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

Ladies and gentlemen, good day, and welcome to Nippon Life India Asset Management Q4 and FY '25 Earnings Conference Call, hosted by InCred Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Meghna Luthra from InCred Equities. Thank you, and over to you, ma'am.

Thank you, Manav, and good evening, everyone. On behalf of InCred Equities, I welcome all to Nippon Life India Asset Management's Fourth Quarter FY '25 Earnings Conference Call. We have along with us, Mr. Sundeep Sikka, Executive Director and CEO, along with the senior management team. We are thankful to the management for allowing us this opportunity. I would now like to hand it over to Mr. Sundeep Sikka for his opening remarks. Over to you, sir.

Thanks, Miss. Good evening, everyone, and welcome to our Q4 FY '25 earnings conference call. We have with us our CFO, Parag; Chief Business Officer, Saugata Chatterjee; Deputy CFO, Amol; Chief Digital Officer, Arpan; Head ETF, Arun; Head AIF, Ashish; Deputy Head AIF, Aashwin; and Matsui-San, nominee of Nippon Life Japan. I would like to share a few highlights of our performance. And post that, I will hand it over to Parag, our CFO, to speak in greater detail on the recent industry trends as well as our performance, post which we'll move to Q&A. Coming to the key highlights. I would like to start by mentioning that NAM India is the fastest-growing AMC in the top 10 AMCs on a 1-year, 2-year and 3-year basis, and we have also had the highest increase in AUM share in the industry over the last 2-year basis. Further, our equities sales market share and SIP market share both improved quarter-on-quarter and remain well above our equity market share. We achieved a high single-digit market share in terms of equity net sales, while SIP market share has been greater than 10% in March '25. SIP market share has effectively doubled in 3 years from 5.15% in March 2020 to 10.6% in March '25 -- sorry, 10.16% in March '25, and this would form a strong foundation for our future growth. On the financial front, NAM India has achieved its highest ever annual profit after tax INR 12.86 billion, a growth of 16% year-on-year as well as the highest ever operating profit of INR 14.04 billion and growth of 47% year-on-year. We have a stated dividend policy to distribute 60% to 90% of our profits to shareholders. For FY '25, the Board of Directors have declared the dividend payout of INR 18 per share, that is 91% of net profit. This includes the proposed final dividend of INR 10 per share. I would like to address the recent cyber-attack on IT infrastructure, which we noticed -- which we notified to the exchanges on April 10, '25. As a precautionary measure to prevent the spread of malware, all systems were isolated or powered down as soon as the threat alerts were received from monitoring systems. All critical applications have now been restored. The fund management system was restored the next day morning itself. The mobile application on the websites are also back to normal. During this period, customers were redirected to alternate channels which remained completely unaffected. And hence, there was minimal business impact due to this. We believe the company and the investor data is fully safe and secure. As mentioned in the past, we will continue to focus on our non-mutual fund business. In line with this, to offer Japanese investors greater access to Indian capital markets through the NISA scheme in Japan, we launched Nippon India ETF, Nifty 50 BeES GIFT Fund, which will feed into the Nifty India ETF 50 BeES. This launch is in collaboration with our partner, Nissay Asset Management Corporation, Japan, which is a wholly owned subsidiary of Nippon Life, Japan, which has launched Nissay India Equity Fund in Japan to feed into this gift fund. This comes after our first gift fund, Nippon India Large Cap Gift, which we launched in Jan '25 to provide global investors an access to flagship -- to our flagship large cap fund. Our future product pipeline includes long short fund, our second fund of fund, which shall be investing in India-focused venture funds and a few more. Lastly, on the SIP front, we have recently appointed industry veteran, Mr. Andrew Holland, as the Head of the asset class, and we believe that this offering represents significant growth potential going forward. In conclusion, I would like to state FY '25 has been another strong year for NAM India, and we are hopeful of sustaining this in the years to come. Now, I will hand over the call to Parag for further details on our industry and our performance.

Thank you, Sundeep. Good evening, everybody. Let me start off with the markets. Equity market in Q4 FY '25 witnessed a drop from prior quarter levels. The Nifty declined by 0.5% quarter-on-quarter, while the Nifty mid-cap and small-cap indices declined by 9.6% and 14.9%, respectively. RBI cut the repo rate by 25 basis to 6.25%, while the 10-year G-Sec yield decreased by 18 basis quarter-on-quarter to 6.58%. On a Y-o-Y basis, the Nifty grew 5.3% while the mid- and small cap indices grew 7.6% and 5.4%, respectively. Coming to data on the mutual fund industry. Industry quarterly average AUM grew by 24.6% Y-o-Y, but declined 1.7% quarter-on-quarter in Q4 FY '25 to INR 67.4 trillion. The share of equity in overall AUM declined quarter-on-quarter, ending at 60% for Q4 FY '25 from 60.8% in Q3 FY '25. Now, moving to industry growth. The equity category, excluding index fund and arbitrage fund, witnessed a gross inflow of INR 2.13 trillion, and a net inflow of INR 1.04 trillion. Both gross and net flows were lower in quarter-on-quarter. Categories where the highest inflows were sectoral/thematic funds, Flexicap and small cap funds. Moving on to SIP. Investment via SIP route further increased with the SIP contribution for the quarter being INR 783 billion, up 37% Y-o-Y and 2% quarter-on-quarter. Monthly SIP flows in March 2025 stood at INR 259 billion, only 2% below the all-time high of INR 265 billion achieved in December 2024. The fixed income category witnessed a net outflow of INR 809 billion in the quarter. The ETF category had a net inflow of INR 216 billion. At the end of the quarter, unique investor in the mutual fund industry increased to 54.2 million. That is an increase of 22% Y-o-Y. Now moving to our business performance. We closed the quarter with the total asset under management of INR 6.54 trillion. This includes mutual funds, managed accounts, offshore funds and GIFT City. Our mutual fund quarterly average AUM grew 29.2% Y-o-Y to reach INR 5.57 trillion. We were the fastest-growing AMC in the top 10 players in FY '25 and had the highest increase in quarterly average AUM market share on a 2-year basis among all AMCs. I would now like to share a few key highlights for the quarter. Starting with market share, our market share increased 30 basis Y-o-Y to 8.26%. Our equity market share increased by 10 basis Y-o-Y to 6.86%. Excluding arbitrage, equity market share increased by 22 basis Y-o-Y to 6.92%. The share of equity AUM in our overall AUM decreased by 1.3% quarter-on-quarter to 49.8% for Q4 FY '25. We achieved a high single-digit market share in net sales in the equity and hybrid segment in Q4 FY '25. However, excluding NFOs, our market share would be in the double digits. We continue to have the largest investor base in the mutual fund industry with 20.8 million unique investors. We are humbled to have over 1 in 3 mutual fund investor invest with us. During the quarter, we also completed NFO of the Nippon India Active Momentum fund. As at the end of the quarter, the AUM of this fund stood at INR 1.2 billion. I would also like to touch upon some of the important aspects of our SIP book. I'm happy to share that there has been continued momentum in our systematic flows, which has led to an increase in market share. SIP market share increased by 17 basis to 10.16% over December '24 to March '25. Our monthly systematic book grows by 37% Y-o-Y to INR 31.8 billion for March 2025. This resulted in an annualized systematic book of INR 382 billion. Moving on briefly to the ETF segment. We continue to be one of the largest ETF players with AUM of INR 1.54 trillion and a market share of 19.07%, which increased by 236 basis Y-o-Y. Our share in the industry ETF folios is 53%. We also have a 53% share of ETF volumes on NSE and BSE. Our ETF average daily volume across key funds remain far higher than the rest of the industry. Moving on to our digital purchase. Digital purchase transaction rose to INR 3.54 million in Q4 FY '25, up 49% Y-o-Y. Digital business contributed 74% of the total new purchase transaction in Q4 FY '25. For FY '25, digital purchase transactions stood at 14.4 million, a twofold increase compared to FY '24. By harnessing the power of digital innovation and executing a well-crafted strategy, Nippon Mutual Fund has reached an inflection point, achieving the accelerated growth, enhanced efficiency and a distinct competitive edge. Nippon Mutual Fund's best-in-class digital assets, strong digital distribution framework and efficient campaign management strategy reinforced its leadership in the online space. Now, I would like to brief update you on our subsidiaries, namely the AIF and Singapore subsidiaries. Starting off with AIF. Under Nippon India AIF, we offer category 2 and category 3 AIFs and have raised cumulative commitments of INR 74.1 billion across various schemes. FY '25 marked our highest ever incremental AUM fund raise of INR 13 billion, which is 2.2x of commitment raise in FY '24. During the quarter, we launched our 10 funds under our long-only equity series. Fundraising is currently underway for 2 of our listed equity AIFs, performing credit AIF and direct VC fund. Fund deployment across all strategies was robust in Q4 FY '25 with 8 active investments in performing credit and full deployment in our tech/VC FoF across 14 fronts with underlying exposure to 380 plus companies. The teams across all functions have been strengthened as well. On the offshore front, we continue to witness good equity inflows in the quarter from various international geographies. Offshore AUM grew 13% Y-o-Y to INR 152 billion with our UCITS equity fund reaching an AUM of USD 483 million. We continue to expand our footprint in Japanese institution and retail space in conjunction with Nissay Asset Management Corporation Japan. We also continue to expand our footprints in new geographies in the European region. Now on to our financial performance. For Q4 FY '25, revenue stood at INR 5.67 billion, up 21% Y-o-Y. Other income stood at INR 0.23 billion, down 75% Y-o-Y and up 50% quarter-on-quarter. Operating expenses stood at INR 2.12 billion, up 14% Y-o-Y and flat quarter-on-quarter. Excluding the impact of ESOP, operating expenses grew 8% Y-o-Y for Q4 and 16% Y-o-Y for FY '25, which was in line with our guidance, driven mainly by investment in talent, non-MF business and technology infrastructure. Operating profit stood at INR 3.5 billion, up 26% Y-o-Y. Profit after tax stood at INR 2.99 billion, down 13% Y-o-Y and up 1% quarter-on-quarter. For FY '25, operating profit grew by 47% Y-o-Y to INR 14.04 billion and profit after tax grew by 16% Y-o-Y to INR 12.86 billion. Profit after tax is impacted by lower other income and higher tax rate Y-o-Y. As Sundeep mentioned earlier, for FY '25, the Board of Directors have declared a dividend payout of INR 18 per share, that is 91% of net profit. This includes the proposed final dividend of INR 10 per share. Lastly, the Board of Directors in their meeting today have approved the following. Based on the recommendation of NRC, a grant of 4,16,972 stock units under Nippon Life India Asset Management performance-linked stock unit scheme 2023 at INR 10 per stock and grant of 17,23,149 stock auction under the Nippon Life India Asset Management Limited Employee Stock Option Scheme 2023 at INR 577.79 per stock option. With this, I would like to conclude my remarks and open the floor for questions.

[Operator Instructions] We have our first question from the line of Prayesh Jain from Motilal Oswal.

Just a few questions. How do you see the SIP trajectory for the industry and for Nippon as such going ahead? We've been hearing a lot of closures and the incremental account openings have been weaker. How do you see the trend in this space, say, over the medium term? Secondarily, you mentioned about the expenses being in line with your guidance. How do you see our expenses in FY '26? And it would be great if you could split up the employee cost and to what kind of ESOP expenses we could see going ahead? And lastly, on the offshore business, I see a drop in -- sequentially in the managed assets from about INR 16,700-odd crores to about INR 15,200-odd crores sequentially. Is it only mark-to-market? Or what -- has there been some outflows? How should we see this? And do you see offshore given that Japan has recently launched a new scheme? Do you see this contributing meaningfully over the, say, next 3 to 5 years? That would be my questions.

So let me start by the last part of the question, and then I'll request Chattee to answer on SIP and Parag on the expenses. Firstly, offshore, whatever you're seeing is just a mark-to-market reduction, nothing else, point number one. Point number two, we are very excited about the launch of the new scheme that we have launched in Japan, which is under the NISA scheme, which is one of -- which gives an access to Japanese investors to invest in India. And it's the NISA scheme is the scheme which is the government of Japan is promoting Japanese retail investors to invest outside of Japan. And we being one of the -- amongst all the Japanese asset management companies in Japan, we -- Nippon Life is the one which has the strongest business in India. We see ourselves to be a great beneficiary of this. We'll not be able to give a futuristic number what it can contribute. But for sure, directionally, over the next 1 or 2 years, Japanese retail money coming into India will become big, and you will see us playing a bigger role in that. So that is the last question on the international and offshore. Chattee, if you could answer on SIPs, please?

Yes, Prayesh, with regard to the SIP, I think what we are seeing in the last, say, 3 months, this quarter gone by, of course, at an industry level, you have seen the SIP book has started now sort of becoming flattish. It happens whenever there is a market volatility, we are seeing some higher percentage of stoppages, which are happening at an industry level. So those are temporary phenomena, which we feel will go by as the market corrects and more education starts happening at the -- from an industry perspective. But when it comes to, say, our business, what we are seeing that since we -- in this particular last quarter, our flows have been much better than the industry flows. Our net flow is actually in case of -- in SIPs, the net book growth what we are seeing is much better than the industry trend. And our stoppages are also much better than the industry trend. So what can happen from here on, though, the overall volume has come down, time has come to diversify the SIP book into multiple categories, which will probably give a better experience to the investor as they go ahead. And that's our endeavor. As a team, we are trying to -- even if the volumes go down, we'll be more focused on diversifying the SIP book into multiple categories and build products around SIP, which will give more stability to the SIP book as we go ahead from here on.

Prayesh, on cost side, we'll keep on investing in the future. So we are expecting a cost increase roughly in the range of around 15% ex of ESOP. Employee costs will be also in the similar range, maybe 14% of ex of ESOP. And the hit on the -- or expense on the ESOP for the current quarter is around INR 11 crores. And for the full year, it's in the range of around INR 43 crores.

Just a couple of bookkeeping questions. For the full year, what kind of ESOP cost should we build for FY '26? Secondly, could you give us the yields across your -- across the asset classes? And lastly, the tax rate has been significantly lower in this quarter. What were the reasons? And how should we kind of model it for FY '26? Those would be my questions.

So the ESOP cost will be in the range of around INR 48 crores INR 49 crores next year. Then, the yields equity is 57. Debt remains 25. Liquid is in the range of around 10 to 12 basis. ETF Remained 15 basis yield. Total yield is around -- blended yield is around 37 basis.

Tax rate?

The tax rate is slightly lower due to some of the assessments got over, and we got some reversal on that. Otherwise, the tax rate should remain in the normally 24%, 25%, which is normal tax rate.

We have our next question from the line of Kushal from CLSA.

Just one question. In your balance sheet number, the property, plant and equipment assets have increased quite a bit. So I just wanted to understand what was that for? That's all.

So around last quarter, we purchased a corporate office in Lower Parel -- in Parel area. So that is what the cost which we incurred and that has been capitalized in that.

We have our next question from the line of Abhijeet Sakhare from Kotak Securities.

My first question is for [indiscernible]. Across your top 3, 4 funds, which attract highest share of flows, can you comment how recent performance trends would have impacted those numbers? Any stabilization or dip that you are witnessing there or continues to remain very strong? That's the first question, please.

No, I think there's -- whatever has happened in the market for the last 1 or 2 quarters, there is no direct linkage of that with the performance on the flow of the business. I think we clearly believe the Indian investors overall. It's not only for us. I think short-term performance dips in 1 or 2 quarters do not make any difference. We continue to see the same inflows in the top 5 funds, and the trend has been the same for the last 4 or 5 quarters.

Got it. And then, sir, secondly, just a follow-up. Like we used to have very strong small cap, mid-cap franchise. And over the last 12 months, you've tried to divert flows into some of the other larger categories as well. How has been the experience in terms of being able to create SIP accounts in those categories as against lump sum? And the point of view here is that just to get a better handle on stability of flows in some of the newer flows that we've been getting in the last 6 to 12 months.

Well, it's not we had strong franchise, we continue to have a strong franchise in small and mid-cap. That is point number one. I think the idea of having diverting the funds to other schemes, it's a part of -- I think idea is to keep getting allocation across categories. I don't think that it's at a cost of one as to others. I think from our perspective, the way we see is from a long-term point of view, we need to be basically across 3 or 4 bigger categories in the industry, whether a small cap, whether it's large cap, Flexicap. I think we want to be in the top 3 out of 5, whatever the allocations are coming. So it's a planned strategy to get the market share across all the categories.

Got that. And just a number question. If you could give the breakup of other income between debt and equity gains?

Abhijeet, we don't disclose. I don't have it handy.

[Operator Instructions] Next question is from the line of Raghvesh from JM Financials.

Yes. Am I audible?

Yes.

Congrats on a strong set of numbers. So getting back to our -- the second mid and small cap funds. So we are severely restricted given the set limits in these funds. So given the markets have been weak in these segments and have corrected, are we considering opening it up to more investors in the near future? And secondly, kind of follow-up on that. Asset market share is already at 10.2%, even when we have restricted some of the inflows. How do we look at that had we not restricted? And what would be a sustainable number if I'm looking at it from FY '26-'27 point of view?

As we have mentioned in the past, I think we see this business from a long-term point of view, and it should be sustainable. It's not about quarter-on-quarter. So for sure, I think at this point of time, we have not taken any view to remove the cap or to take more money into small cap. And I think as and when it's taken, I think we'll make it public. But the only thing I can share, having said that, if I have the question that had we not stopped, could this 10.1% or 10-plus could have been more? I think it is speculative thing, very difficult to comment on it. We believe by doing that and getting flows into all of the schemes, we are making the foundation even more stronger.

Just a follow-up. Have we considered -- I mean, where are we on the entire distribution payout restructuring that we have done in the last couple of quarters? I mean, what percentage of our AUM is being replaced in terms of distributor commissions and what more we are looking to do in the near future?

We have done around 45% to 50% of the overall AUM.

Yes. It's Chatterjee. So we have -- already 45% to 50% of our existing book has been -- yes, so it has been repriced. And I think we need to stabilize this as we go ahead from here on. And as the business dynamics evolve from here on, we'll see how we can look at further opportunities. But, as of now, I think the majority of the -- major part of the AUM has been repriced.

We have our next question from the line of Mohit Mangal from Centrum Broking.

Congratulations on a good set of numbers. So first is in terms of investor segment-wise breakup of AUM. Actually looking at the last 3 to 4 years data and I look retail plus HNI going forward and say, corporate, which was around 50-odd percent of the total AUM, now is around 39%, 40-odd percent. So going forward, I mean, as per your analysis, do you think this corporate number will shrink further as retail plus HNI will grow from here?

I think our focus continues on retail. The retail will continue, I mean, we believe and that is where the biggest opportunity is. So I think all of the efforts across the company, across branches, across our digital properties and ecosystem continues to be on retail and HNI. That does not mean we will not focus on corporate. Corporate is not something which you can directly control, but we clearly believe that going forward, both when it comes to equity, 90% plus of the business will be from retail and HNI.

Okay. Understood. Next is in terms of the number of employees, I think we added about 160-odd employees in the last 1 year. Going forward, do you think this number of 1,165 will grow with the same run rate?

Not really. I think we had added that we were flat for the last couple of years. So maybe next year, we may add about 75 to 100.

Okay. So that run rate will come down.

Yes.

We have our next question from the line of Madhukar Ladha from Nuvama Wealth Management.

Congratulations on a great set of numbers. So just two questions. First, I think you mentioned earlier that we've not participated in the new thematic/sectoral sort of fund launches. And still we've managed a high single-digit market share in net sales. And had we -- if we exclude the NFO money, then our market share is actually in double digits. So are you -- is there any rethink in this strategy? And going forward, should we see new fund launches from you? And why are we not sort of doing that? Some thought process around that because it definitely helps us build scale and we're losing out on that additional flow that we could get. Second, just on the staff cost, maybe I missed this because the line has kept disconnecting today for some reason. The ESOP costs, what are the ESOP costs in this year? And how should we think about ESOP costs going into next year? And what would be sort of your expense guidance on an overall basis over the next couple of years? That will help me.

So, Madhukar, I'll take the first question on the NFOs, then I'll request Parag to give you an answer on the ESOP cost and all. So I think let me clarify first. I think our strategy over the last 2, 3 years has been not to launch new big mega NFOs, thematic funds, and it's per design. I think while on the passive side, we'll continue launching wherever there's new themes, we have let the investor take the decision whenever he wants to enter any particular theme in passive funds. But for NFOs, we have our internal view that launching mega NFOs gives a short-term kick, gives a short-term AUM, but from a long-term stability point of view, if you do a deep dive into these numbers, a lot of this AUM gets shifted from scheme A to scheme B within the same AMC or some other schemes of other AMCs. And our historical data shows us that NFO investors typically are not very, very sticky. We believe continue scaling up our existing products, continue to get investors who come because of the track record of the scheme rather than coming because of the hope of returns. So I think that's how -- that's the big strategy. And also, what we want is, NFOs many time distracts the company, distracts the sales teams, everyone starts working on it. We continue focusing, as I mentioned in the past, on building a strong foundation which is scalable in the long run. With immediate short NFOs doing INR 5,000 crores, INR 10,000 crores, I mean, for the scale and size that we have, it's very easy. But it is -- it requires a lot of conviction to say that we are not going to be participating in short-term gain, but continue really gaining money from the long-term point of view. So I think that's the answer on the NFOs. Having said that, I think one more thing I'd like to touch is since you touched, are we losing out a big pool of money? Answer is no. If you see the investor pool, our investor base continues to grow faster than the industry, and that is a reflection of the fact that investors actually prefer schemes with long-term track record. Selling NFOs with the hope of return is short term may be a good strategy, but from a long-term point of view, we ourselves are not convinced. That's on the NFOs. Parag, can you please answer on the ESOP?

So Madhukar, the cost on the ESOP in the current year, the expense is around INR 43 crores. In current quarter is around INR 11 crores. Next year, we are expecting something in the range of around INR 48 crores, INR 49 crores with both the ESOP schemes. Our guidance on expenses. Currently, this year, we had ex of ESOP around 15%. We will keep on investing in our business. So our guidance on -- our expectation is around 15% on next year also ex of ESOP.

That's on overall costs?

Yes.

15% growth on overall costs. Is it, sir?

Yes.

We have our next question from the line of Abhijeet Sakhare from Kotak Securities.

I have a question on yield. So if I recall correctly, I think last quarter as well, our equity yields were about 57-odd basis points. And if that number is correct, how has the recent commission cuts impacted the overall yields given that the equity AUMs are also down quarter-on-quarter?

Abhijeet, overall, the impact will be very -- on the yield basis may not be very great. It will be part of the overall yield. And this 57 last quarter maybe on basis point in decimals might have changed. So the overall yields remain more or less in the line. There may be some decimal changes.

Understood. And that the entire commission cut is now in the base, right? There's no more pending impact to be taken, right?

No, no, no.

We have a follow-up question from the line of Prayesh Jain from Motilal Oswal.

Just a couple of years back or a year back, we had a 70% volume share on exchanges in terms of ETF. We're now down to 53%. Is there anything to read into it? I know it's still a very meaningful market share, but the drop has also been quite meaningful. Anything to read into it? And how do you kind of aim to protect this? That will be my first question right now.

Arun here. So first of all, you would appreciate that if you look at other numbers like net sales, for example, and even this current volume is way, way higher when compared to current market share. But the volume per se, it is part of the pie, right, with more players coming and that as a percentage might look a little on the lower side. And in some categories, we are consciously not present. For example, some of the smart beta, et cetera, where the liquidity can be on the lower side, which could impact investors negatively. We may have decided not to launch ETF at this point in time. That also could affect our margins at the periphery. But having said that, this number fairly is a high number. And within that, some categories like, for example, Nifty, we command 73% of the volume. And much of the net sales also happens in categories like Nifty, gold. So that's where we are, Nifty, gold and silver particularly. Our volumes are fairly, fairly high and much higher than our current market share.

Got that. And a broader question on the debt side. We are heading in -- we've already seen 1 rate cut and possibly, we will see more rate cuts going ahead. The debt segment, how do you see the trends there? Do you think that it can revive and you can see significant inflows there going ahead? How should we kind of look at this segment as such?

Yes. I think, Prayesh, you have analyzed it right. What we have seen in the last 2 months, the liquidity in the mutual fund industry has gone up in expectation of moderate rate cuts or moderate rate scenario. And also, we have to also remember the fact that a lot of these FDs which the banks had mobilized in the last couple of years are now coming for maturity. The rollover will be at a lower yield. So -- and hence, the mutual fund schemes start becoming the first port of call for investors. And we are seeing in the month of April and in the month of March, there was a good flow into the shorter end and the medium-duration products. And hence, if the softer regime continues, which we feel will be the scenario as we go ahead, there will be a sort of inflow into these categories, for sure.

Okay. Just one last question on the offshore business. What kind of yields we make on the offshore business? And how is the trajectory there?

Around 50 -- depending on this thing, around 60 to 100 basis on which product equity and that is yield.

60 to 100 bps is the range?

And also, I think we -- like we mentioned earlier, we have a digital fund, I think, which, again, which is a venture fund which comes under our AIF subsidiary. For that also, there comes a carry to come into play after a certain time, but that's still a long time away.

Okay. Any other geographies that you're looking for to grow the offshore business apart from Japan in the near future?

I think we -- from our perspective, we continue leveraging the global network of Nippon Life. I think wherever -- I think till now, if you see most of our other business that is coming -- international business is coming, whether I think if you look at a slide in the presentation, whether it's coming through DWS, whether it's [indiscernible] Japan, BBL AM, which is Bangkok Bank of Life Asset Management; and Cathay, which is Taiwan. I think all these are companies where Nippon Life has state strategic interest or something. So we'll continue. I think we will -- we don't want to reinvent the wheel. We do not -- and neither we have the direct capability. We do not want to go out anywhere in the world and start afresh. So we'll piggyback on Nippon Life network, but what you will see, Japan will continue to be our core.

We have our next question from the line of Gaurav Jani from Prabhudas Lilladher.

Firstly, I wanted to check on the blended yields and the related equity yields and what should be the payouts. Given that you had already rationalized commissions for a few funds since -- with effect from February 1, would there be any benefit that will flow through the next quarter? I mean what is your assessment of that?

So the blended is around 37 basis. The equity is 57 basis as I mentioned earlier. And the fact which has happened in the current quarter, which is already part of the yields, and this will continue.

So I was asking on a net basis, would that benefit also in the next quarter or all the benefit is already taken?

Yes, yes. So it is already part of this. And so that will continue.

Understood. Go ahead.

So Gaurav, just to add to that, the blended is the combination not only of the yields, but also of the mix. So if the ETF business grows at a faster pace, then the yield will show a decline on a blended basis. But as we have been guiding in the past, we expect a 2 to 3 basis point decline year-on-year going forward as well.

Sure. And lastly, on ESOP, right? So I believe there was a fresh issue because I guess ESOP trajectory that we had originally estimated, there's an increase in that. So can you just tell out as to what would be the cost of '26 and '27 put together?

So in the current year, it was around INR 43 crores. Next year, we are expecting in the range of around INR 48 crores, INR 49 crores.

Okay. And FY '27?

FY '27 will be lower than the number because it will go down.

It will taper down, yes.

Any chance to sell out, I mean because we follow trajectory, right, in ESOP for '27, I mean.

Gaurav, I don't have numbers right now. We can -- I'll let you know off-line.

We have our next question from the line of Krishnam Mundhra from NJ Invest.

On the SIP side, I just wanted to know your perspective, like can we assume that going forward, given the direct tax limits being increased to INR 12,00,000 for individuals and INR 12,75,000 for salaried individuals, more disposable coming in -- more disposable income coming in the hands of individuals, basically more of salaried individuals. So will that disposable income, can it come into mutual funds through SIP or majorly this will go into consumer discretionary segments? Just wanted to know your analysis from the past, basically when such limits were raised.

So broadly, Krishnam, the way it's very difficult to have a direct correlation between when the disposable income increases and will that directly flow into consumption or into mutual funds. But our, this thing, dipstick says that, I think, clearly, the awareness about mutual funds is increasing. The culture to invest in SIPs is increasing. And whatever is going to be the disposable income when it increases in your hand, you will see a part of it coming -- surely part of that will be coming into SIP. Will that entire amount come? I think it's really difficult to predict. But definitely, mutual fund industry and players like us who are very active in retail, this SIP is very important for us. We'll benefit from this taxation change.

We have our next question from the line of [indiscernible] from Ajanta Capital.

Am I audible?

Yes, yes, please go ahead.

I just had a couple of bookkeeping questions. Now can you just share the net inflow numbers for the equity on the ETF segment for the fourth quarter and for the full year, please?

We don't disclose the net sales number for -- specifically for us. Industry number, we have mentioned in the part of our speech and part of our deck.

Yes, roughly we're higher single digits or just about double digits in net sales.

Yes.

Sorry, I missed that.

So we are -- net sales are higher single digit and ex of NFO higher double digits. So you may look at the numbers.

Right. Would you give out the closing AUM figures for the segments?

So the closing, overall around INR 5,54,000 crores.

And for equity?

It is around INR 2,76,000 crores.

INR 2,76,000 crores. ETF, sir, if I can get?

ETF is INR 1,65,000 crores. Liquid is around INR 33,000 crores and debt is around INR 80,500 crores.

Sir, just last question on the SIP book. Now sir, in terms of the mix of the SIP book, what proportion would be towards, say, small and mid-cap? Any flavor if you can just give?

I think for us, the top 5 funds are 80% of the funds then we do not give the breakup fund by fund.

And for the last quarter or so, has there been any change in that? Because I see the book has been relatively stable. But has there been a change in that net book over the last 3 months?

I think it's broadly been the same. I mean there's nothing significant to report.

We have our next question from the line of Bhavin Pande from TrustPlutus Wealth Managers.

Am I audible?

Yes, you are Bhavin.

Congratulations team on a wonderful set of numbers and a wonderful FY '25. I just wanted to touch up on the structuring of passive products and ETFs. Is the sole purpose just to minimize the basis risk or we also look at expanding our offering where an investor could have a repertoire of products? It would also enhance returns from a diversification perspective.

I think your voice was not clear. Could you repeat that, please?

Sure. I hope I'm clear now.

This is much better, yes.

Yes. Yes. So when we look at the structuring of products in the ETF and passive bucket, so the sole purpose, is it just to minimize the basis risk or we look at expanding our offerings in a way where an investor would have a repertoire of products which would enhance returns as well?

So I think from our point of view, I think it's definitely there are -- thought is that I think we need to offer different type of funds, different styles, different categories of funds and passives to the investors and let the investor make a decision. We do not do it with the intent of what is good for us. We do not want to do with intent that the investor will make a better return. The reason why we do not do active funds, big NFOs, out there, our strategy is very different. But for passives, our approach is to keep launching products, keep them available on the shelf and let the investor with the help of his adviser decide which one he wants to invest in.

Okay. And any conscious effort is there to minimize the basis risk?

Basis risk, you mean...

The tracking error?

Tracking error. It's conscious. It's -- there's a lot of science and art behind it. It's definitely -- that's the core of the whole business. I think as we have mentioned in the past, ultimately, many times, when the markets are not mature, investors feel that the only thing that matters is the expense. But in reality, the liquidity and the tracking error are the 2 most important things. And the majority of our focus is to keep -- have lower tracking error and higher liquidity. So the impact cost for the investor is not there.

Thank you. Ladies and gentlemen, due to time constraints, that would be our last question. And I now hand the conference over to the management for closing comments.

Thank you all for joining the conference call, and wishing you a happy new financial year. Thank you.

On behalf of InCred Equities, that concludes the conference. Thank you for joining us, and you may now disconnect your lines.