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

Ladies and gentlemen, good day, and welcome to the Prudent Corporate Advisory Q3 FY '24 Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Swarnabha Mukherjee from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

To give a brief update on the 3Q FY '24 results and address investor questions, we have with us from the management of Prudent Corporate Advisory Services Limited Mr. Sanjay Shah, Chairman and Managing Director; Mr. Shirish Patel, CEO and Whole-Time Director; Mr. Chirag Shah, Whole-Time Director; Mr. Chirag Kothari, CFO; and Mr. Parth Parekh from Investor Relations. Now we would request the management to start with the opening comments, post which we can open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Swarnabha, and let me welcome all of you to this -- our Q3 FY '24 earnings call. I thank you all for sparing your valuable time to join us today. I hope you all have got the access to investor presentation, which has been already uploaded by us on the exchanges. And while I'll be discussing about the -- our numbers, I will be giving reference to various slides. So before having -- move to company's results, let me take you to Slide 19. So that's the slide which deals with overall asset management business and how we view this year currently. And December has been really a historic month for the entire asset management industry. So we cross INR 50 lakh crores of AUM, where equity and ETF/FOF contribution is almost 69% total AUM, so it's very, very heartening. It's a big landmark with total unique investors has crossed 4.21 crores in December 2023. And industry have added almost 54 lakh new investor in the last 12 months. Against that, Prudent has also added roughly about 215,000 new investors and which represent our market share in retail, which is roughly about 4%. So I think, I thought that's very important milestone about the industry, and I congratulate entire industry, regulators, all the participants for the significant efforts which they have put in for bringing the industry to this level. Now let me take you to the regular business slides. So please move to Slide 44. Yes. So if you look at this slide, we have given the details of our closing AUM as well as quarterly average AUM. So we began this fiscal that is April 2023 with an opening AUM of INR 56,200 crores. And we ended December with a closing AUM of INR 77,800 crores. It's an addition of about INR 21,500 crores of AUM in first 9 months, which is almost 38.4%. And as you are aware that market has given a significant broad base really in this last 12 months. So mark-to-market growth has been very, very robust in this entire growth. If you see the chart on the right-hand side, our quarterly average AUM, which is the average of daily, has grown by 30% on a year-on-year basis and 8% quarter-on-quarter basis to almost INR 72,000 crores. On stand-alone operations, we are starting January 2024 with a very good tailwind. As you see on the chart on the left-hand side, closing AUM as on 31st December is almost 8% higher compared to our quarterly average AUM of December quarter. So we have started fourth quarter with a very good tailwind on the mutual fund front. So now please move to Slide #45. If you look at this slide, we have provided the details of what has moved our equity AUM on a year-on-year and quarter-on-quarter basis. So as seen in the left-hand chart, equity AUM has moved by almost 42% Y-o-Y to around INR 74,450 crores, wherein almost 3/4 of our movement has been contributed by mark-to-market gain. Even on a sequential basis, if you look at, our equity AUM has moved almost by 14%, wherein 10.8% is contributed by a mark-to-market gain. So this strong momentum of Q2 in the net sales has also contributed in December quarter. We did net sales of about INR 1,795 crores in the quarter, while the same number for Q1 was about INR 682 crores and Q2 was about INR 1,400 crores. So all in all, for 9 months, we did a net sales of almost about INR 3,886 crores in the equity funds. Now please move to Slide #46. So this is a slide which provides the details of our market share in overall equity AUM and the SIP data. Our market share in equity AUM ex ETF has improved from 2.5% in December '22 to 2.52% in December '23. On the bottom left, we have given the data on monthly SIP flows as well as our market share in the SIPs. So during the quarter, our monthly SIP book has crossed 6 billion mark, INR 600 crores. And our monthly SIP flow as of December end has touched close to INR 650 crores. We have added INR 166 crores to our SIP book during last 12 months. So it's a growth of 34%. In the same period, industry SIP book has also moved significantly from INR 13,500 crores to INR 17,600 crores. So industry also grew at a very healthy pace of 30% when against it, we grew at 34%. The average value of new SIP in December was at INR 3,400, which is much, much better than our existing average SIP book, which suggests that the retail investors now are able to contribute more towards SIP and their input value per SIP is increasing, so which shows the confidence to the investment vehicle of SIP as a long-term value creation. Given our strong focus on SIP, we believe that by March '26, as we have been aiming for INR 1,00,000 crore of AUM. We also foresee that our SIP book will cross INR 1,000 crores by March '26. From this quarter, if you look at on the same slide at the bottom, we have given one line, which talks about STP value as on December 2023 stood at INR 79 crores, which is not included in the above number. This numbers are as reported, and it is on the actual realization basis. So I think I wanted to highlight that from this quarter, we have started providing our systematic transfer route numbers. In the month of December, we collected INR 79 crores through systematic transfer route. And this number is reported by us on the actual realizing basis. As we are able to collect and properly formalize the data, we'll start providing you with more and more granular numbers in the STP book. But if you look at, I think, a couple of AMCs do provide the data of SIP/STP combined. And on that ground, if you look at our SIP book was INR 650 crores. My STP book was about INR 80 crores. So that both put together also gives you a very healthy recurring money, which can move from -- which can move to what you call the equity as an asset class. So I think we believe STP is a good data point and gradually we'll start providing you with more and more granular numbers. So I think this is more or less about the KPIs. Now I'll take you through the financial numbers. So when I start talking about the financials, please move to Slide 49, which is the last slide of my presentation. This talks about the stand-alone, our mutual fund distribution vertical and the flagship company on corporate financials. So as stated in the last quarter's call that revenue growth has not kept pace with the quarterly average AUM mainly on back of SEBIs decision to keep the B30 incentives in abeyance from March 1, 2023. So if you look at revenue from operation of our mutual fund distribution business, has grown by 25% year-on-year basis, lower than our quarterly average AUM growth of 30%. So in FY '23, our yield, I'm balancing FY '23 as the previous year, our yield on overall book through this B30 commission was around 8 basis points, roughly about INR 40 crores from B30 cities, while our total income from mutual fund distribution was INR 501 crores in last year. So if we remove these B30 additional incentives, our yield was about 82 -- 87 to 88 basis points in FY '23. In this quarter also, ex of B30 incentives, our yield has remained stable. But 8 basis point yield on B30 incentive in FY '23 has now dropped to 2 basis points in this quarter. If the impact of B30 would not have been there, our revenue would have been higher by almost INR 11 crores in this quarter, leading to an additional growth of 7%. So if you combine current growth of 25% plus 7%, I think the growth would outpace our average AUM of about 30%. So this explains reason for lower revenue growth compared to an average AUM growth. This 2 basis point of B30 additional incentive, which we have on in this quarter, will be very, very marginal in the last quarter and it will completely go away from March 2024 onwards. So in FY '25, assuming everything constant, our yield should ideally move towards 87, 88 basis point kind of a range. So this is the prime reason behind the lag you see between the revenue and the average AUM growth. Our operating profit grew by 21.3% year-on-year basis. As stated in second quarter call also, we have started providing for the higher cost for our flagship Prudent Loyalty Coin Program in FY '23. And that is the reason it has been reflected higher in the operating expenses and the higher operating expense. However, if you look at on a -- you might see a higher cost on year-on-year basis. On quarter-on-quarter basis now, last quarter also has a significantly higher base. So quarter-on-quarter basis growth is not there significantly higher. Our stand-alone profit after tax grew by 32% Y-o-Y basis, led by higher other income as our treasury book is now growing in size and treasury book is now close to INR 200 crores. So despite challenges coming from B30 additional incentives and changing AUM mix toward indirect, leading to a higher commission payout ratio, we are extremely happy to report that in the first 9 months of our fiscal, our profit after tax grew at a healthy pace of 34%. Now please come to Slide #48, which talks about our consolidated numbers. So let me address about the insurance business on the general insurance front, which is predominantly a health business, and that is also a retail health business for us. It is picking up really very well. And our fresh premium in first 9 months for the current fiscal is growing by a healthy pace of 35%. On the GI front, our total book has crossed INR 116 crores, which will give us a very good renewal premium for a long period of time. In case of Life, one of our main product we sell on the Life is nonparticipating saving product. Given the bumper sell we had in Q4 of last year due to taxes and change, we are witnessing a consolidation in this business, and we have maintained the strengths in the beginning of this year that the FY '24 is going to be a consolidation as far as our business in the Life side is concerned. Also post regulatory changes on the AUM front, life insurance industry is still trying to adjust and absorb these changes. On account of this, fresh premium in first 9 months of current year fiscal is lower by 17%. This drop is significantly -- this drop will be now again seen significantly in fourth quarter on account of higher base. However, the base of insurance will be normalized in FY '24, and we expect to move forward on our growth trajectory from FY '25 onwards. Our strategy to become a multiproduct distributor is well reflected in the numbers with revenue from other products and the mutual fund is growing at a healthy pace on a Y-o-Y basis. During the quarter, growth in non-mutual product was almost 85% on a year-on-year basis. And mix-wise, non-MF revenues accounting for almost 21% of our overall consolidated commission and the fee income. Our consolidated revenue is up 33% year-on-year basis. Other expenses also on a consolidated level are very high, mainly as we explained you in the previous quarter is because of our spend on marketing, branding and awareness for the insurance as a vertical. So consequently, our consolidated profit has grown at 25% year-on-year basis. So lastly, when I conclude my opening remarks, we are getting very closer to hit our INR 1,00,000 crore AUM by March '26, as targeted, and we have touched INR 80,000 crores of AUM during this month. The ability of mutual funds to deliver inflation between returns is well understood by retail, and this product will eat into the share of bank deposits gradually, but very, very slowly. There are about 4.21 crore unique investors in the mutual fund industry, and this number is expected to grow by leaps and bounds in the face of Amrit Kaal, wherein per capita income is also likely to grow by almost 10% in the next 25 years. So we are aptly placed in this growing industry, and we are sure we'll be able to reap the benefit in years to come. Thank you very much. I'll just open the floor for the question and answer now.

[Operator Instructions] The first question is from the line of Rohan Mandora from Equirus Securities.

Congrats on the good set numbers. Sir, on the MF yields, like you explained, there was an impact of B30. But if you look at it on a Q-on-Q basis, there's still an improvement from 91.3 to 91.9. So I just want to understand the reasons for the same?

So Rohan, might be some -- because I think there is no specific reason for -- we were also trying to look at what is the reason for roughly about 0.5 basis point yield going up. It might be a normal only. I don't think there is any specific reasons for that. But we can assume that it will be in the range of 91.3 to 91.5 will be total yield you are talking about, right, with B30, right?

Yes, with B30.

Yes. So there's no specific reason for yield improvement of about 0.5 basis point.

Sure. Second, sir, if you look at the insurance business, other OpEx to revenues while every quarter, there's some volatility. But going into FY '25, so like if you look at 1Q it was 43%, 2Q was 49%, 3Q was 45%, other OpEx to revenues in insurance business. So going into FY '25, what kind of a normalized level should we expect in this OpEx line item given that you have been spending on marketing and other activities here?

So I think the -- you're talking about the operating expenditure as well as the brokerage payout combined, right? You are looking from that angle?

The other OpEx in the insurance business, the nonemployee expenses total.

Roughly, both combined should be in the range of about, I think, 65% -- 64%, 65%. So more or less I can see that, yes, I think roughly, you can say that nonemployee costs -- nonemployee, nonappreciation cost on the insurance vertical should gradually be in the range of 60% to 65%, probably or 64%, 65%.

So it will be higher than the current levels, that means? Because currently it's around 45% to 49% in the last 2 quarters, other OpEx by revenues on the insurance part?

Yes. So I think, ideally it should settle in the region of 64%, 65%.

Okay. Okay. Sure. And sir, thirdly, on Slide 29, where we are giving MFD productivity. If we were to look at from the new to MFD clients, is there any productivity difference in that case between less than INR 10 crore and greater than INR 10 crores MFD? Because I assume for greater than INR 10 crores, it could be that some of these new accounts or folios are getting opened from the existing clients and that's why the ticket size is higher. So just wanted to get some color around that.

Shirish, you want to address this?

MFD, when he joins -- when he starts in the industry, initially, majority of the business come's through SIP. The client acquisition also becomes with the smaller or the midsized clients. When he become bigger and bigger in the industry, he start getting the bigger reference, bigger clients and that is how his business grows. Even if you consider the average AUM, I think if you split the AUM and the business mix between the smaller MFDs versus the bigger MFDs, in terms of AUM, you always can say that the bigger MFDs might have a bigger share. But when you look at the SIP share, the smaller SIPs percentage share would be higher. So that reflects that the smaller SIPs are able to establish themselves with the newer relationship with the client, with the smaller ticket size with the SIP as a business. And as they become mature, more and more clients and more and more -- higher and higher amount comes with them. So I don't think that. I think the smaller MFDs productivity would be lesser than the bigger ones. But this is a normal trend and this is how the business happens in the industry.

Sure. And sir, lastly, with respect to FY '26, we were expecting roughly INR 1,00,000 crores worth of AUM, and we are already at INR 80,000 crores. So any revision in guidance there?

Basically, again, if you look at historically, what we are trying to say that our net sales is equal to the SIP sales. Now today, we are already at around INR 650 crores of SIP book. We are hoping to touch, let us say, I think, hopefully, we maybe around INR 700-odd crores kind of SIP book by March '24. So the way we see that our SIP gross sales would be the net sales of -- that way you can say around INR 7,000 crores, INR 8,000 crores by way of SIP sales and the remaining could be a mark-to-market. So historically, if you see, I think all the communication, we are trying to say that in the medium to long term, we assume that 10%, 12% kind of growth can come by way of SIP or net sales, and 10% to 12% kind of sales growth can come by mark-to-market. All depends on the mark-to-market from here to March '25. So that depends on the mark-to-market. But in terms of the numbers, I think what we believe that what we have delivered in the net sales, I think it is in line with our expectations for the beginning of the year.

The next question is from the line of Hardik Doshi from White Whale Partners.

Over the last 1 year or so, there has been a pretty sharp growth from a lot of these digital platforms, like Groww and even Angel One in terms of the SIP number of accounts and the flow that they're getting. Can you maybe talk a bit about the overlap between their target customer base and the customer base that we target? Because it sounds like they're also getting a lot of their flows from the smaller towns, smaller cities, not really urban phenomena, either. So how are you viewing them from a competitive threat perspective?

Shirish?

So if you see the growth of all these fintechs, definitely, they are growing faster than the industry in terms of new SIP sales. But having said that, if you see our market share in terms of SIP, still, we are -- either we are flat or I think still we are able to grow our market share though the overall pie head [indiscernible]. One thing which definitely we'd like to say that today, what we are seeing around 4.2 crores of unique investors in the industry and almost 50 plus lakh new investors coming into the industry, I would say that majority of these clients definitely would have been acquired -- new to industry clients would have been acquired by many of these fintechs. So one way, yes, you can say that in the long run, these kind of platforms may play as a competition to the platform companies like us. But at the same time, we strongly believe that the kind of new client acquisition work these fintechs are doing, it definitely is going to help the distributors or the companies like us. So that when -- because we as a sub-broker or B2B platform, we might not be able to reach to the smallest of the town with our business model. Obviously, the fintechs are able to reach to the smallest of the town. They will acquire the client. But we strongly believe that when there is some consolidation in the market, when the size of the client becomes a little bigger, obviously, they might make some kind of advisory and that time they might come back to us. So net-net, we strongly believe that the direct or the fintech platforms might grow or definitely will grow and the market share also might increase. But in the regular plan, we strongly believe that we still are in a position to maintain or grow our market share. So I don't think that admits competition towards us as of now that way.

Okay. Okay. Who do you think they are taking market share from then because we are maintaining our market share?

I don't think that they are taking market share. One, I would say that they are creating the market share. That is the first point I would like to say. Second is any distributor who is not bullish or rather I would say that who is not optimistic about this particular business and the direct client acquisition or the growth in the client acquisition is slowed down, probably you can say that they are eating into their clientele to a certain extent. And additionally, they are creating the newer clientele. So you can see in the industry who is growing and who is not growing. You can assume from that perspective that they are eating some market share from those who are not growing. And second, they are creating their own market.

Okay. Okay. And just related to that. I mean a lot of the sales they are doing are direct plan. So that then kind of instill the culture of direct plans within the retail as well. And is that then a threat to our revenue model?

Sir, I think my belief, and I don't know, I think whether there is a study or not. But my strong belief is that 70%, 80% of the clients who are transacting through all these fintechs platform might not be aware about direct or the regular plan. They are going to these fintechs not to save the distribution costs, but they are going there because the -- all these fintechs have explained about the SIP concept and everything. Obviously, there are clients who know about the difference in the regular plan and the direct plan. But most important part is incrementally, the more and more clients will also understand the importance of distributor or an adviser. So obviously, you can say that from the cost perspective, there is some benefit while going to the direct platform. So at the same time, they don't get the advisory or the distribution same thing. There are studies which say that I think distributors can add the alpha. As and when the realization to all these, even the HNI clients also would come, who has already gone to the direct platforms, I believe many of them might come back.

The next question is from the line of Harsh Shah from HSBC Asset Management.

Congratulations to the team for a good set of numbers. Just firstly, circling back to the first participant's question on yield. When we were in last quarter, that is Q2 of FY '24. At that time, we had said that we will again take around 2 to 3 basis points hit per quarter till Q4. And we showed on a gross commission, we should settle somewhere around 87, 88 basis points. So on that 87, 88 basis points, we have reported around almost close to...

Sorry to interrupt you, your voice is quite disturbing.

Yes. So versus the 87, 88 basis points, we are at 92 basis point close now. So can you just help us bridge the gap between the earlier guided 87, 88 basis points on a constant basis minus B30 to now around 91.9 basis points in this quarter. Is there a better -- is there a higher TER schemes where there was more flows in this quarter? Or is there some other reasons for that?

Harsh, I think, probably, if you look at 91 basis point yield, which you are talking about is inclusive of B30. So I think B30 would be roughly in the range of 2 to 2.5 basis points. If you take out the 2, 2.5 basis points, I think this quarter our yield is looking reasonably higher by about 0.5 basis point, not more than that. So let me just tell you, last year, our total yield was roughly about -- if you take out that 8 basis point of B30 FY '23, last year, [Foreign Language] our first 9 months if you look at. I think first 9 months, we are probably in the same range of 87, 88 basis points. Only thing is in last quarter of October, November, December, some 0.5 basis point extra yield is visible, could be because there are a couple of cases of KYC revalidation. [Foreign Language] there were serious efforts of people putting into revalidate the KYC because there were some deadline. [Foreign Language] some accumulated KYC money would have came but we are unable to identify that 0.5 basis point real impact. Coming to the real answer to your question, we assume next year, our yield should be in the range of 88 basis points, you can say. FY '25, [Foreign Language] when your B30 would be totally out, our yield should settle in the range of 87, 88 or 89. Roughly in the range of 88, probably you can say.

So let's assume 88 basis points for calculation purpose. And on commission expense outgo basis, we are constant at around 63 basis points. So this quarter, we put a net commission of 29 basis points. Should it go down to 25 basis points?

So first of all, expenses should be 62 basis points. Net of 62%. Because then the B30 costs will also be out, right? So you can look at 62% on a consol basis, which is inclusive of direct and indirect mix. So 62% [Foreign Language] if I'm earning INR 100, INR 62 is the brokerage cost. So you can say 88 basis points [Foreign Language].

Correct. So that is around 55 basis points. So 33 should be our net commission?

You're right. You're right, yes.

Which is right now at 29 basis points this quarter. Is it correct?

[Foreign Language]. I think Parth can take you through separately on the entire this part. Because when I'm talking about the 62% is the payout on the consolidated basis, including direct and regular. So I think that number is steady.

Correct. Okay. Let me take this off-line then. The second question I had, you explained nicely in terms of your expenditure going forward also. But from a revenue perspective, how big is the scope for the insurance product considering Q4 of last year was heavy for you at INR 35 crores of revenue because of high one-off sale of non-par high ticket size. Entering this Q4 of FY '24, you think you can do a better Q4 FY '24 versus Q4 of FY '23?

So Q4 of last year versus this year, definitely, because there was a one-off revenue, if you look at last March itself, was about INR 98 crores, INR 100 crores. So I don't think it's going to be repeated. But what we are trying to say that whatever is going to be the dip in the insurance in the current year, versus last year is going to settle the trend. And then you'll be into a growth trajectory. I think I'll just share because -- Shirish, can give you more idea what is our target for the current quarter, what we are projecting. Shirish, if you want to enter this -- address this.

Comparing straight away last year's Q4 versus this year's Q4, definitely, there would be a huge dip in terms of the premium. Last year, whatever we had collected almost INR 190 crores of premium. Out of this almost INR 100 crores was collected in the last quarter. You can say that more that 50% was collected in the last quarter of the financial year which is not going to be the case in quarter that is this quarter. So one, of course, I think because of the taxation changes, there was a huge pool in the insurance premium. Second, I would say that there was some kind of preponement of the purchase also. So that is the reason last quarter of the last financial year was a bumper year. If you currently look at our premium collection in the life insurance business in Q3 '24, it was almost around INR 30 crores. Obviously, if you compare our growth in this financial year, quarter-on-quarter, we are growing. Obviously, historically, as we see that Q4 number, ideally is better than the previous year's -- previous quarter's number, that will surely, it will grow compared to the -- this quarter. But if you are comparing last year's Q4, it would be drastically down compared to the last year.

Understood. Just last question before I join back in the queue. From a M&A perspective, right now, any mind share which areas should the company focus? And are there good targets right now evaluated at a fair value? Or are they coming very expensive?

I think we haven't reached to that valuation stage still in any of the cases, but we have been definitely exploring regularly, but nothing is getting materialized because unable to identify something which is very, very close to our DNA, Harsh. But we are open. We are definitely open and regularly we have been trying to explore.

The next question is from the line of Srinath from Bellwether Capital.

Sir, one quick question. So if you see this quarter mark-to-market for all asset management companies have been very large. And many of the large schemes have kind of moved to a different TER bucket. How does this impact us from a payout perspective or from a revenue perspective, both in new SIP and flows and back book, which was originated, say, 18 months to 2 years back.

So if you look at -- as far as back book is concerned or the current book is concerned, which is already built up with the margin which we have stated, we did not -- so probably there is one important message that with the increasing size, my book, which is already collected by us, is not going to have any impact. [Foreign Language] yield which you are looking at, right? 87, 88 basis point, which you're talking about, it's something which is fixed. Incrementally because particular schemes AUM has increased and now they are going to, let's say, we are charging 5 basis points less as an expense ratio on the TER front. If they're paying me also less by 2, 3 basis points, then my payout will also get adjusted. Say, for example, if my earning is 100 basis points, my payout is 62%. If my earning is 90 basis points, my payout is also only 62%. So I think that's why we are trying to talk about the payout in the percentage terms, 2 important message. Book is not going to be repriced. It's a static, and that is very solid clarity of revenue, which you can always keep in mind. Incrementally, whatever new business which we book would be definitely at a newer rate.

The next question is from the line of Pallavi Deshpande from Sameeksha Capital.

Just wanted to understand on the insurance side of the business, the take rate has increased to 22% this quarter from 20%. And this is -- I just wanted to understand what would be the -- I'm just looking at quarter-on-quarter, the increase, 20% in the previous. What would be the sustainable number going ahead and what's driving this increase?

So Pallavi, I think the insurance is still going through the adjustment process in the full year. And that's the reason, if you remember, last time, we said in the call that we are providing for revenue in our books of accounts only when there is a clear visibility and on the basis of confirmation. So in the current quarter, you have seen that there is some improvement in the yield. It might be because some amount of confirmation might have came from the insurance company and there could have been the spillover of revenue of previous quarters. And that's the reason our yield has improved from 20 to 22 basis points, right? I think come FY '25, from, I think, April, May, June of '24, we'll see a very clear visibility on the margins. And then only I think I'll be able to communicate what is going to be the real margin. Because by that time, the entire insurance company board will approve everything, which is going to be a part of system, and regularly we'll start getting that reflected.

And sir, second question would be on this marketing expense, which was INR 8 crores in the previous quarter for insurance. How much would that be this quarter?

So I think this quarter, I think that cost is roughly about INR 9.5 crores.

The next question is from the line of Viraj Sanghavi from Banyan Tree Advisors.

So can you go to Slide #10 in the presentation, wherein you have given the AUM for investors to be around INR 4.8 lakhs, right? And when you go to Slide 35 again, you see a table wherein we have the last column, AUM per investor, wherein none of the range -- age ranges we will see an amount of more than INR 4.8 lakhs. So I just wanted to see how those 2 match, datas get married?

So I think the -- I think this is a very important observation. Number one, the bifurcation, which we have provided is for the total AUM. And I think you will be just capturing the mark-to-market gain, which has -- came from March 2023 to now. That could be the reason. But -- so you are saying that my average AUM per investor is INR 4.2 lakhs. Here, none of the number is showing INR 4.2 lakhs?

Yes, correct.

So, I think we need to go through that, yes, it's a very important observation. Yes, I think -- sorry, I need to go through that, and probably there is some error in the data, we'll try and rectify, but I think Parth will definitely come back to you on this. You can probably talk to Parth directly, and I think probably we might provide the additional information in probably 1 week time.

Sure. And sir, like your financial from FY '21 to '23, the margins have improved quite much. And most of this is contribution from the employee cost. So going ahead how does the line item of employee costs move like? Won't we need more IFAs to onboard -- won't we need more employees to onboard more IFAs?

There's lot of echo, probably, I'm not unable to [Foreign Language].

Okay. One second. Is my voice better now?

Yes, sir.

Yes. So what I'm saying is we have seen quite a lot of operating leverage in the business, and most of it -- this is contributed from the employee cost since last 2, 3 years. So I just wanted to know will this -- like what are -- how the line item of employee cost will move going ahead?

So if you look at overall in this business, I think the -- it's a business where a lot of back-office cost is thereby way of employees. If you look at probably the non-sales functions and the IT, customer care, FundzBazar team, compliance, operations, research, I don't think this number is going to grow significantly. And that's the reason in last 2, 3 years, what has happened that volume has grown significantly while the employee cost has not commensurately increased in the same way. However, the people who are facing the advisers or the IFAs or the branch expansion, I think that cost might continue to grow. So overall, you are right, I think the growth in employees would not be in line with growth of the top line. That's also I assume. However, in the lean period that again start outpacing because I assume that if the top line is continuously going to grow at 20%, 22%, then definitely, employee cost will be the biggest beneficiary as far as your operating leverage is concerned.

Got it. And if you see your pure mutual fund yields, so they have improved a little bit. So I was like one of the reason to my mind that comes is the equity mix has improved in your mix. So that will be the sole reason?

So that could be possible. You are right, that could be the reason. But -- so the equity yield -- in the -- so there's -- the improvement is visible between quarter-on-quarter. So Q2 to Q3, there is improvement about 0.5 basis points, and then the mix has not changed significantly. So that could be one of the reasons on a Y-o-Y basis, but not on quarter-on-quarter basis. So I think this 0.5 basis point is something which I think we try to look at, but we are unable to get any concrete reason for that.

Okay. And with the Karvy and iFAST assets, so those are getting rebranded to Prudent name, right? So like how -- do we have a track of that? Like how much of that AUM has been rebranded?

So I think there are 2 parts to this. One is the assets, which is below -- let's say, for example, in case of iFAST and Karvy, a lot of business was coming through the mutual fund distributors who were empanelled with them. Once they became mutual fund distributors with Prudent and once we have transferred that asset to their code, they are merged with the organizations in direct business, so which is not tracked. Then independently, that IFA is tracked. The Karvy business is not tracked. So that is number one. Number 2 is wherever the -- I think, the iFAST business are fully distributed. Nothing has been left out. In case of Karvy, still, there are about 3,000 -- roughly about INR 4,000 crores of the asset, which has been given as a lead to IFA, but it is still not mapped to anybody, that number we are tracking. And that number is not growing -- not -- I think roughly, I can say that in last 12 months, we would have -- we grew that business by about 10% against the market wise growth about 30%. So overall, [Foreign Language]. But that asset is still not addressed by anybody.

Got it. Got it. And last question. So this other expense that has gone up, that is because of 2 reasons, right? One is increasing marketing expense in the insurance vertical and the other is the Prudent loyalty program. So can you provide a split of the 2, like how much has been invested? I think marketing [indiscernible] for the quarter..

So marketing expenditure is significantly higher. But on the Prudent corporate balance sheet, the Prudent loyalty program expenditure last year was roughly about INR 6 crores. We are assuming that costs would be in the range of INR 12 crore in the current year. So there is additional cost of INR 6 crores on the balance sheet of Prudent Corporate. Marketing expenditures, as I explained, is roughly about INR 9.9 crores in this quarter, which is emanating from the insurance, that is the additional cost.

Okay. So you said INR 12 crores for the whole year, right, for the loyalty program cost expense?

Yes, yes, which is under Prudent Corporate. In case of insurance vertical also, there is a Prudent Loyalty Coin Program cost. So that is separate because there I don't see huge escalation.

The next question is from the line of [ Lakshminarayanan from Tunga Investments ].

Sir, that total distributable TER, how much players like you [ that cannot bid ]?

Sorry, I think still...

No, there is this thing called the total distributable TER, right, which the mutual funds have for every scheme. So on a blended basis, how much of the [indiscernible] of any mutual fund you actually take and how that number has actually changed in the last 3, 4 years? Has it moved up or down?

Shirish?

You already know that our blended yield is around 91 basis points. On a distributable TER, every schemes, every AMC distributable TER is available in the industry. So you can definitely consider what percentage on a book basis or the AUM basis we are getting. Giving any ballpark numbers specifically on a percentage receipt from any AMC was on a blended, I think probably every AMC would be having a different understanding with Prudent and various distributors. So definitely we would not be open on that particular front. But if you see the yield, as you said, how it has moved in the last 3, 4 years. One, definitely, I would say that in the industry, there were assets prior to 2018, '19, wherein the upfront regime was there and the trail was less. So obviously, whenever these money got churned and has come in the new region, that is I would say post 2019, overall the yield definitely has gone up on a book level. So last 3, 4 years, definitely, the yield on the book has inched up slowly and gradually, mainly, as I said, because the historical assets got churned with the new asset. But now onwards, I think we believe that now majority of the assets are post 2019. Improving the yield, as we said earlier also, there is some money available of the Karvy and iFAST, with a lower yield, there's a potential to reprice those assets. At the same time, with the increase in TER, there could be some downward revision in the yield on the new business not on the old business, [Foreign Language] we believe that the next few years, we will not be able to -- we'll not see the huge gap in the yield going up or going down, probably we will be able to maintain this kind of yield for next few years.

Got it. Sir, if you look at the total AUM, do you also do things like balance advantage fund, conservative hybrid fund? Or are you mostly focused on the equity, the pure equity growth oriented schemes?

So when we say equity, it is not only equity, it is equity and hybrid both put together. So out of our total equity AUM, almost 20% plus is contributed by the hybrid categories. So yes, we do sell balance advantage. We do sell conservative hybrid. And lately, if you see the industry is also selling the multi-asset that also we do sell aggressively.

Got it. Sir, for AUM, reflecting broadly the industry or are they skewed towards midcap or small cap? Because midcap and small cap has actually contributed to most of the flows. Do you think that as a risk? And how -- what is our mix? Because we give an overall mix. But in terms of midcap, small cap, how is it? Is it reflective of the industry or we are a little skewed towards a particular category of funds?

So basically, if you see, definitely, our mix is well diversified. I won't say that we are completely skewed towards mid and small cap on the AUM basis. But yes, you can say that incrementally, the new business in this financial year was a little skewed towards mid and small basis, and that is the trend in the industry. But when you look at the total AUM, it is not that much skewed, it is in line with the industry.

Got it. Sir, and third on the net sales. How are we doing from a market point of view, the net sales as a percentage of the net sales of the industry, are we increasing as a market share?

So basically, if I say, we -- my net sales market share is higher than the AUM market share. So that say that on a net sales basis, we are doing far better than the industry.

And one last question regarding your retention. So how much of -- as a percentage of the redemptions, and how much is our sales if you just look at it?

I couldn't understand your question. Can you please repeat it again?

If you look at our sales in the quarter and there is also people who were actually redeeming. Okay. So what is our retention ratio? How has that moved?

So basically, if you see our gross sales for the quarter and if you see the net sales for the quarter, gross sales again, gross sales includes the -- gross sales would be in 2 parts. One is the regular SIP part. And second is, I would say that is the additional lump sum purchase in what we do. If you roughly see the last quarter, you can say the retention ratio or the way it is almost 40%. If you look at the gross sales for the quarter in totality and what is my net sales, you can say almost 40% or around 40% is net sales.

And how is it trending, sir, over the last couple of -- last 3, 4 years? Are our retention ratio going up or directionally or...

I think there are multiple parameters. I think you can consider in this particular ratio. Obviously, I think market sentiment plays a very, very important role. But all said and in respective of the market conditions, you can say that my net sales ratio in all years, you can see historically, last 4, 5 years or more than that, my net sales market share is always higher than the AUM market share. So that says that irrespective of the market condition, Prudent has delivered better net sales for our market share compared to the AUM.

The next question is from the line of [ Sudhesh from Geojit Financial Services Limited ].

Regarding SIP book, and now we have INR 650 crores, what is the average SIP price per client?

So on a book basis, if you see my number of SIPs, and the current SIP book, average SIP value is around INR 2,800. But if you see the incremental SIPs, what we are doing in this financial year is almost INR 3,400. That way, you can see that incrementally my new SIP average is higher than the book.

So this is SIP ticket size?

Yes, ticket size, average SIP.

Yes. I just -- I want to know that -- what is your average SIP per client, whether it's available in our PPT or presentation?

Well, I'm not getting -- average?

SIP per client. For example, INR 650 crores, from how many clients?

We have got 20 lakhs SIPs roughly. I think, Sanjaybhai, if you can exactly -- but number of clients, I think, let me put it this way. We have got almost 16 lakh clients. Out of that, almost 50% client has got the SIPs, in a nutshell you can say that 8 lakh clients [indiscernible] of SIP.

8 lakhs clients. So...

So Sudesh, roughly about, live SIPs, you are right, roughly 50% of people have started SIP. So you can say that 24 lakh SIP coming from 8 lakh average SIP per customer would be about 3 and which is probably industry number is also. Industry number is also about 2.5 average SIP per investor.

Okay. My next question and last question. LI premium for the quarter is INR 30 crores and total commission is INR 29.8 crores. Whether we have any split of what is the commission from the fresh premium, fresh life insurance premium?

That number is not separately provided. I think we don't have that handy also, right? You are talking about the out of INR 29 crores, how much we earn by way of risk premium and how much it came by way of renewal, right?

Yes, correct.

Hello?

Yes, yes, same. I have the same question.

Yes. Yes, that number is not handily available. And there is some -- there are some provisioning also, which is on the overall book. So that's the reason. I think I've been just trying to maintain that, that in the current phase, bifurcating overall revenue required or the income required from the insurance company between 2 would be difficult also. But still, I think that exact number is not available.

Yes, because recently that change in the commission structure, whether this have any impact in the total commission?

Sorry. So you are saying in the current year, there is a change in the commission structure? And if you look at overall -- sorry, sir, I'm not able to hear you properly.

No. My question is whether any change in the commission structure of life insurance in recent quarter, the last quarter?

So can I comment, Sanjaybhai?

Yes, yes.

Basically, if you talk about both the insurances what we normally talk about health and life insurance. In health insurance, as such there's no change compared to what it was earlier and what it is now. When it comes to the life insurance, as we said in the last call also, there are certain clarities. I think many of the insurance companies had given somewhere, I think, in the second quarter. And obviously, certain payouts are linked to the various parameters now. If you look at the commission structure given by the life insurance or for the first year business, few of the percentage or few of the commissions are linked to certain parameters. As, Sanjaybhai said that, we came to -- and that I think one question was why the yield has gone up? So one reason definitely would say that when we qualify for certain parameters definitely, we become eligible for that commercial in this particular quarter based on the last quarter's business. So in this quarter, when we do the business, we are not sure that whether we are going to be eligible for this parameter or not. After the business is over, then and then only we'll be able to get the clarity about the exact commercial. So if you consider that way, yes, you can say that compared to the first quarter or the second quarter, this quarter's yield has gone up. But net-net, looking at our historical number, looking at the quality of the business, what we see, in the long run, we don't see there is a change in the commercial. But yes, compared to the first 2 quarters, you are seeing the change in this quarter, mainly because we became eligible based on those parameters and which insurance companies will communicate after the quarter is over. I hope I think this addresses your question.

[Operator Instructions] The next question is from the line of [ Gaurav Nigam from Tunga Investments ].

Sir, just one question on the insurance business. Can you explain how do we sell this insurance? And where are the -- and what is the -- like as you explained, right, 62% of the commission received goes in the mutual fund business. How is that economic takes place in insurance business?

Shirish?

Basically, if you see the insurance business is the mix of 3 parts. One is, of course, the POS business, second is our in-house team and third is the online business. When we talk about the average payout to our POS, yes, you can say that, that is in line, the sharing ratio is almost similar like mutual funds. But yes, I think that varies because that varies based on the mix of the product, what we sell. Now every quarter, you will see that the product mix in the life insurance business would change in certain product mix because we have to be aligned with the market reality, in certain product mix, the margin would be higher, certain product mix margin would be lower. We'll not be able to generalize that like mutual funds, you can say that 62% is my cost, we'll not be able to generalize for that particular number. But yes, [Foreign Language], you can say that we are aligned to that number when we decide our pricing strategy.

Understood. Sorry, sir, I could not hear, you said there are 3 channels. One is own employees, second is online and third one is POS. Is that correct?

Yes. So incrementally, POS is becoming bigger and bigger. So yes, currently, it's 3 channels.

Okay. Can you just broadly tell which one is the dominant channel like out of the 3?

Historically, POS was the smaller one. Incrementally, POS is becoming stronger and stronger. And we visualize that POS will become very, very strong. As you see our number of POS, I think last year, it was around 6,500. Currently, we are more than 10,000. One, so number of POS are -- registered POS are increasing. And second is, more and more POS are becoming productive with us. We strongly believe that over a period of time, POS contribution, will become bigger and bigger. That we overtake the remaining 2 channel.

Understood. So in case of nonPOS channels, there is no cost. It is absorbed in the employee costs. Is that the way to understand?

Yes, you can say that. Perfect.

Yes. One more question. Sir, on the P&L. Consol P&L, we have one revenue line item called interest income. What is that, sir?

So interest income mainly comes from specifically, it is linked to a broking business because you have many deposits which is lying with the exchanges and the DPC income, which comes from the delayed payment charges is provided into interest income.

Okay. Understood, sir. And sir, just last question, the SEBI started this campaign for mutual fund distributor creation. What is the status of that? And any progress has happened on that front?

So I think MFD Shuru Karein campaign is already there, right, because we have been spending in between, it was stopped probably. Shirish, if you have any idea on that?

Yes. Definitely, I think at AMFI level, they had a goal of I think around 5 lakh MFDs for the distribution community and keeping that thing in mind. And we had started this campaign, MFD Karein Shuru. Yes, I think there is a big focus at AMFI level or the SEBI C level to increase the gift of this particular business or the number of MFDs. Still, we are continuing the campaign. If you see the outcome, I think over that, you might not see the response to this kind of campaign. But one good thing I would say about these -- all these campaigns because they are targeting mutuals fund distribution as a good profession. I think they are trying to give the respect to this particular profession. We surely believe that in the medium to long term, we will be able to see the results out of that. But immediately, if you see, has it increase the number of distributors in the industry? I would say no. But yes, I think, incrementally, it will become better and better.

The next question is from the line of Pallavi Deshpande from Sameeksha Capital.

Just wanted to understand on the POS, how much of -- what will be the contribution to the insurance business as of now?

So, Pallavi, lion business -- lion's share comes from POS. And you need to understand ours is a pure, pure B2B business. So technically, significant business comes from them. And then we also have our in-house team who does the business. But exact percentage will not be available with me currently. But the POS is a lion contributor in our total business.

As there are no further questions, I now hand the conference over to the management for closing comments.

Thank you very much for listening to us patiently. And if you still have any query, which could not be answered, I think management as well as Parth Parekh, who handle our Investor Relations, would be readily available to address any query. Thank you.

On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.