Prudent Corporate Advisory Services Limited (PRUDENT) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to 3Q FY '23 Results Conference Call of Prudent Corporate Advisory Services Limited, hosted by Equirus Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohan Mandora from Equirus Securities. Thank you, and over to you, sir.

Thank you, Neerav. Good afternoon, everyone. Welcome to the Q3 FY '23 Earnings Call of Prudent Corporate Advisory Services Limited to discuss the quarterly performance. To give a brief update and address investor queries, we have with us from the management, Mr. Sanjay Shah, Chairman and MD; Mr. Shirish Patel, CEO and Whole-Time Director; Mr. Chirag Shah, Whole-Time Director; Mr. Chirag Kothari, CFO; and Mr. Parth Parekh, Investor Relations. We will begin with a brief management commentary, followed by Q&A. Thank you, and over to Mr. Shah.

Thank you, Rohan. Thank you, and good afternoon to everybody. Let me first of all welcome you all to the earnings call of Prudent Corporate Advisory Services Limited for the third quarter of fiscal 2023. So I thank you all for sparing your valuable time to join us today. The fiscal which has been ended has been very, very special for us as we crossed the landmark of INR 50,000 crores of asset under management. Also, as per the AMFI ranking, based on the commission on which AMFI publishes at the end of every year for FY '22, we jumped our position by 1 notch in the ranking to become country's second largest non-bank mutual fund distributors. So that has been very, very satisfactory for us. So all these efforts were reflected in the quarter's numbers, wherein we recorded the highest revenue in the profit. I hope you have the investor presentation in front of you and handy, which we already uploaded on the exchange yesterday, so as we'll be giving reference to the slides where I'll talk about this quarter's numbers. So let me start with our AUM, which is the very important parameter of our business for this quarter. So I'll just take all of you to go to Slide #36. So if you see Slide 36 of the presentation, despite having Karvy in the base quarter -- as you are all aware that we acquired Karvy and the entire assets of Karvy were transferred in our core on 20th of November 2021. So in spite of there being Karvy in our core in October, November, December of last year, our closing AUM grew by a healthy pace of 17% Y-o-Y to INR 56,138 crores from INR 48,197 crore in December 2021. Further, our quarterly average AUM grew by almost 32%, which is much higher than the closing AUM. This has been mainly because in Q3 of current year, the Karvy's impact was there for the entire 3 months, while it was only for 1 month in last quarter. Also, if you see in slide -- in fiscal 2023, we are currently running at an average AUM, which is almost 39% higher than the FY '22's full year average AUM. Thus, we are expecting that we'll close FY '23 with a very robust growth in top line as well as in the bottom line. So now I'll move to Slide 37. If you see slide 37, we have given you the variable, which moved the equity AUM on a year-on-year basis, on a sequential basis. So equity AUM has grown by 18% year-on-year. And mainly it has been due to our recent growth in net sales, thanks to our SIP flows. Net equity sales during 9 months FY '23 has been INR 3,520 crores, and we are in line with our guidance to achieve net sales of INR 5,000 crores during the entire year. On a sequential basis also if you look at, equity AUM grew by almost 6%, aided by mark-to-market movement in last quarter. However, if you look at the full year mark-to-market movement, it has been a little bit muted, because on a full year basis, mark-to-market benefit which accrued per area was only about 5.3%, which is also in line with -- if you look at full year earnings of NSE 500 stocks or probably Sensex. Sensex gave close to about 5% return. Now I'll take you to Slide #38. So if you move to that slide, I would like to point out that despite all the noise around fintechs, our market share in equity AUM without ETF has remained stable at 2.4%. On the monthly equity SIP flow for the December, which was very, very strong for us and it was at INR 478 crore. If you compare the same number one year before in December '21, it was INR 371 crores. So we grew our SIP book by almost 29% on a year-on-year basis, which gives you a very strong traction and visibility for the inflow. And we expect that this book will definitely close at INR 500 crores plus within this fiscal itself. The SIP mobilized during the quarter was also at a historical high of INR 1,411 crores, and every second rupee which we had mobilized in the gross flow came from SIP. So that shows that how granular our business is and that should be relative for AUM also. SIP will continue to be -- will play a very pivotal role in our growth going ahead. I'll take you to Slide #39, which is basically, we want to emphasize our emerging business segment, Insurance. It forms around 8% of our revenue in this quarter. This vertical grew at 52% year-on-year and 80% of this vertical revenue during the quarter came from life insurance and the raise from general insurance. Our point of sales person, POSP, network is a strong 7,524 and we are relying on this channel to bring scale to the business. I'll take you to now Slide #40, which is the summary of our consolidated earnings of Q3. It contains the details of consolidated numbers. So revenue from operations grew by 35% year-on-year in first 9 months, led by solid growth in quarterly AUM, aided by the acquisition of Karvy last year as well as change in mix towards higher yielding equity AUM. Our operating profit grew by 41%, which was higher than the revenue growth led by operating leverage. Our operating margin has expanded by 109 basis points to 26.4%. If you look at our profit after tax, it has grown a tad slower than the operating profit growth, which was at 31%, mainly because of the higher depreciation and the lower other income. Depreciation expense doubled led by the amortization of Karvy's assets. As you are aware that when we acquired Karvy, we paid INR 151 crores for that, and we are going to amortize that amount over a period of 10 years and that's a noncash expenditure on the balance sheet. So similarly, other income has also reduced mainly because company utilized surplus liquidity of INR 151 crores for acquiring Karvy assets. If you look at our annualized return on equity in first 9 months, it stood at a very healthy rate of 50%. So this is broadly about the numbers which we have given and it's a part of our presentation. I'll just try to briefly touch base on our growth outlook. So let me just tell you that there are a couple of drivers which are very, very strong and very steady for our retail wealth management business. And number one of our growth driver would be the continuous addition of mutual fund distributors in our kitty. So as a business strategy, we are focusing aggressively on adding more and more mutual fund distributors, which are the backbone of our business. And as of March 2022, Prudent was having 20.4% of overall mutual fund distributors of the country empaneled with us as a business partner. In 9 months of current year, which is 9 months FY '23, we have added around 3,360 mutual fund distributors. So there is an increasing need for mutual fund distributors to collaborate with a tech-based platform to service their clients, and we are capitalizing on this opportunity. We had a target of adding close to 5,000 people in the current year, and I'm sure we'll be able to at least reach that number closely. As more and more mutual fund distributors join the industry, we expect that incremental benefit will accrue to our company, which is through the corporate. Second number which is our growth driver would be the cross-selling of other products using our strong network of mutual fund distributors. So ours is now -- we are moving from our single product distributors to a multiproduct distribution platform, which has helped us to capitalize on our vast mutual fund distribution network. Our multiproduct platform has also created a great value proposition for our mutual fund distributors who have joined us. So far, company has converted 7,524 existing distributors and their family members to point-of-sales persons, who can also sell insurance products through our group company, Gennext Insurance. So the third number for our growth outlook would be the strong SIP book, which we always encourage our mutual fund distributors and educate them to build for the purpose of granular flows. So ours is a very unique B2B2C platform, positioning in the Retail Wealth Management segment, and it helped us to build the granular flows through SIPs. Our monthly equity SIP flow for the month of December was INR 478 crore, and almost a second rupee of our equity in new flow in last quarter came through SIP. So we believe SIP is a very robust organic growth lever for us going forward. And finally, number 4 will be the effective utilization of cash flows for inorganic acquisition, which is another critical strategy for us. We generate significant cash flow from the operations, and we are always on the lookout if something lucrative comes on our way. Generally, we generate the significant healthy cash flow also. And if you look at 9 months of this year, the profit before tax, and if you add the depreciation to that, significant amount of cash is being generated by the organization. During this quarter, we also acquired all mutual fund assets of iFast. So in October, we merged the INR 517 crores of iFast mutual fund assets and we paid INR 2.56 crores (sic) [ INR 2.26 crores ]for acquiring these assets. So overall, these are the growth drivers which I look at from the point of view of Prudent. However, let me just tell you that overall, on the industry front also, we are very, very comfortable, and we feel that the entire wealth management industry is poised for significant growth. I was referring to our institutional risk research report of the mutual fund industry and they are having a view that active equity assets of mutual fund industry will grow by -- in next 10 years, will grow from currently about INR 19 lakh crores, INR 20 lakh crores to INR 77 lakh crores by FY '32, so that's about next 9 to 10 years, representing a CAGR growth of 15%. If you look at historical growth of Prudent, where Prudent grew almost double than the industry's growth. So I'm sure I think we'll be able to ride on this wave which is going to be there as far as retail wealth management is concerned. And we are immensely going to be benefited by this trend. If you look at the U.S. As a country, U.S. witnessed a rapid rise in retail mutual fund investing from 1980 to 2000, wherein the share of households owning mutual funds increased from 6% in 1980 to 45% to 46% in 2000. I think we'll go through a similar trajectory in the next decade, and we are looking at the next decade as extremely positive for the industry as well as for us. So with this, I'll just end my discussion, and I'll open the floor for the Q&A. Thank you.

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

Congrats for a good set of numbers. So a couple of questions. One on the iFast acquisition. So if you could talk a little bit about how the yield of that business is? Because when I see, after consolidation, there is no discernible impact that we can see on the mutual fund business yields post this. So if you could talk about that, what could be any kind of impact that you would see going ahead? And also in terms of the distribution partners of iFast, what are we doing to ensure their stickiness, or is there a risk there that they may move out [indiscernible] there? That would be my first question, sir.

So if you look at iFast, probably you do not see a significant change in the revenue because iFast is less than 1% of my AUM. So if you look at end of December, our total AUM was INR 56,000 crores. And what we acquired from iFast was only about INR 417 crores, and then assets got merged by the end of October. So November and December, these are the 2 months where revenue has been -- so the asset has been merged and revenue has been booked. So there is no separate reporting for iFast, but I can just give you a rough number. I think we are going to make additionally about INR 11 lakh, INR 12 lakh by way of this acquisition. So it's going to be very, very remunerative for us because we paid INR 2.56 crores for acquiring iFast and I believe payback period would be less than probably 2.5 or 3 years. So we'll be able to recover whatever we have paid for acquiring the Karvy -- sorry, iFast assets. It is number one. But however, it being INR 11 lakhs, INR 12 lakhs a month, so you'll not see a significant change in the revenue overnight. Number two, iFast was significantly, like Karvy, also a business model driven by B2B. And there were a couple of partners who were working with iFast and also working with Prudent. So all in all, we got about some 250-odd partners who were new to us, and they all have empaneled us. There might be a few people who might be still in the process of empaneling. However, I believe, as far as the positioning of Prudent in B2B segment is concerned, I think we have very strong deliverables and value proposition for them. So anybody who will come from another platform to us would be more comfortable to work with us. So we believe we'll be able to take care of them. And I haven't seen any slippages. And slippage is in the form of whether he'll continue to work for the additional business or not, but the business which we acquired and is a part of our AUM will definitely remain with us only.

Okay. Okay. Got it. Now coming to the insurance side of the business, sir, if you could give me some color on how are the commissions shared between us and the distributors? And is there a possibility that since we would be having a higher scale, can we get a better commission structure out of the insurance companies? And again, the same question on the stickiness of the agents, that in insurance the upfront is significantly higher than what would be the trail income on the renewal of the policy. Could there going ahead be risk of an agent getting empaneled separately with the insurance company, or can they, by regulation at all -- if they move out as an agent of our insurance company, can they still function as a POSP? If you could highlight that.

Shirish, you would like to address?

Yes. So I'd give the answer of last question was that the agent who becomes the POSP has to work only with one particular broker. So the chances of leakage of the POSP is much, much lesser. In case if he wants to move out of Gennext system, obviously, they'll need the NOC from Gennext and then he can get registered with some other insurance broker. So if hypothetically there is a possibility of people going out, there is a higher possibility of people coming in, because currently we have hardly 7,000-odd POSPs, wherein I think many other competitors would be having much, much higher number in terms of POSPs. Second, why we believe that the attrition would be lower, because our focus of recruiting POSPs is not the broader market, but mainly our focus is to cross-sell over existing mutual fund distributors. So they don't have only the insurance relationship with us, they ideally deal with multiple products with us, and that is the reason the attrition level could be much, much lower compared to other brokers. So that is why I said I think the chances of people coming in would be higher than the chances of people moving out. So that is the last point. The second question what you asked is, is there a possibility of our gross yield moving up since our business is increasing. I believe that, yes, I think the insurance industry is very, very dynamic. With the volume increasing, there could be a possibility of increasing the gross yield. But in last 3, 4 years, the kind of growth that we have shown, obviously, we believe that we are almost near to our peak negotiations. So we don't see that the gross yield improvement can be great going forward. Yes, there could be, I think, 1% or 2% improvement possible. But otherwise, we don't have a great improvement in the gross yield. So that would be our second point. Coming to your first question, the sharing. I think the sharing ratio continues at a similar level what it used to be earlier. So again, I think it's a very, very dynamic thing. I would say, it's volume linked. So lower the volume of our distributor, lower the sharing, and higher the volume of the POSP, higher the sharing. So sometimes it may depend on the composition of the business which is delivered by a few people delivering more business and more people delivering lesser business. So like in mutual funds, we have got a tiered structure. Similarly, we have got -- I won't say exactly the tiered structure, but higher the volume, higher the sharing kind of structure we have. But we have not seen any change in the sharing mix in the last few quarters. So that practically is the same.

So on an average, sir, if you -- what would be the mechanism? Because, say, let's assume that -- last call I think you mentioned that the largest portion of your business is coming from non-par. So assuming that commission that an insurance company is giving somewhere around 30% or so on the first year premium, on an average how much would a partner get?

So ultimately, I think different products mix, if I talk about on an average, roughly sharing, would be around 65% to 70%. But again, that is not product specific. I think we look at so many parameters. It is not only the product, it is also the PPT, as I said, the volume of a person. So what average you can call about is 65%, 70% on an average.

Okay. And sir, the ticket size for insurance that you had mentioned in the presentation, average ticket size, I think, around INR 33,000 or INR 35,000. So in LI particularly, ticket sizes can go up significantly. So what would be the kind of steps that we had taken to improve productivity of our POSP? If you can give some qualitative commentary on that?

Here, I would say 2 things. One, the productivity and second is the quantity of the POSP. As we already shared that the number of ARN holders with us is around 26,000, out of that hardly 7,000-odd ARN holders are converted, either they only or the family members. So still, I would say that almost 80,000, 90,000 mutual fund distributors are there who we can tap. In addition to that, also, we keep on adding the mutual fund distributor and then we also try to cross-sell them to become the POSP. So that is one parameter which always we should look at. Second, many of the guys who we have trained for insurance business to become the POSP. Definitely, initially our challenge was convincing them to start the insurance business, either the insurance business altogether for the first time or with us. Because historically, we have been known for the mutual funds business, so majority of those guys who are converted to the POSP, many of them don't have the experience of dealing in insurance in the past. We actually have convinced them about the benefit of the cross-selling and everything. So over a period of time, yes, I think we are able to convince them, we are able to guide them how to do the insurance business and their productivity also increases. Second point, there was some -- I would say, since we are mainly on the mutual funds side, those who were already dealing somewhere with the insurance business, probably for them I think the proven track record of Prudent or Gennext was required, but are you in a position to deliver the similar kind of services on insurance side also or not? Now I would say that with the decent volume, we have got a track record of around 2, 3 years. Now they have experience, they have experienced the service standard of their colleagues also. So yes, I think we don't see a challenge in improving the productivity. But yes, we would love to see their complete potential come out the way they are showing in the mutual funds. But yes, I think as and when they are getting convinced for the insurance business, we are very, very sure that the productivity of many of those guys who have started insurance for the first time will improve a lot. But I think, otherwise we don't see any great movement or the change in that.

Okay. And last one from my side. So among your top MFD, say, if we look at the top 20% or 25% of your MFDs, some color on how -- what would be the amount of delinquencies, or how many -- what share you have seen historically who would have moved out from your top performing guys?

So today, we have already given you in the presentation that top 10 of our distributors contribute hardly 2.5% of our AUM, and around top 50, if I take it, almost 8.5%, 9% of our total AUM will be contributed by these guys. Please understand, obviously, there could be some kind of leakage, but we have not seen the leakage on the guys who are already big, the reason being the majority of the top distributors who are already doing mutual funds business with us, their clients are on FundzBazar. So practically, when -- and majority of the distributors are on the retail side, we hardly have any distributor in the top segment who is HNI focused. So majority of our distributors are retail focused. And almost all their businesses are happening through FundzBazar. So practically, we are saying that their 300, 400 clients are utilizing the FundzBazar services for the transaction purpose, for the view purpose, and for the multiple product transition and the portfolio valuation purpose. Even if my distributor hypothetically thinks of moving out, it would not be easier for him to take that call in isolation because he has to think about 300, 400 clients' account opening somewhere else, how to move the transaction, or how to move the portfolios of mutual funds to somewhere else. So it is not that easy for any distributor to move out even if he decides. Second point I would say that -- this I'm saying, if he decides, it would not be easy. But my point, again, would be that why would he decide to move out? Now as we spoke earlier also that we have got a very, very good tiered structure that was as and when the distributor becomes bigger and bigger, he gets the higher share of Prudent's revenue. So obviously, he's not losing on the compensation side. Second is, last 3 years, we have added many other products, even assuming that they are losing 2 basis points commission on the mutual fund product side, but they get to sell multiple products, which otherwise they would not have the access to. So obviously, they believe or they find that by doing the cross-selling to existing set of distributors, their overall revenue has gone up. Third most important part, I would say that the kind of platform what we offer, FundzBazar, I think probably they also believe that it is one of the best platform. So obviously, they need not invest on the technology side, they need not invest on the servicing of their clients side. So obviously, they also understand the cost saving aspect while dealing with Prudent. So one aspect I covered is why they would not like to move out, and second, even if they decide to move out, it would not be that easy for them. So yes.

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

Congratulations on a good set of numbers. Just firstly, if I look at your growth in SIP book from December last year to this year, while in our last year's base would also have Karvy in December, right, but your growth in SIP book is higher than your growth in the overall equity AUM. So is it that we have been able to extract more SIPs out of the Karvy assets? And what more can we really drive the increased growth from there? That would be my first question.

Yes, Shirish.

So basically, if you look at our SIP book as of last year, last year Karvy acquisition would have added around INR 30 crores to INR 33 crores of SIP book. So in March '22 number, around INR 30-plus kind of -- INR 30 crores to INR 33 crores kind of SIP book came from Karvy. So if I exclude that number, last year, probably, we have added the net SIP book of almost INR 100-plus crores. This year also, I think as Sanjay bhai said that we'll be ending close to INR 500 crores plus in this financial year. Obviously, we are hoping to get another INR 100 crores of addition in this financial year as well from the SIP book. So practically, when we talk about INR 500 crores or INR 510 crores of SIP book by March '23, the incremental compared to March '22 would also be around INR 100 crores. Last year also it was around INR 100 crores. One point I would like to highlight here is that definitely, I would say, the termination ratio of Prudent is much, much lower compared to the industry. That actually is helping us to increase our net SIP book. We said that the AUM growth percentage is not there. I would say the mark-to-market gain I think in the last 1 year is reasonably okay, reasonably subdued, I would say, and that is the reason the AUM growth was not there. But otherwise, in terms of net sales growth, I think we are almost on par with what we anticipated at the beginning of the year.

Okay. And secondly, on the commission paid out to your distributors, it has gone up sequentially in this quarter. Anything to read into it?

No, I think it is sequentially, so probably you should not look at sequential data, because quarter-on-quarter might seem some amount of movement in the numbers. [indiscernible] there is a 1% of variation between last quarter to this quarter, mainly because -- as say, we have tiers, we move our partners from one category to another category. And when we move them from -- let's say, somebody has moved from, let's say, silver to bronze or silver to, let's say, gold. And for that, linked to that, there is some payout which we do as an incentive for moving to another category, which happens once in a year. And that cost was there in the month of October, November, December, which was not there in previous quarter. And that's the reason that cost is about some INR 50 lakh, INR 60 lakhs, which was there last year also. So if you look at on a 9-month basis, you'll not see the impact. But on a quarter-on-quarter basis, you might see there is some impact. So probably you should look at already 9 months number for the purpose of better comparison.

Okay. Great. The next question was on, how are the kind of commission payouts coming on NFOs vis-a-vis what we are seeing, say, 6 months back or a year back when the payout has really gone up? So how are the NFOs commissions trending right now?

Shirish? Yes, Shirish.

[Operator Instructions] The line for Shirish sir has dropped.

Okay. Yes. So normally, if you look at probably NFO has been not that significant contributor to the business. However, for these, say -- if you look at from the point of B2B, in case of NFO, the payout from the AMC side is normally higher than what they normally give as a brokerage. And our sharing is also normally a little bit higher than the regular business. So there might be 1 or 2 basis point margin pressure when it comes to NFO. However, NFO will not be a significant amount because -- I think Shirish would be giving more about the exact number of mobilizations through NFO, but NFO may not be a significant part of our mobilization. And overall, there was a significant rush at the beginning of the year in the NFO, but it has now tapered down. So the NFO collections are not very significantly larger.

Okay. Okay. Okay. And sir, my last question...

We have Shirish sir's line reconnected to the call.

Shirish, you wanted to say anything on the NFO?

My line was disconnected, so I don't know, but ultimately, I'm assuming that it was margin pressure due to the NFOs?

Sir, your voice is not coming clear. [Operator Instructions]

Yes. Sir, in the meantime, could you also throw some light on how are you seeing the redemptions coming through? Yes, obviously, your AUM has gone up and your monthly revenues -- but is there a pressure on [indiscernible] coming through in certain segments of late very recently, like last couple of months, has there been some increasing redemptions overall?

So probably, if you look at industry as a whole and for Prudent also, I think the last quarter has been a little bit tepid on the net flows. And even the lump sum money has also been reasonably slower than it used to be. So I don't want to read anything for this one quarter changed number. Overall, retail sentiment is -- so probably there is -- I will not be able to say anything on the categorization of a particular segment of the customer because we broadly represent pure retail. So if you look at on the net flow, I think the net flow is a bit lower. So I think redemption is almost about 55% to 60% for us for the last quarter. Industry is in the range of 75%, 80%. So gross flow to redemption ratio. So that way we are reasonably better. If you look at my gross flow, gross flow has come down somewhat, but my SIP is helping us significantly. Because as I told you in the presentation itself, every second rupee which came in gross flow came through SIP and that gives us strong visibility of inflow. So you are right. I think last quarter has been reasonably somewhat tepid as far as net flows are concerned. But I think I feel comfortable when the retail investors redeem at the high end of the market rather than redeeming at the lower end of the market. So that's okay.

[Operator Instructions] The next question is from the line of Nidhesh Jain from Investec Capital.

Can you talk about the market share trends in terms of net equity flows and gross equity flows?

I think both are consistently -- I think we are able to maintain our market share in spite of there being a lot of noise on, what you call, the direct side. So overall, if you look at, I think -- on the gross sales side, Prudent market share is almost about 3.4%, and similar will be the story as far as SIP would be concerned. So these are the 2 important numbers from the point of view of participation in the SIP book and participation in the gross flows, both are significantly steady.

Okay. And secondly, sir, if we think from a longer term perspective, around 5 years, 6 years out, the trend towards direct mutual funds should continue to go up in our view. And as time progresses, the difference between regular plan and direct plan will become larger and larger because of the compounding effect. So how are we preparing -- first of all, do you agree with this view, and if yes, how are we preparing ourselves for that eventually?

So I think there is scope for direct to grow. There is a scope for the active management also to grow significantly. There is scope for distribution also to grow significantly because the industry itself is likely to move significantly in the next one decade. So I believe everybody will participate in this growth story. Definitely, direct is a segment which is a DIY kind of a segment or the segment which has been advised by the RIAs and they are charging fees to the customer. So probably people look at the difference in cost structure of direct versus regular plan without taking into consideration the probably behavioral costs, which investor is paying because of DIY, or the RIA fees which they pay to the registered investment advisers. So if you take that into consideration, today, I believe that India is not into that kind of expensive trade as far as distribution cost is concerned. But all said and done, what I wanted to communicate is that we are definitely not a part of direct. Even if that segment will grow, we will not be able to address that. However, we very, very strongly believe that there is a need for advisers and advisory segment will grow significantly as far as India's retail wealth management story is concerned. And within that, probably MFD has to align with some platform, there also we are going to play a very huge role.

But internal advisory will continue to have a model of manufacturer paid led advisory, not customer paid led advisory?

So the only issue because -- see, understand we have 15 lakh customers with INR 56,000 crore of AUM. So average customer AUM is about INR 4 lakh, right? So it's very difficult, you cannot collect fees from 15 lakh people. You might collect fees from 2,000, 3,000 families easily, but you cannot collect from 15 lakh. So there is no very standardized, what you call, fee collection mechanism set in the industry. If that happens, then probably we might give it a thought. Otherwise, in the current context, you can't go and collect fees from 15 lakh people.

Next question is from the line of Abhijeet from Kotak Securities.

Sir, first one is a data question. What is the share of B30 [indiscernible]?

So B30 would be close to about 25% -- 22% to 23% probably, and industry is about 29%, right? Last data was -- Shirish, any idea?

So industry was around 23%, and Prudent was around 19%.

Okay. Sorry, Prudent is at what level, sir?

Around 19%.

19%, okay. Got it. Sir, second one is that when you onboard MFDs, is there a rework of commission payouts with mutual funds?

Shirish?

Pardon? When we onboard the mutual fund distributors, what?

The prevailing payout ratios with mutual funds, is there any tweaking of that which happens when MFDs join your platform? Or that remains intact?

No, no. Our negotiation is...

Sir, sorry to interrupt you once again, your voice is not coming clear.

So there are -- let me just address it. There are 2 parts of the question. One is, let's say, when certain MFDs join us, that will not help -- so what Shirish is trying to say that our negotiation with AMC would be on our strength, our reach, and whatever the distribution network, right? That is what we negotiate with them separately. So somebody joining our platform will not have a significant change. Another thing is when somebody merges his assets with us, on that particular assets, when he is merging, at that point of time we share everything to him because he's already created assets on his own efforts. So say, for example, tomorrow somebody comes with INR 5 crores, and he wanted to merge his assets with Prudent, what Prudent gets is there is a defined rule in the MCV space that the my trail rate or the incoming distributor's trail rate, whichever is lower, would be given to me. And whatever I'll receive is given to him because that's the asset which he already spent time and energy for acquiring. Then after his share will be or his rate would be applicable based on my prevailing rate as for the structure.

The next question is from the line of Nilesh from Bank of India Mutual Funds.

Sir, I had some clarification. So on Slide 37, when I see the net sales for the quarter, it says that INR 780 crores is the net sales for that particular quarter. On the next slide, when I see the gross equity SIP flows, which comes out to be INR 1,411 crores. So the difference is the redemption during the particular quarter?

Yes, you are true. Absolutely true. So last quarter, if you look at -- overall, there was 70% of the redemption. So if you look at the INR 780 crores net sales. And when I'm saying you that INR 1,411 crores came by way of SIP, which was 51% of my gross flow. So gross flow must be INR 2,800 crores and net flow is INR 780 crores. So INR 780 crore divided by INR 2,400 crores, that's the redemption.

Got it. Sir, my first question was broadly on the industry part. Sir, there's a lot of data which is coming out on SIP being closed. I just wanted to understand what trend are we observing at Prudent?

Shirish, you want to address?

Historically, we have been following the similar trend for the industry we have but with a better number. We have seen that some kind of terminations have increased in last...

Sorry, sir, your volume -- your voice is not clear, I'm unable to listen to you.

Yes. I think there is some network issue where I am right now. Hello? Hello? Hello?

No, sir. The voice is still breaking.

So what he's trying to say is that at the end of the day, we are also part of the industry. So overall, within the industry, our discontinuation rate will be much, much lower than the industry. But overall, if you look at the new SIP to the discontinuation rate, it has definitely gone up. So if I'm bringing 1 SIP, I think the closure is about -- or other way around, I can tell you that if there is 1 discontinuation, we bring in 2 SIPs. That number will be better in the previous quarters.

Okay. Got it. So broadly, from this part itself, are we able to understand, going ahead, your run machine, which is adding the more and more MFDs, will have to grow at a much higher pace, so that closing of the SIPs, et cetera, should be taken care of. So this 5,000 number of annual addition, can we see an upgrade on that number considering SIP closure, et cetera, have started to inch up in the last few months?

See, in spite of there being a closure, as we discussed about that, we grew our SIPs by almost 29% year-on-year, which itself is a very, very healthy growth rate. And we believe that the -- if you look at a couple of slides, the people who have joined our platform in the last 2 years, there are almost 50,000 distributors that joined our platform. So definitely, if you look at the key parameters of our growth drivers, adding more and more mutual fund distributors is a part of our growth drivers and bringing more and more SIPs from them. So there is no dispute about that. But I believe -- so this is the cyclicality of the business. So you can't say that because 3 months has gone, some amount of redemption came in, so there will be a change in the trend. I believe the SIP book is going to be very, very healthy in the next 3 to 5 years. And my personal view is that the industry is mobilizing INR 13,000 crores a month. You'll see that number growing to INR 25,000 crores in next 3 to 4 years. So I think the growth rate will be very, very healthy. Within that, some amount of hiccup would come. But definitely, we'll continue to focus on adding more and more distributors and educating and encouraging them to do a maximum business through SIP, which is a very, very -- that's a significant growth driver for us.

Sir, one follow-up on this. Sir, broadly, you said today we have X number of MFDs with us. So out of which how many would be active? And the number of MFDs, which you would have added in the last 1 year, say, 1 year before, say, in FY '22, say 9 months FY '23, how many of those would be active with us?

So basically, if I give you that number...

So out the 100 we add, almost 60% to 70% of them become active users. Our active definition may vary every time. So for us, I think, how we track our numbers, how many unique distributors have participated in particular month? So on an average, if you see, depending on the month, our number varies between 40% to 50%. That means if today we have got hypothetically 25,000 distributors and 10,000 distributors actually have contributed new business in this particular month, that is 40% distributors are active in this particular month. So practically, this number, on the long-term average, if we see, I think, ranges between 40% to 50%. So this 25,000 number becoming 35,000 number, obviously, our number of distributors participating in the business in any month will increase. But otherwise, unique -- how many of the new recruits we are able to active, I think I would say around 60% to 70% of the recruitment becomes active.

So considering this trend, say, from a long-term perspective, from a 2- to 3-year perspective, can I say our retentions can actually increase considering we have tiered payout policy where the smaller contributor would be shared less among? So for the 2 to 3 years, is there a scope for improving the retention ratios?

So retention ratios are good today also. So definitely, with added product as and when more and more distributors starts distributing multiple products with us, automatically, retention ratio improves. Second, I would say that, as you said, the tiered structure, obviously, the person becomes bigger share of the revenue also increases. For there also the retention ratio increases. So yes, I think you can say that with increased engagement with Prudent with our distributor, the retention ratio improves.

[Operator Instructions] The next question is from the line of Saptarshee Chatterjee from Centrum Portfolio Management Service.

My question is again on the MFDs side that if you see quarter-on-quarter, there has been some reduction in MFDs. Can you please throw some light in terms of which bucket we are seeing attrition? What is -- what explains this attrition? Because I would have expected that MFD number should have been growing every quarter.

Yes. Shirish address that but before, I'll just tell you one thing that in last quarter, some 928 ARN holders number would have been reduced mainly because they have not renewed their ARN with AMFI. And normally, after the deadline, let's say, 31st March was the deadline, and we give them 6 months time for them to renew their ARN. So after September, about 928 to 930 people has been terminated from the system. And they will, again, be reactivated once they renew the ARN. So that could be one reason. Otherwise, we added about 3,400 people in this 9 months. So that is -- if you look at only number to number, you might see lower addition. Otherwise, we are in 3,500. Now Shirish can take it further. Shirish?

Yes. So on the incremental side, definitely, our market share in terms of new recruit is much, much higher. So when I initially said that currently around 20% of the ARN holders are registered with Prudent. But every month or every year, the new addition to the industry, I think that share definitely will be much, much higher. Two reasons for us. I would say that we actively go out in the industry or the market, I would say. We convince people to start the career in the mutual fund distribution. So those who are currently not in the industry, we convince them and we get them into our fold. So that is the reason that. Because of that, our ratio is better. Second is the existing mutual funds distributors who are already dealing in the AMC directly. That is also overmarket with [indiscernible] tell them about our offering. And obviously, because of our offering and everything, they also join us. So how many new ARN holders, the industry would recruit I think fairly speaking, we do not look at that number, you always try to set our numbers and we follow that numbers in terms of addition. We respect you whether the industry would be negative or positive. On this parameter, we always believe that we would be positive. We'll keep on adding the new ARN holders in the Prudent equity to just give you the one potential numbers, I would say, currently in the mutual fund industry, hardly 1.1 lakh, 1.2 lakh ARN holders are there, wherein in the insurance industry, 23 lakh agents are there. So I think if you simply look at those who are selling insurance products at least even 50% of those guys start selling mutual funds, then obviously, I think the potential market could be around 5 lakh, 10 lakh distributor. Even AMFI has also set a huge number focusing MFD Karein Shuru campaign. So we also believe that because of this AMFI's initiative of new MFDs recruitment, I think we'll be one of the biggest beneficiary of that as well. So again, coming to this point, whether the industry adds the number or reduces the number. I think we are very, very sure that our distributor number will keep on increasing every month.

Understood. And secondly, in terms of our state-wise distribution, if you can give some exposure towards which are the like top 3, 4 states for us? And what would be their distribution in the area?

Maharashtra is the #1 contributor for us and followed by Gujarat. If we add only these 2 particular states, our market share would be around 70% -- around 70%, 72%. So these are the 2 main contributors. The main reason because we originated from this side that Gujarat we originated and Maharashtra was the second state wherein we expanded. And that is where I think we would like to highlight the potential about this particular business. Many of the states, we have just opened. I would say, I think, before a few months only we expanded our footprint in those states. So yes, 70% of our market share comes from Gujarat and Maharashtra, followed by north and the south still, I think we are growing.

Sir, 70% of the AUM links you are seeing coming from Maharashtra and Gujarat, right?

Yes.

Okay. And thirdly, last question is basically, if you can give some understanding in terms of your customer base or your mutual fund distributor base if you can give some number of data points in terms of traffic in your digital platforms, like the policy platform or Fundzbazar? How or what percentage of clients are using your digital platform? What percentage of mutual fund distributors are using your digital sector for the [indiscernible] given. Sir, a bit of understanding on the usage of your digital platform?

So out of our mutual fund transaction -- 78% of our transactions are happening through the Fundzbazar that is on mutual fund platform. We have 2 platforms, one definitely for the mutual fund transaction from the customer's point of view and second for the distributor, we have their separate login. I would say that more than 90% of our distributors are using our digital platform. So obviously, I think that is where I would say the biggest USP of Prudent and that is where the association with Prudent continues. As we said that 78% of the transactions are on Fundzbazar, remaining 22% also, I would say that it will keep on growing. So the number every month, I would say that is inching up slowly and gradually. So adoption of technology specifically post-COVID has become very, very fast. Insurance side, yes, I think there are no dedicated portal wherein you can track or traject everything. Obviously, I think PolicyWorld is the platform wherein you can transact -- Yes. So PolicyWorld is the platform wherein you can transact the insurance product wherein we have not activated all set of insurance products. But there, yes, the execution happens on PolicyWorld. Chirag, If you can give the exact percentage number, I think to PolicyWorld if there would be better?

Yes. Percentage of total online transactions would be around -- if you look at the number of policies, it would be around 25% of the total. So main reason are the 2 -- main 2 reasons are that we keep on adding integration with various companies. Also at the moment, lots of health insurance companies is undergoing the version change. So even if clients want to do their online business, they have to go through insurer portal. But currently, you can say 25% [indiscernible] are being sold through our portal.

Understood. This is very helpful. Just one last question if I can squeeze in. Your AMC count has come down from [indiscernible] to 42. What would be the reason for that?

Merger of AMC. L&T has got merged with HSBC, that is one of the reason, quick merger was a reason.

Next question is from the line of [ Shubham Bhatia ] from Shubham Investments.

First of all congratulations on the benchmark of INR 56,000 crores of AUM. And my question was regarding the mutual fund distributors, which we're [indiscernible]. So what percentage of that will be new distributor [indiscernible] with AMFI as compared to the distributors, which are transferring the existing program?

Shirish? I haven't understood the question exactly. You wanted to say that if there is a growth in AUM, what -- how much is the growth because of acquiring or somebody's joining the Prudent platform, what is the organic growth of regular business in the beginning -- that's the question?

Yes. In terms of mutual fund distributor, so how many is already distributing [indiscernible] Prudent as compared to new standards with our first-time distributors?

Unable to understand the question.

I did not understood the question...

Hello, Shubham. Can you hear me? May I request you to speak through the handset please?

Am I audible now?

Yes, better.

Yes. So let's say, see in panel and mutual fund distributor, and let's say if you have panel 10 mutual fund distributors, out of them, how many were already distributing mutual funds but have not in panel with Prudent and have transferred their AUM versus how many people are the first time mutual fund distributors whose first time distribution is through Prudent? So if you could clarify on that number?

Yes. So if we are adding around 5,000 distributors hypothetically in this financial year, I would say that, that mix would be almost 50-50. So 50% of the distributors we will be adding for the first time to the industry and 50% maybe from the existing distributors, either they are active or inactive in the industry. Second point, you said that when the ARN holders get merged with Prudent, they transfer the AUM. Hardly any of them transfer the AUM. A majority of them do the business with the merger become very, very rare. So they start doing new business, but not the merger. If you are saying that when they come from the industry, automatically, the AUM Prudent would increase -- the Prudent AUM doesn't increase because they start contributing new business, they don't transfer the existing AUM to begin with.

Okay. Got it. And the next question was we have 2 portions, 2 verticals, 1 for real estate and 1 for loans as well. But I haven't seen any robust contribution to the total revenue. So are we aggressive on those verticals? Or how are we planning to increase those verticals?

Basically, both these products are very, very limited to a few branches. The property right now, we are doing only into Mumbai and Hyderabad. The revenue contribution of this business is really very, very minuscule. Loans, we actually are trying to establish the business. I think, last 1 years, 1.5 years, we started creating this Creditbasket portal. We are just experimenting on the beta version only in the Mumbai market to begin with. I think once we believe that now we can take it forward to other cities, obviously, we will take it. But currently, I think there is no substantial plan to make it big on an immediate basis.

[Operator Instructions] Next question is from the line of Dipanjan Ghosh from Citi.

Just 2 questions. First is on your insurance business. If you can share what proportion of policies have a renewal revenue attached to it? The second question from my side is with this industry, with the distribution industry and the mutual fund side gradually consolidating and you mentioned that your market share in incremental IFAs additions or net addition for the industry, it's higher than 20%. So more from a medium- to long-term perspective, how does the negotiation with the AMCs really swing? Is the balance shifting towards larger distributors as a whole? Those are my 2 questions.

So talking about yield and negotiations with incrementally more and more distributors joining Prudent, I don't see there is a great scope available with the AMCs to offer more. So I would say on the mutual fund side, the current yield, what we are enjoying or the current percentage sharing of the [indiscernible] what we are enjoying probably we believe that we see that a peak. So I don't see that any major improvement or any improvement on the yield side. So that is the yield. Your first question, actually I missed your first question, if you can repeat, please?

The first question is on your [indiscernible] business, what proportion of book or incremental policies has a renewal revenue? I mean, I understand that health insurance in some of the segments will have a renewal revenue attached to it. So what proportion of the book has the renewal revenue attached to it? And in that case, is the renewal pass-through to your POSP agent decided upfront? Or is it renewed on a yearly or, I mean, on a frequency basis?

Yes. So our average revenue contribution between health and life, if you consider this year, almost 30% of our revenue comes from the health and 70% of the revenue comes from life. Both the products have got the renewal. But yes, as you said, that health product would have a higher renewal sharing -- renewal margin compared to the life insurance business. Our persistence is very, very high in the -- compared to the industry standard. As you asked, I think do we actually share the renewal also to the POSP? Yes, we do share the renewal portion also to the POSP. There are 2 orders in the industry, which we have seen that many of the brokers only share higher upfront and no renewal. I think we have tried to purposefully keep the reasonable sharing on the first year as well as on the renewal side. Because we believe that if we keep on sharing the renewal to the POSPs, their intention or their consistency in bringing the renewal would be much, much higher and that is visible in our persistency. To give the answer, yes, we do share the revenue on the renewal as well.

Sure. So my question was more on -- so let's say, on health, retail health product, let's say it comes in for the next 20, 25 years. So the renewal commission paid through -- I mean, pass-through between the manufacturer to Prudent and then to the MFD, is that decided today at the time of policy origination? Or is it decided, let's say, every year as and when the rates are renegotiated with the manufacturer also?

Majority of the component is pre-decided, some part of the component is also dependent on the year-to-year negotiation, but the majority of the health insurance [indiscernible].

Next question is from the line of [indiscernible] Capital.

Congratulations for good set of numbers.

Sorry to interrupt you. Can I request you to speak through the handset?

Yes. Sure. Am I audible now?

Sir, there's a lot of echo from the background.

Hello? Now is it fine?

We can hear you, sir, but there's a lot of echo from the background.

Okay, is it better now?

[Operator Instructions] Next question is from the line of [indiscernible] from HDFC Securities.

Am I audible?

Yes, sir, you are.

So firstly, so what is the risk of our IFAs moving to some of the larger distributors like [indiscernible] of the world, given that they are offering higher commissions. So what drives the stickiness of the IFAs to Prudent? That is one. And so I mean, I do understand that the existing IFAs maybe somehow will stick to Prudent but what is the additional incentive for the new IFA to come to a Prudent and not to go to [indiscernible] maybe? Yes, that is the first question.

So both are good platforms. So obviously, for a new distributor, I'm sure I think both of us will be picking in and almost similar kind of number would be going to the [indiscernible] platform. The biggest point I would say what we offer is the multiproduct to compare to our competition our product basket is better. Second point, I would say that the kind of technology offering and what kind of features, what we offer to our distributors, we believe that currently, our features and the technology superior to our competition. In terms of footprint, commission sharing and everything, almost we are similar. So obviously, we both always try to complete in terms of adding more and more features, more and more product, making our process is simpler and better trying to provide the best of the services. So yes, I think we do approach of all the distributors. I think many of them would be joining us. Many of them will be running our competition. So yes, but I think competition also equally good.

Right I mean, so product -- expanding your product basket is something which an...

As I said, product basket and the technology, I think these 2 points, I believe that I think we are superior to them, footprint and everything. Now it's almost at par. I think before 3 years, yes, you can say that their footprint was much, much higher than Prudent's footprint. But last 3 years after our expansion, what we did every year, number of branches, number of sales, manpower. As of now, on these 2 parameters, almost we are similar. One parameter, we still they are bigger in terms of number of MFDs working with them because they came in the industry before, I think, 7, 8 years before than us in terms of B2B business because of that advantage number of distributors currently dealing are little higher than Prudent. But there on that parameter also we are catching up very, very fast.

Right. And on Slide 27, where we have shared your SIP book -- SIP flow breakup, can you also give us the vintage of these books across each cohorts -- across customer reach cohorts? And what percentage of your...

I think on the -- if you look at Page #27, I think on the age also, we have given you that -- so you see also the period otherwise age wise we have said that is about [indiscernible] for SIP is about, say, 30% of the SIPs coming from those who are in the age bracket of 25 to 35. And that is something that -- if you look at AUM, larger AUM is with people who are above 45 years of an age. So if you look at the total AUM, about 33% and more is with people who are above 45 years. And the SIP book is more with those who are in the age bracket of 25 to 35. So new money is coming from those who are going to invest for a long period of time. Otherwise, the bulk of the assets with those who are closer to the withdrawal stage or the retirement age.

Right. So of this 2 age cohorts 45 to 60 and more than 60. I mean what proportion of these SIPs and equity do you foresee that will lapse or get insured in the next maybe 5 -- 2 to 5 years?

So I can tell you if you look at the SIP today, more than 50% of our SIP book is perpetual in nature. And when there is a defined maturity given for the SIP, I think the average age itself is about 12 to 13 years. So I think the stoppage of SIP before the maturity is something which is very difficult for you to predict. But I believe there is a significant amount of continuity, which we can foresee. I don't see major reason for abruptly large number of SIP being closed.

What I'm trying to understand is that if you're -- if the customer is already at the age of 65, I mean the max, you can contribute to your book is until maybe until he turns 70 or 75 tops, right? Beyond that, he will not be continuing with his SIPs. So from that point, I'm trying to understand, given the 55% of our book is coming from customers who are more than 45 years of age. So in the next 2 to 5 years, what proportion of this book do you anticipate will?

Yes, Shirish. So I just wanted to say that you can probably cover. So I'm just saying you the number of live SIP above 45 is about 30%. And those who are about 60 years is only 6.5%. Number of lives -- forget about the amount, what is important in the number of SIPs, right? So number of SIPs of those who are above 60% -- 60 years is about 6% of my book. So if you assume 20 lakh SIPs, there are 1 lakh SIPs of more than 60 years old people, which may or may not continue for more than 5, 6 years, probably. Otherwise, all the SIP can be an average age of about 7 to 10 years, you can easily assume that as my understanding. Because now SIP comes with a lot of comfort, and that's a base of investing. So we do not see any abrupt changing, abrupt changes in the investor behavior. Shirish, you can just cover it.

At the same point, you already covered. I think those who are a part of 60 years, their contribution to our SIP book is 8.75%. Even if you assume that after certain age, once this income is not there, if they stop renewing the SIP or they don't continue the SIP, the maximum [indiscernible] what you can look at 8.75% of our SIP book.

[Operator Instructions] The next question is from the line of [indiscernible] from Envision Capital.

Have you seen any increase in investor interest for debt or fixed income products? Can that mix change going forward?

Shirish?

Incrementally, yes, I think the behavior of investors on the debt side, I would say, is a volatile. When they see the returns on the debt side, they might come -- sometimes they exit because of the bad experience like 2017, 2018. I think ours is a pure retail distribution model, wherein many of the clients are saving by way of SIP. And then when they do SIPs, mainly it is on equity but they believe in the wealth creation. Even if you look at the breakup of the industry on the debt side, majority of the investors are non-individual or other, I would say, institutional. And within individual also, the share of HNI or the ultra HNIs is much, much higher on the total debt segment. The retail investors, which is the network [indiscernible] what the average AUM is INR 3 lakh, INR 4 lakh, INR 5 lakh [indiscernible] on the debt side is very, very minimum on the industry side also because they believe there are so many other options that are available. If you exclude the tax arbitrage, I think that one thing which definitely rates the mutual fund would attract, retail investors are not looking at tax arbitrage in a big way and that is where we believe that share of Prudent on the debt side might not become that significant. But I would say, last 3, 4 years, many of the clients were looking at the stable returns and not the volatility of the equity. The new category, I would say that the balance advantage category or the dynamic equity category. That is becoming popular. I would say that is somewhere in between of debt and equity. And we try to replace the debt component with this kind of category -- the equity saving category or the balance advantage category. So you can say and that is where you would have seen that this category has got the maximum flows in last 3, 4 years. Incrementally also, we believe that retail investors might go to these categories rather than the debt category. Yes, I think that might remain as a short-term investment part in mechanism, but for the investment purpose still they will go to the best category on the debt component.

Okay. And my second question is just on growth in SIP book to INR 478 crores. I think sometime back, maybe a year back, the average ticket has to invest was maybe INR 2,600, INR 2,700. So this growth in SIP book happening by currently for this quarter, it's maybe around INR 3,200. Is it happened by increase in ticket size? Or we also like large customer count is also increasing at the [indiscernible].

It's a great question. I would say both ways. I would say, last 6, 7 months, there is a conscious efforts to increase the ticket size for -- from the investor. Now before a few years the sales speech used to be, I think you should have the SIP. Last, I would say that 6, 7, 8 months, we changed the tone, we changed the sales language that you should have a different amount of SIP. So there was a phase wherein we need to go to the customer and commence them to start the SIP. And after, I think, 5, 6 years of good experience. Now I think rightfully, we can go and ask them to increase the SIP value. So I think people need to start the SIP for any amount. Now I think there is a good trend of starting the SIPs for being some kind of gold planning or something. So that is where we are seeing the improvement in the average ticket size as well, and that still we believe that it's a conscious effort at the industry side as well. And at Prudent side, also we are focusing on that. And in addition to that, yes, I think because of the new addition of the -- new addition of the clients as well.

[Operator Instructions] The next question is from the line of Arpit Shah from Stallion Asset.

Hello? Hello?

Yes.

Just I missed your net sales number guidance for FY '23. Hello?

Yes, Arpit. Go ahead.

I missed your net sales guidance for FY '23? And what is the number that you're targeting for FY '24 for net sales?

It's a difficult question because I think if you have heard any of our regular communication. Historically, we have been saying that in the long run, our observation is that our net sales are in line with our SIP. Depending on the market sentiment, there could be plus or minus some year, it will be higher than the SIP sales. And for a few years, that could be lower than the SIP sales. But if I take the 10-year average, it is in line of our actually gross SIP sales, plus/minus few percentages. If I look at this year, YTD, we have done almost INR 3,400 crores, INR 3,500 crores of net sales. Our current run rate is around INR 300 crore, INR 350, INR 400 crore because last 2, 3 months, we have seen there is a drop in the net sales. So as of now, I think you can assume around INR 300 crores. If this kind of sentiment continue, INR 300 crore is the current run rate roughly. So you can see around INR 4,300 crore, INR 4,400 crore kind of number. assuming there is some market corrects and some kind of people coming back related redemption, this number can improve and that can reach to our guidance number at the beginning of the year was around INR 5,000 crores. Next year also, since we have added the SIP book and obviously will continue the long term or the medium term net sales number could be in the range of around our sales book. So in my SIP book is hypothetically INR 500 crores, then you can assume that net sales could be around INR 6000 crores. But as I said, in the short term, it varies and that so many other parameters like sentiments in the market retail also play a very, very important thing.

Got it. And any data where you might have gained market share in SIP book?

So I would say 2 good parameters. I think this again, a derived number based on the industry number. I would say that historically, every year, we are trying to -- or rather I would say we are gaining the market on the net sales side also. So that means our redemptions are lesser than the industry if you compare last year, net sales ratio in the industry or the net sales market share and this is also net sales market on our number has been good. Similarly, on the SIP side also, on the book side. When we look at the book side, if our market share is growing, that is nothing but the indirect way of saying that our redemption ratio are less compared to the industry. So on the net book side, also, we are growing our market industry.

The next question is from the line of [indiscernible] Capital.

Am I audible?

Yes.

Yes. I noticed that in your cash flow from operations has been quite strong for the last 3 years, and you have a very strong balance sheet. And you mentioned that around 70% of your AUM comes from Maharashtra and Gujarat, where you're very dominant. So I wanted to know if you have any plans for any acquisitions to expand your presence beyond these 2 states in the coming years?

So I think if you look at today, we have 121 branches and as Shirish said that even though our significant market share comes from Gujarat and Maharashtra. Currently, we cover almost 21 states and entire length and base of the country has been covered by physical footprint. So probably, we believe that what Shirish was also trying to say that today, in spite of we having the full scale business in the country, 70% business comes from these 2 states. That means there is a huge potential for us to get the business from rest of the country in which we believe gradually, there is a strong amount of traction, acceptance also, and people are joining also the platform, so the growth will come from those places also.

Okay. I just had one more question. I wanted to know if since your balance sheet is so strong, if you had any plans in the coming years to return cash to shareholders, what your dividend policy was for the next 2 to 3 years, if you have any plans for that?

So the significant cash, which was generated by us has been fully utilized by us for acquiring the Karvy last year. I think we continue to believe that industry will see some amount of strong consolidation. And we will go to preserve this case at least for the next 1.5, 2 years. And would go to scout further opportunity and something will definitely come on the way. If you are unable to utilize significantly this cash in next 2, 3 years, then definitely we'll define -- we'll go to the board for [indiscernible] dividend policy or something like that.

Thank you very much. I now hand the conference over to the management for closing comments.

Thank you very much. I think we would be able to address all the questions. If you have any query, you can definitely reach out to Mr. Parth who is handling our Investor Relations or otherwise, can reach out [indiscernible] also, they can -- they would be [indiscernible] all the queries. Thank you.

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