sales or due to market appreciation. But this combination will lead to higher increase AUM and because of the increased AUM you will have lower targetability year. And because of the lower targetability year, you will be earning less.

Next question is from the line of Arushi Shah from Sushil Finance.

So I just wanted some clarity when you adjust it the hardest on the amount of going to gain more traction. So the hybrid are more like the active parties or more on the EPS side, like a further, how could the use for the hybrid fee?

Yes. So see, when we say this, so one I'm saying in the context of Jignesh question on a macro basis, because the tax break has been taken away on the debt side of it. And therefore, we will see more money coming on the -- over the period on the hybrid side. As far as the hybrids are concerned, those we earn on our equity slabs. So those are considered anything which is having more than 65% equity earning on an equity slab basis.

It seems that we have lost the line of the current questioner. So we will move to our last question of the day from the line of [ Anthony John ], an individual investor.

Sir, I would like to know is. What's the end of your state when you have said from strategic sales could be there in the offering in the future. Could you just that?

So I think what I mentioned was that we continue to remain in a open for strategic opportunities wherever it adds value to our existing businesses and distinctive for our profitability point of view. So I think it has been clarified, nothing to do with sales. It is about acquisition.

So which means you would be looking into acquisition of some AMCs.

I will not like to qualify that, I think is, we remain open for any acquisition, which adds value, whether it's on the business, AMC, mutual fund or any other part of the business that the regulation allows, which can add increase the ROE for the business.

Okay. So is there any timeline for us, sir?

No, I think we will not. I think we continuously keep evaluating as a company. We keep evaluating various opportunities. I think as and when we have something, I think we'll be coming to and informing through the stock exchange.

Thank you very much. Ladies and gentlemen, this was the last question for the day. I would now like to hand the conference over to the management for the closing comments.

So thank you all for joining this call. We call it an end to this conference. Thank you so much.

Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.