Ladies and gentlemen, good day. Welcome to the Computer Age Management Services Q3 9M FY23 Conference Call organized by Orient Capital. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star zero on your touchtone phone. Please note that this conference is being recorded. We request all the participants to kindly refer to the safe harbor statement in the earnings presentation. I now hand the conference over to Mr. Anuj Kumar, Managing Director, CAMS. Thank you. Over to you, sir.
Hi, good morning, everyone, and thank you, Michelle. I hope all of you are able to hear me clearly. I appreciate all of you taking the time out to join our earnings call. As you may have seen in the results, we've had a satisfying quarter, and I have a number of things to share with you, significantly in terms of operating highlights. As we continue to work in a business environment, which had a set of challenges to deal with, I think the overall outlook for the quarter in terms of business results has been very satisfactory. I will run you through a structured presentation. Starting off just in terms of our mutual fund business. You would have seen that we announced two new wins, two new logo wins.
These are always an important part of our overall endeavor to maintain share and relevance in the marketplace. Helios Capital, which is entering the mutual fund market through a new license, has chosen to join the CAMS platform. This decision came in the month of November. Navi Mutual Fund, which was an existing mutual fund, but under a new management, after a takeover of an existing fund, has also chosen to select CAMS as their provider. That's the good news on the new logo win on the mutual fund side. Overall, on the core business metrics, our AUM scaled a lifetime high of INR 27.8 trillion, just short of INR 28 lakh crore.
This came on the back of what I would call steady growth in equity AUM, which is of course, the most relevant, best priced and profitable part of our business mix. That grew 6.1% quarter-on-quarter. We will speak a lot more about mutual fund business as we move along. On the alternatives business, we saw another very strong quarter. We grew revenue and sales over 20% during the quarter. Our digital onboarding platform, which is CAMS WealthServ, continued to see sustained interest and a slew of wins in the marketplace. It has now crossed, as of end of December, over 60 sign-ups, and we continue to see a lot of interest and momentum in the marketplace as we broaden our sales effort and outreach.
On the e-insurance side, where all of you have been following the media and following the announcements, regulatory announcements in terms of Demat regime coming up and a mandatory KYC requirement for all kinds of insurance. I would like to call out two things. While that topic is progressing, and we all continue to watch specific regulatory announcements, what we saw happen in the quarter was that in anticipation of a regime of compulsory Demat, consumers voluntarily chose to join up this regime. You will see. Although all of this is on a small base, and we normally don't call out very stark comparison numbers, but this is a stark comparison number. Our e-insurance accounts, the new ones, at close to 5 lakh almost doubled quarter-on-quarter.
Similarly, our e-policies during the quarter crossedI NR 5 lakh, and this also almost doubled quarter-on-quarter. Q3 over Q2 was a significant growth, all on a small base of course, but a very, very positive consumer-driven outcome in terms of consumers watching an announcement and then aligning their own behavior to take advantage of the very convenient regime that is about to come into the world of insurance. On the CAMS FinServ side, which is our account aggregator business, I think we continue to report positive news in terms of going live with several FIPs and FIUs and continuing to win business.
One of the things on the highlights I would like to call out is that CAMS has now pioneered the usage of account aggregator data for bank account validation as you know. Any format of paid payment across industries, whether it is insurance, mutual fund, MPFCs, banks. So far, INR 1 drop on a penny drop through IMPS has been considered a very convenient tool. This is the first time we are trying out account aggregator data to validate bank accounts. It's a nice beginning. It's the first experiment or usage of this use case, and we will continue to share with you as we scale this. We've also been the first one to go live on the account aggregator platform with Titun data as an MPFCRA, as an FIP.
Insurance companies, as you know, have started integration with the AA ecosystem. The mutual funds are beginning. That, as the story completes, will herald an era of almost all kinds of financial services sectoral entities joining the account aggregator platform. On the overall innovation and technology side, again, very strong quarter. Two highlights that I'll share with you, which you perhaps read about on our website and other media news. One is that CAMS won the Cloud Innovator of the Year award from NASSCOM. This was particularly in reference to our putting out a fully on cloud NPS CRA platform. Like we've said to you in the past, we were the first ones, and this has been acknowledged quite well by a very large industry body like NASSCOM.
Just deepening the trend of technology-led innovation, technology-led experimentation, tinkering, whatever word you want to use. We've gone live now with our FinTech Innovation Lab with IIT Madras. As you know, amongst the IITs, too, for all of you who've been tracking, IIT Madras has perhaps got a place of pride in terms of, you know, doing industry collaborations and generally having interfaces which are very, very strong with industry.
As part of our overall CSR initiative, we've gone live with this lab, and we will have interesting things to report as we move forward and engage the brightest brains in the country, both from the faculty side, students and other participants in bringing out services, conveniences, utilities, and perhaps products which will start influencing the lives of people that we want to influence. On the NPS side, we continue to retain the number two position, and you know that it is still not one year since we launched. Just short of 10%, so 9.2% market share. What's also happened is that we are now seeing subscriber addition not just through eNPS, which is something that I just spoke about.
Our POP retail linkages where a point of presence has retail traffic on their website and then, and that traffic starts registering with CAMS CRA. That process began sometime in December. We are seeing a build out of volumes. The consumer side continues to remain over 90%. Quite happy with the progress in all of these new initiatives that we've been sharing with you all through 2022. I know a lot of you have been curious about when they become, I would say heavy in terms of subscriber interest, B2B interest and ultimately revenues. Moving on, just in terms of growth in overall AUM, which you know is basic core operating metric on which everything hinges in our industry.
Despite the times that we are living in, where you know that there have been a set of macroeconomic factors all through FY22, nothing much changed in the quarter we're talking about. We've lived through those challenges. Also we've lived through an interest rate regime that continues to scale interest rates to almost levels which are not very precedented in the recent past. Given that backdrop, it has not been very easy. I think, our overall AUM growth has been satisfactory. We're now reporting a lifetime high of INR 27.8 trillion. Like I said, this has largely been riding on a smart equity AUM growth both year-on-year and quarter-on-quarter.
If you see the numbers, you'll see almost an 18% + year-over-year and 6% growth number over the past quarter. Equity AUM at the end of the quarter was just shy of INR 13 lakh crore at INR 12.9 lakh crore. I think the significant metric is, and I know all of you are watching inflows. Our equity net inflow share has gone to 63.7%. Of course, we continue to watch this closely as this number builds out. I think basic bedrock this is building itself on is the monthly SIP collections, and I'll just come to that. I think overall at the foundational level, despite what we are seeing structurally, I would say these are very positive trends to look at.
Similarly, on new SIP registrations, you know that, a large part or a, or a notable part of the industry participation now commences with SIPs. A number of INR 37 lakh and INR 37 lakh plus has actually grown a little, from first quarter to second half, second to third, INR 37 lakh to almost INR 38.3 lakh. I think that holding number growing about 2% every quarter, has been a very good tool at about INR 38.3 lakh, that is the new SIP registrations. Net of attritions, et c, new, live SIPs grew over INR 12 lakh. All right. So apologies, team. Maybe there was a blip in the line. I will just commence back where I'd left.
We were talking about SIP registrations holding between first, second and third quarters at a number above INR 37 lakh, growing about 2% from Q1 - Q2 and Q2 - Q3. Net of attritions and net of falloffs, live SIPs grew by about INR 12 lakh in the October to December period. I think a very strong, steady metric is INR 7,800 crore per month of SIP collections during the quarter. This, as you've seen in our case, has continued to go up. Obviously, there are no certainties, but continues to go up by an average of INR 150-INR 200 crore a month. I think that's almost formed the bedrock of equity net sales in the industry. This number grew by almost 6%, slightly ahead of industry growth. Transaction volumes grew.
You can see in the chart, again, a good measure of customer engagement. I think when you see new fund offerings, and we're gonna talk about two segments of new fund offerings. In equities, we had a 70% share of collections. In debt, we had an 86% share. The two categories which really matter. I think, both from a new fund offering and SIP collection and share of equity net and flow, those have been very steady metrics, leading to where the AUM has been. I think, like I said, given the backdrop of the times, it's all holding move forward. We spoke about the new initiatives. On MF Central, I think, the trend of consumer participation and consumer satisfaction, that line is holding very steady.
The apps have now crossed a daily login of 10,000. Of course, this number, our aspiration is to scale it significantly several X times where it is. At 10,000, it shows a good, you know, a good index of consumer participation. When you see in terms of other value, which is not just consumers coming to the app, but consumers going to any other app or website and being able to access this information, MF Central has now got live APIs, absolutely live APIs, where you can pick up your combined account statement. This includes all your mutual fund data, and all means all. It gets you live API-based data from the depositories.
Only the MF data, by the way, not the stock data, but that comes in both through your ETF holdings and MF holdings, and of course, everything that is in the RTA records, the first of its kind. As that goes live and as we continue to scale it, there is more happening on the financial information, financial transaction side and the non-commercial transaction side where we are making distributor-based APIs live now. That will then broad-base the usage of this utility to direct consumers, to consumers who come to the app and website directly, and to all consumers who may be using any other partner app or website but will be using the data CaaS and then the transactable, the transactability through the financial transaction and non-financial transaction APIs.
In terms of market share, 68.3% market share, like we said, largely riding on a 6% quarter-on-quarter growth in SIP collections, 23%+ year-on-year. Overall AUM at INR 27.8 trillion grew 4.3% year-on-year, 2.9% quarter-on-quarter. Similarly, equity AUM, as you would have seen, continue to grow well, 18.8% year-on-year, 6.1% quarter-on-quarter. Other metrics, you've seen the transaction volumes. The SIP book has grown 20% annually. Like I said, very strong foundational metric. The SIP book stands at very close to INR 3.4 crore, so 44 million. We processed 97+ million SIP transactions. Live consumer folios, investor folios are close to INR 5.6 crore now, grew 13% year-on-year.
Unique investor service are a little over twenty-four and a half billion, so about INR 2.45 crore, again grew 14% year-on-year. On the alternatives business, like I spoke when we were talking about the headlines, the AIF business grew 20% year-on-year in the third quarter. Almost 17 new AIF and PMS mandates won, so more than one per week during the quarter, just holding up the trend that we have faced or that we have experienced in the, across, almost the entire year, calendar 2022. 60 funds have signed up for AIF and PMS digital onboarding with CAMS WealthServ. On Fintuple, we continue to make inroads with large ticket wins from marquee clients.
On the Gift City, we are now scaling operations, and we are present in the Gift City operating with seven signed-up clients. On the account aggregator, overall total 55 account aggregator and TSP wins, large, medium, small, all kinds, 20 in the third quarter. I spoke about the customer account verification that CAMS is pioneering across the industry through account aggregator data. We plan to scale this and make it a lot more popular. We've been to all the major metros, engaging with consumers, B2B connects of all kinds, in terms of holding events to popularize the AA concept across various use cases, including wealth management. Overall, over 18 banks and one life insurance company are live as financial information provider.
On the pension side, like we said, we are the first to go live on the account aggregator platform with pension data. The IRDAI entities are now initiating their integration journey. High volume cash flow-based lending use cases using GST data, are now beginning to become popular. We are building out capabilities and utilities to take all of that to market. On the CRA side, you would have seen, the various numbers that we put out. I think the significant thing is, over a 9% share in eNPS, continuing to hold the number two position in the industry. Commenced our entire journey on POP retail customer acquisition, so have taken our seven POPs live and are beginning to get traffic from them, starting in the month of December.
I think from an innovation and transformation perspective, industry first features of CAMS CRA using CKYC data to onboard customers and then UPI based bank account verification. These are things which are being noticed by the industry, including the regulatory circles, and are actually being recommended to our peers for them to implement, just like CAMS has implemented. On the CAMSPay side, just from a product and markets perspective, UPI AutoPay features are live with seven clients, very popular, including for mutual fund purchases. We've gone live with Insta SIP, where a same-day SIP can be started by making a one-time investment and then setting up an auto pay kind of mechanism for the same day.
Similarly, we've continued to scale various business features, including Insta eNACH and giving out a business app to our B2B consumers for merchants and their customers to experience a completely frictionless journey in their dealings with CAMSPay. Next. On the CAMSRep side, we had spoken about two things in the last quarter. One is KYC to become mandatory for purchase of any kind of insurance. That has now gone live, and we are working with partners and clients in order to be a large participant in that space. I think from a numbers perspective, from a consuming numbers perspective, I'd spoken about a 2x growth from 2x - 3x in the number of e-insurance accounts that were opened and in the number of e-policies promoted to those e-insurance accounts.
Like I said, start very nice growth numbers coming off a small base. A good measure of what consumers can do by themselves even before there is a regulatory framework as consumers open these accounts and pull their policies themselves. We now have over 4 million e-insurance accounts, 5 million+ policies. On our AI infused initiative to pay back unclaimed insurance amounts to consumers, we are now doing this for several insurance companies, started with a base of INR 750 crore of unclaimed amounts, and then managed to spot the right claimants for about INR 135 crore in paying the money.
I think that product is now going quite well and will continue scaling in popularity because finding the claimants of unclaimed money is, I think, continues to remain a priority for insurance companies. It is a priority for all kinds of financial entities, just to make sure there is transparency with respect to this operation. That product feature has gone very well. I will pause here and then hand over to my colleague, Ram charan, to take you through our financial numbers, after which we'll be ready for Q&A.
Thank you, Anuj. I will take the next five minutes to go through the financial numbers for the quarter. The revenue for the quarter, we ended at INR 243.57 crore. This was up 2.5% year-on-year and 0.5% quarter-on-quarter. As you know, the component of the revenue, there are three components. One is the asset-based revenue, one is the non-asset-based revenue, and the non-MF revenue. During the quarter on a year-on-year basis for the same quarter, our AUM equity grew 4.3%. We ended the quarter with INR 27.83 lakh crore as opposed to we had INR 26.99 lakh crore in the same quarter last year. There was a 4.3% up on AUM.
The asset-based fee also tracked the same number. It was up 4.5% year-on-year, and we ended at INR 187.5 crores of asset-based revenue. The second component, the non-asset-based revenue, we saw a dip year-on-year, a sharp dip of 8.8%. This dip was mainly driven by the drop in transaction revenue during the quarter and lesser NFO revenue during the quarter. The earlier year, there were a lot of slew of launches that happened from an NFO perspective, and there was some amount of depletion from a miscellaneous application revenue. On a year-on-year basis, there was a sharp dip in the non-asset-based revenue, but the asset-based revenue tracked the growth in assets.
From a non-MF revenue on a year-on-year basis, we grew 4.2%, driven again, Anuj was mentioning about the smart growth that we are seeing in the alternate space, the AIF space. Driven largely by the traction we are seeing on the alternate investment fund sign-ups as well as revenue. We grew non-MF revenue by 4.2% year on year. There was some amount of increase because of higher transactions processed by our payment platform, CAMSPay. However, there was some decrease because of the KRA, new KRAs coming onto the system. KRA revenue was lesser than the earlier quarter. On an overall basis, the summary is that asset-based revenue year on year tracked the growth in assets at 4.5%.
The non-asset-based revenue grew, depleted in 8.8%, driven largely by transaction revenue, NFO revenue. The non-MF revenue increased year-over-year basis, 4.2%, driven by alternate investments and payment businesses. On a quarter-over-quarter basis, the revenue increase was 0.5%, out of which the asset-based revenue grew 1.4%. The assets growth during this period was around 2.9%. There was a reduction from the overall asset growth to asset fee growth into what we see in the current quarter, which leads to the question on yields, which I will touch upon later.
On a non-asset-based revenue, it was almost flat, just 1% quarter-on-quarter down, again, driven by a reduction in NFO transaction revenue that kind of largely drove the small reduction in the non-asset-based revenue quarter-on-quarter. The non-MF revenue did not grow. It actually de-grew by 3.9% quarter-on-quarter. This was largely driven by some reduction that we saw on the payments businesses during the quarter. However, we see some sort of increase in revenue that is coming to us from the payment business in the fourth quarter. Overall, the non-MF revenue did decrease by almost 4%, driven largely by reduction in the payments businesses and some amount of CRA business.
From a yield perspective, you know, we have already, we consistently have guided that, you know, given the telescopic pricing and the sometimes the price discussions that happens with the customers, there always there will be a lag between the asset growth and the asset fee growth. Our long-term, medium-term trend has been between 75%, around 75%-80% of the asset growth will translate as asset fee growth. Over the year and over the nine-month period, although we have seen stable yields, largely driven by the fact that although there has been some price depletion, this has been compensated by the favorable mix ratio that we got because the equity mix has recovered smartly. It is around 46.4% for the quarter.
Any price depletion that happens because of the reasons I mentioned has been largely compensated on a year-on-year as well as a nine-month basis by the mix. However, on a quarter-on-quarter basis, the equity component growth was less pronounced. you know, it was 45%-46% is the growth that we saw. As we had mentioned last time, this year has also been the year where there are 11-12 of our contracts of the 17 customers came up for renewal and due to various reasons, including COVID and various other reasons, they got bunched together in a single year for renewal. We're happy to say that all the contracts have been renewed, and overwhelmingly majority of those have been rolled over with no price increases.
one or two contracts which were long-term, which came up for renewal over five years, there is some amount of reduction that's happened. All these, together with the mix impact, is contributing to what you see as stable yields on a year-on-year basis. However, on a quarter-on-quarter basis, we have seen the yield drop by 0.03 basis points. That's the commentary on the yield I wanted to leave you with. We'll just move on to the profitability index and the matrices. As we had consistently guided, you know, what we are aiming for is the EBITDA margin of 40%+ . You know, we have seen over the course of the year, the EBITDA margin has kept inching up, right?
We had a first quarter EBITDA margin of 41.4%. The second quarter was 43.3%, the third quarter it inched up further to 44.5%. We ended the quarter with an EBITDA of INR 108.32 crores. On a year-on-year basis, this is actually up. It is down in terms of 4.4%. We have seen an increase in margin profile in the course of the year as we progress from one quarter to another.
We would like to remind you that this number also includes the entire expenses we are eating on the new initiatives, like the Account Aggregator, like the TSP business, like the MFCentral business that we are launching, and the increased expenses that we are incurring from an overall cloud perspective for various initiatives that we are running. The investments in the new business during the quarter has not been slowed down. They continue to be incurred in terms of technology, in terms of platforms, in terms of licenses. As we have consistently guided, we feel that the revenue from these operations would start yielding results from the first quarter of next year. Till then, this is an investment phase we continue to incur, and we have not slowed down the investments, for any reason in the last few quarters.
Given all those things, we feel that the margin is a credible number of 44.5% for the current quarter. The PBT for the quarter is INR 97.94 crores, that is 39.1%, and the PAT is INR 73.72 crores, which is 29.4%. Again, 2.2% up quarter-on-quarter, but 4% down year-on-year. We ended the quarter with a cash and cash equivalent of INR 479 crores of cash in our balance sheet in terms of liquid funds, deposits, and balances. The return of net worth was close to 40%. The board was pleased to declare an interim dividend of INR 10.5 per share in its board meeting yesterday, which has since been notified.
All in all, the quarter has been characterized by muted growth from a asset-based revenue perspective. Not much of a growth from a non-mutual fund perspective. However, due to the additional investments that we are continuing to do in the various initiatives that we have taken, including MF Central, account aggregator, TSP, CRA, et cetera, which we feel will bear fruit in the coming year, we were still able to maintain margins at a healthy 44%+ percentage. With this, I kind of hand over the call back to Michelle. You can open it up for questions.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah, hi.
The question I was asking that, I mean, the lion's share of our revenue remains tied up with the mutual fund, and the other revenue are picking up. Now, as, I mean, you are getting more clarity on the other revenue streams. Can we have sort of a, you know, the medium term of say, next financial year and the year after that some sort of a revenue mix or expectation, assuming that, I mean, the mutual fund sort of industry remains in an accelerated state growth. How this MF versus non-MF revenue mix is going to pan out? That's number one. Second, if you can help us understand, you know, eventually the revenue model, if there is any of MFCentral. These are my two questions. Thank you.
Sure. Let me take that. I think you've heard us say in the past that we want to diversify our revenue outside of mutual funds and scale it from our current levels of 10% to, let's say, 20% of company revenues. There are three or four businesses that we need to work on and scale, and they all have, I would say, significant promise. The alternatives business is to an extent delivering that promise right now because it is scaling beyond company growth rates and to an extent beyond mutual fund growth rates. That's a good trend to be at. Insurance, our expectation is, once this announcement gets implemented and if we see deepening of the trend that we've just shown you, Insurance Repository could be in that space for the next few years.
Account aggregator could go that way. Like we keep saying that it is still perhaps slightly early days. We are focused on these three businesses, to scale beyond company growth rates and produce a diversification. Anything else that we may do on the inorganic side should only add to the overall trend. Is adding many more new products going to be the answer? The answer is no. In terms of how much we can invest on go-to-market and product build, and how much can we consume the teams in these pursuits, I think we have the right balance. The payments business is also there, and the payments business has scaled, like, you know, 50% of the output comes from the mutual fund industry, the rest is diversified.
We think we have a fair mix of products, and we will continue sharing with you as the scale-up happens over this year and the coming years. It's our absolute focus to grow these alternative businesses or non-mutual fund businesses faster than company revenue growth rate. On MFCentral, you know that this is more constructed and designed like a consumer utility. We've been building it all through 2021 when we launched it towards the end of the year. We've nurtured it to the current size and shape all of 2022, and we'll continue scaling it. Of course, right now we are not expecting that revenues will even equal costs. They will not. That may take another four-five quarters, six quarters to happen.
Once we get to that point, I think it'll be a good point where it becomes a self-sustaining property, maybe at the end of this year. That is an aspiration. Is that going to be a completely profit-focused, revenue-focused entity? The answer is no. It's more built like a public utility to just add a significant layer of convenience for the mutual fund investors, I think philosophically, that's the way we continue to look at it.
Thank you.
Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi, everyone. Just a few questions. Firstly, could you know, throw some light on, you know, there's a lot of media talk again of, you know, SEBI kind of looking at relooking at the expenses of the TERs for the industry, and, you know, kind of talking about subsuming the brokerages and other element, GST element also into the TERs. Effectively the ease of for the AMCs will decline and possibly some part of it will be passed on to you. In the revision of the contract that you all have done, is there any clause wherein which, you know, kind of allows the AMCs to renegotiate immediately, say, the announcement comes say in the next three-six months?
Prayesh, you are right. There is this live topic, it has the components that you referred to, which means other components of the TER, what is outside the ceiling, there are way of components outside. There are some components like transaction charges and for certain kind of cities, if you get consumers from there are incentives. All of that is, you know, it's public news, is under examination. What will happen? Time will tell. We are watching it as closely as you are. Again, the only point I would like to underscore is that from a scope delivery perspective, we as RTAs have continued to expand our scope every year. We do more and more things, I think that's evident to the mutual fund industry that we are doing more and more things for them.
Is there any clause as a specific answer in our contracts that they can come and renegotiate, et cetera? Of course, there is nothing like that. We are watching the space. We will see what the outcome is, and if anybody wants to start a dialogue, obviously, we know that we have to defend our overall value position and we have to defend our charging, which we've done successfully in the past, as you're aware. To answer your question, there is no specific clause like that.
Okay, great. Coming to the second question is actually on the margins. You know, You're mentioning that, you know, in spite of the investments that you all are making in the new businesses, the margins are healthy at 44% and really commendable job for doing that. My question is more on from Q1 FY24, where, you know, possibly some of these businesses start scaling up. Do you think that you will gain, you'll start moving your EBITDA margins more towards, say, 46%-48% in that zone? Do you think that you would retain some part of that profitability and invest in some other businesses and maintain the EBITDA margins at the current levels? How should we start thinking about EBITDA margins for next year onwards?
Prayesh, I'll take that question. See, just as a quantification, I think you got the delta right, which is that, we spend almost 1.5%-2% per, you know, on the revenue in these new investments which currently do not have a significant top line or a material top line. See, the way we look at it is, and we will have to keep providing for the expenses from a wage inflation perspective, from a security perspective. Our software expenses, if you see the operating expenses for the current quarter, the bulk of the increase is because of the additional investments we are making on cloud, on platforms, on security, on various licenses, you know, cutting-edge technologies, on databases, tools, etc.
We do not see from our perspective that those investments would stop or decelerate in the next year. Yes, there will be welcome addition to the revenue in terms of the new initiatives. Again, the ramp-up would not be dramatic over one quarter. We expect that the ramp-up will be gradual over the next year. Having said that, from a margin perspective, I think we are comfortable with the margins and the guidance that we're giving on the close to 43%-44%. In fact, early forties will be a good margin for us to aspire for. We will continue to make the investments on people, technology, etc. While the revenue from the top line will continue or will kind of help us, the investments will not slow down.
I don't think we should expect that dramatic increase in the margin profile from next year. What it will do is free up more resources for us to keep investing in the other initiatives that we have in mind. The margins will continue to be a range amount, is our thinking.
Okay. Thanks for that. Another question is on the insurance repository business. Now, you spoke about the, you know, the settlement of claims which were not, you know, earlier settled, kind of, that you. Is that kind of an activity chargeable? My question is more broad-based as to what are the charges, what are the services that you are currently charging for and what are the incremental services that can come through? Currently, what is the size of the industry and what do you expect the industry size to be, say, you know, when the actually norms get implemented?
Okay. I'll again answer that question in two parts. One is, our insurance current revenue has got two parts. One is the outsourcing business, which is the labor business where we work on various customer systems, from a policy servicing perspective, from a persistency perspective. The focus and the growth will be on the second part which we are talking about, which is the insurance repository business. The repository, the current charging model is that, we get paid for a policy conversion, which is that a policy that's converted into Demat or electronic, we get paid by the insurance company. Secondly, we get paid an annual maintenance charge, which is for maintaining that policy in our electronic platform. Thirdly, we get paid for the transaction revenue.
The transaction revenue currently is limited in scope because, you know, the scope of the IR as it exists today is limited to maintaining the master data and the policies. The plan is actually very deep. We plan to do various things, and initiatives have already started and getting implemented. In terms of enriching the platform to be a policy servicing and a, and a insured servicing kind of a platform, where we are building in various facets, including like, you know, the statements, the surrender value computation in terms of other servicing requests, probably even claim processing. These are rich in transactions and policy servicing, which will kind of give us additional transaction revenue going forward. This is the enhancement that's happening as we speak, which will probably take a quarter or 2 for it to get fully into revenue.
This is our scope. In terms of IR specifically on policy conversion, I think all of us are aware of the numbers. In terms of the policies that are live and not Demat-ted, people are talking about a 45-50 crore policies that could potentially get Demat-ted, including those with LIC, if the regulation comes through. That's a big if. We don't know what shape and form the regulation will take place. It is going through its own in terms of discussion papers and notes and committees in terms of how this will pan out specifically. Readiness in terms of infrastructure, IRDAI is closely on the job and monitoring in all IRs, and we are also one of the committees which kind of goes through this. We'll have to wait for how it pans out.
If and when it comes, you know, in the course of the next year, we would expect that this will create a big market for policy conversion, as well as the platform that we are building for policy servicing. The one new development that's happened is from January 1st, the KYC has become mandatory. That we will start getting action on that in a quarter or 2 from now. Even the motor insurance policies would require a KYC, which were so long are not mandated. There a lot of happening in that system. We will take probably a quarter for all these things to settle down. Everything is tending towards a positive direction in terms of incremental revenue.
Paresh, I'll just add to this. Just think of it in two dimensions. One, think that when a mandatory Demat regime comes, the INR 2 crore or under INR 2 crore policies in Demat
Can scale to INR 50 crore. That's a significant multiple in terms of scaling of an industry. Will that go through a bit of price shapes, etc.? Any industry would. Net of price shapes, it will get a revenue scale of several x times. Could be 10x-20x. That's point number one. Point number two, just look at the way you deal with mutual funds versus the way you deal with insurance. You don't deal in the same way. Mutual funds have allowed you to. I mean, there are aggregator platforms, think of myCAMS or think of MFCentral, where you can do everything in one place irrespective of who has sold you the insurance and who has manufactured it. You can do things in one place. That format is right now not available.
The e-insurance account will herald that format. It's a significant consumer convenience which will lead to, I mean, large scale changes in consumer behaviors because consumers know, that behavior in other industries, why would they not use it here? The question to ask is, will all that become a commercial activity? Will it be paid for? Will it help revenue scale, etcetera? I think those are the two broad themes I'll encourage you to think about and, base your thought process on.
Great. Thank you so much for all the answers.
Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one now. We have the next question from the line of Sanketh Godha from Spark Capital. Please go ahead.
Yeah, thank you for the opportunity. Sir, again, the question is on insurance repository. In the mutual fund industry, if a MF chooses one RTA, it is the 100% business given to the final party business. Are you seeing the similar trend happening in the insurance space? For example, if HDFC Life or LIC has chosen to open all the insurance accounts or e-policies, whether it will be one insurance repository or they will socialize it or giving it to more insurance repository. Just wanted to know how it is going to play out.
Second, you touched upon the pricing, but just wanted to understand how the pricing according to you will change from the current level, whether you see a steep correction from current what you are charging or you will see a marginal correction, but it could be a meaningful number from the top end?
Hi, Sanket. I'll take this question. From our understanding and what is prevalent from a market perspective is that there is no monopoly or one insurance company going to one IR. Primary choice is with the insured person to kind of where he wants to link his account with. Bearing which, I think the insurance companies would kind of allocate it. What we are seeing is that we don't see many cases where they work only with one insurance repository. It is definitely more than one. We don't see this RTA kind of a one-on-one relationship from a insurance repository to a insurance company. It's more kind of more spread out among multiple EAAs.
The primary, you know, it could be the choice of the insured also to pick the IR provider to whom he wants his account settled. From a pricing perspective, we are now it's probably high single digits in terms of what we do for a policy conversion. It is only natural that, you know, for a given volume where we do 5-6 lakh policies in a quarter, do it with multiple crores, it's only been natural that we'll expect a sharp depletion in the policy cost. It will not be marginal as in 5% or something like that. We expect it to be sharp, especially given that, you know, we'll have to wait and see what happens to the biggest insurers, how they are going to join this market, what is going to be the architecture for them.
We would not be surprised if the decline is sharp, and it's not just marginal 5% here and there. That's our expectation. Having said that, what this number will be, it's entirely demand and supply dynamics and the who is gonna kind of opt for what IR accounts. That we have to wait and see. We don't know the exact indication for that. Probably a quarter or two from now when there is more regulatory certainty on this in terms of the shape of the guidelines. As you know, they are being upgraded from guidelines to a regulation perspective as that is aim of the IRDAI. All those things get published over the next three months.
We will have a greater clarity on what's going to happen. It's really natural to expect that there will be a rate depletion.
Got it. Just from the market share point of view in the Insurance Repository, today we enjoy around 35%-40% market share in the Insurance Repository. As you rightly said, it is 32% of the entire policies, dematerialized. We just wanted to understand that this number you expect to stay there even for the entire when it becomes for the entire universe or you think there could be a natural depletion in this market share in a bigger pie?
See, as you know, there are four providers as of now who are doing these services and, two, actually have similar market shares of 35% +. It is us plus one more provider.
Yes.
Of the four, one is not very active, at least until the last quarter.
Yeah.
One is kind of a lesser market player. Now, obviously our endeavor will be to retain and if possible, increase our market share on this and all our efforts are going towards that. If we are kind of diligent on that and do our work properly, we do not see why our market share should decrease. You know, obviously we're working to maintaining and increasing our market share. Yes, obviously it's going to be a hard fought market, so we need to kind of work towards that. I think all our attempts are being made to ensure that we either retain or increase our market share.
Got it. The last one, on the again, on the Insurance Repository. You actually rightly said that from first January, all the non-insurance policies or all the policies that KYC has been made mandatory. Just wanted to understand the trend, whether it is being outsourced to Insurance Repository or insurance companies, for promoter or a health are preferring to do it in-house, rather than outsourcing to you people. How is the trend today, and how do you think you will convince if it is in-house, how you think, you will convince the companies to go to move it out to Insurance Repository?
We have some value propositions. It could be tied up to your AA account opening, et cetera. There are some strategies that we have thought about. It's very, very early stages, Sanket. We are yet to see the trends emerging, especially at the time of maturity, this will actually pick up, right? It's just being introduced. We have a proposition from a eKYC perspective, KYC purposes, which we feel is very strong coupled with the AA account opening. We are going to the market with that. I think a quarter down the line, I'll be able to answer your question with exact details on what market is doing because I think everybody is on a figuring out basis now. We will have to wait for a quarter for clarity to emerge.
Got it. Last one. LIC, just wanted to understand because it's an elephant in the entire game. LIC is thinking to do it in-house, either the e-policies or they are open to outsource it to the repository message?
We have no concrete information on that. As I said, we'll have to wait for more clarity to emerge from a regulatory perspective, what the shape of the guidelines is going to be, regulation is going to be, and how they are gonna react. I think be premature to speculate on that, and we have no concrete information on that.
Got it. Perfect answer. Thanks, Anuj.
Yes. Thanks.
Thank you. The next question is from the line of H. S. Frederick from Sundaram Mutual Fund. Please go ahead.
Hello, sir. Thanks for the opportunity. Sir, my question again is a continuation of the earlier participant. The Insurance Repository revenue currently, what is that for us?
We have Insurance Repositories, the overall including outsourcing, we don't give a full filter. I will tell you Insurance Repository, if you do 6 lakh policies, you know what their approximate realization will be. On overall basis, the insurance vertical, for us is around INR 4-INR 4.5 crores a quarter is the revenue.
Okay. Okay. This can go up to 10x, assuming that we maintain our market share and a majority of the policies come with Insurance Repository. That's the that's the direction we are looking at, right?
Let me just clarify. This is the insurance vertical. Out of it, there is outsourcing as well as the repository revenue. Repository revenue will be for a quarter will be around less than INR 1 crore.
Okay.
That's the component of this. In terms of growing 10x, again, obviously, you know, we are looking at a positive uptick to this revenue. How dramatic that is going to be, we'll have to wait and watch. We are very positive that this is going to be a reason for us to show increase in revenue definitely in this vertical. Given that we are well positioned, we have 35%+ market share. We've been in this place for seven years. We have the IT backbone ready. We have the IT infra ready. We have the connects with the customers and insurers ready. We are very hopeful that this will be a huge uptick in our revenue.
Everything is dependent on how the regulations pan out in terms of compulsorily matching.
Got it, sir. Got it. That is very helpful. The other question again is, sir, on the TER cuts. I mean, how was it last time when the TERs cut? Did the AMCs approach you immediately after the regulations came in, or you did have the existing contract going on for some time? How did it happen last time?
The last time when this happened in 2018, 2019, you may have seen that a number of leading AMCs made a public statement that they believe they will reset the larger components of cost.
Mm-hmm.
largely connected to sales and distribution. In that year, if you see historically, any impact that we took was very, very small on overall price. I won't say we didn't see the pressure, but we didn't see any unreasonable pressure of people asking us to scale down prices. Also, like we've said, if you just compare the larger components of cost in this industry, especially sales and distribution, which is perhaps, I won't say an exact number, but an approximate number, 8x- 10x as big as RTA cost. The ability of us as an RTA to scale down prices is obviously very limited. To answer your question, the impact wasn't severe or unreasonable. It was what we expected and did not lead to any significant number in price cuts.
Got it, sir. Got it. Just to iterate, as of now, whatever we signed with the larger AMCs, that holds true for the next couple of years at least, right?
That's correct.
That's correct. All right, sir. That's very helpful. Thank you very much on all the questions.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
Hey. Hi, good morning. I had a two-part question on OpEx. Firstly, you mentioned investments, will continue into new businesses, going ahead. Is it possible to qualify at what stage we are in terms of investing in these businesses in terms of, let's say, getting them ready for future growth?
Okay. I'll split down into various businesses. The investments are predominantly into AA TSP, the CRA business, MF Central, and insurance repository, getting it ready for the next uptick that we are seeing broadly on these businesses. The AA TSP, we have seen green shoots in terms of sign-ups and all those things. We expect that the revenue will be a gradual ramp-up starting from first quarter of next year, where they should start contributing material amounts to the top line. We have seen a lot of sign-ups, but obviously this is the first time it's happening, so in terms of linkages, in terms of technology testing, security guidelines, et cetera.
Obviously, the ecosystem will also have to be ready. Now, we have seen the mutual funds, you know, have to sign up to this. We have seen the pensions getting live on this. We expect that from the first quarter of next year, the revenues will gradually start picking up. In terms of CRA, you have seen that the eNPS has become live, and we have seen traction on that. But the POP, which is again a very big revenue source for us, has become live only from this quarter. Again, it's going to be a slow burn in terms of revenue. Again, you'll see a gradual ramp-up. The investment in insurance, I think we spoke about with the earlier questions.
It's kind of we are making proactively the investments in the platform to make it ready for investors, to make it ready for insured servicing as well as policy servicing. This depends on the regulatory guidelines. If the regulations get favorable and passed over the period of next year, we see a big uptick on the revenue. While the contribution to the current P&L is absolutely not material, we expect that starting from first quarter of next year, all these businesses, some of which is already live, right? It's only a question of customer acquisition and scale. MFCentral also falls in the same category, will start giving us revenue from first of April next quarter in a gradual ramp-up way.
I think from an investment perspective, we have seen the this quarter and next quarter will be when the gap between the expense and the income on these verticals will be the maximum, and then they'll start narrowing down from the quarter after that.
Sorry, my question was also more on the OpEx side, because there seems to be, like, some visibility that you have that, you need to continue to invest in these businesses. I was kind of wanting to understand, where we are in that stage of investment cycle in terms of building these businesses. The revenue obviously will take its own time and is subject to how the market also evolves.
From an OpEx perspective, I think we have reached a stage where the stability of expenses will happen. As we told you, we spend around INR 3 crores a quarter on these expenses, predominantly on cloud and various other, you know, on the platform and technology engineers. If we spend around INR 3 crores a quarter on these initiatives, this is actual expense taken to the P&L. From an expense perspective, we don't see there'll be a lot of optimization that will happen. There could be a small drop or a small increase, but this is kind of steady state. We continue to invest in these technology resources, the platform is not a one-step go-to-market. There's gonna be continuing enhancements that's going to happen, feedback that's gonna come from the market, and enhancements we'll have to do from a security technology perspective.
I would not expect a huge drop in the OpEx we do on these platforms. It'll be more kind of a revenue kicker that we will get.
Got it. That's helpful. Last quick one. On the non, controlling interest line, there was a marginal loss, so which is that entity that's relating to that loss?
We are, if you remember in April of last year, we acquired an entity called Fintuple Technologies in the alternate investment space.
Yeah. Yeah.
That's the kind of a marginal loss for the quarter. Again, we are in the ramp-up stage. We are a startup in the ramp-up stage. A very good order book visibility. This is going as per plan. We knew that the first year is going to be kind of investment for their platform. Going forward, given their order book, we are confident that from next quarter it will not be a negative. Again, from an overall perspective, it was a small immaterial amount as a loss.
Got it. Sorry, just checking this, cross-checking this, the increase of the depreciation line, is this a reflection of what the investments have happened? There's no change in accounting policy here, right?
Absolutely not. No change in accounting policy. If you see, we had a record CapEx done over the last two years, INR 65 crore and INR 70 crore and all those things. Given the three-year depreciation, you will actually see a spurt in depreciation, which we have seen in the last few quarters, and we've seen the current quarter also. There's no change in the depreciation policy.
Got it. Thanks a lot.
Thank you. The next question is from the line of Ansuman Deb. Please go ahead, sir.
Yeah. Hi, good morning, and thanks for the opportunity. You briefly mentioned about the yield cuts that have happened for some select accounts, and largely you are able to pass on or pass through the new registrations or new renewals would be the right word. If you could just give us some description on the like-to-like yield cuts which have happened in the NFO accounts.
Ansuman, you know, we will not get into specific customer contracts, but suffice to say that a large part of it got rolled over. There were a few contracts which came up for renewal after 5-year period and things like a very, very long-term period. In the period that if they had shown, and they had shown significant growth, you know, there was some amount of yield that was that price depletion that happened. Again, nothing that we would think will alter our assumption or guidance saying that the growth of AUM fee to AUM will stay within the range that we have indicated, which is 75% more, 70% or more.
This is, as I said, an exceptional year where we had 11, 12 contracts come up for renewal out of the 17 customers, right? This is not something that will happen on a every year basis given that they are renewed for different periods. The overwhelming majority we did roll over. In terms of quantification, we would not like to get into specific individual customer contracts, but this is the broad guidance that I can give. Perfect, sir. No, thanks a lot. Thank you.
Thank you. The next question is from the line of Sahej Mittal from HDFC Securities. Please go ahead.
Hi. Morning. Just 1 question on the Insurance Repository business. What is our incremental market share on the new flow of motor insurance policy? Is there a right to win for CAMS in this business, given that everyone's turning more and more competitive for this business? If there's a new insurance policy coming up, then for them to choose CAMS over someone else, is there a right to win? This is largely a commoditized business? Yeah.
just so that you understand, think of today's consumer tendency to participate in EIA is largely for life. Okay? Motor insurance coming into this hasn't become a trend yet. It'll take some time for that to become a trend. Overall, you would have seen that we have overall, this is market share in e-insurance account has crept up from 36%-37%. I can give you broad share numbers. I think motor insurance will take some time for consumer tendency to park these in e-insurance accounts. That's not a very pronounced trend yet. Does that answer your question?
Do we have a right to win, in any way?
The right to win comes like this. I mean, think of it this way, and think of the architecture of the industry that you will have 1 e-Insurance Account. Let's say you opened it with CAMS. All the insurance then that you buy, you will then park it in this e-Insurance Account. You will not be able to hold two. If you're unhappy, you can shut this and go somewhere else. Therefore, the primary metric the demand gen, therefore, has to be done at an e-Insurance Account level. The faster you open e-Insurance Accounts and the bigger your market share, the more will be your policy market share, and that perhaps gives you a right to win.
Is there any other right to win, which means that do you have an exclusive contract with a manufacturer or with a seller, like we said earlier? Very difficult for that to do, we don't expect the architecture of the industry will ever go that way because the choice is still. I mean, if you were to try one of the websites and open an account while buying insurance, you will see the choice is left to the individual. It is more a individual mandated choice. When that choice is taking place, normally everybody is offering all the four. That's how it works. A tied model where a manufacturer will just go with one guy, with one e-insurance company, one rep, that's what scale market share is an unlikely scenario to emerge.
Right. I mean, this would be happening when someone's buying an online policy, right? When an agent is selling an offline policy. What is the default insurance repository? If the customer does not do anything, is there any default repository which the agent chooses or how is it? Is there an option wherein a manufacturer is only working with maybe two repositories and not all the four?
That is entirely possible. That is possible that a manufacturer may be working with only two and not the four. Like we said, in the industry, when you look at shares, you will find that two of the players, including us, have been hyperactive. One, of course, has been very quiet and the other is less active. It is possible. There are examples of manufacturers working only with two IR accounts. There is or two repositories. There is no default repository. It is not that if the consumer doesn't make a choice or the consumer says, "Put me where you want," unlikely to happen. There is no single repository which has kind of defaulted as a choice. Think of it as a competitive industry.
I mean, if you're trying to imagine how this industry will emerge, think of it as less of a land grab industry. We're not expecting it will grow into that pattern where large manufacturers align to a single rep and then they push all the consumers there and that gives rise to share. can happen, but unlikely to happen. It will remain more democratic. The consumer will make a choice. He will hold one e-insurance account, and then he will drag his policies into that account. That is the architecture which will emerge.
Right. Maybe one follow-up. Given that there are talks that the LIC would be opening their own repository, would there be a conflict of interest if they start to manage maybe some other insurance companies', policies as well, in their repository? Would there be a conflict of interest, and they'll be allowed only to manage their own, insurance policy? How should we look at it?
I would not make a comment on what will happen. We will see what happens. Think of it yourself. Just lay out the principles. I as a consumer may be consuming insurance policies of four different companies, and if one of them starts a repository, in your case, you're illustrating LIC, think of my insurance account existing there. All the competitive data, all the purchase trends, whether I'm paying my premium, nominees, everything will be visible to one guy. That obviously creates what you just said. It will create a potential conflict, and it will create an uneven playing field. I will not comment on whether this is going to happen or not going to happen. Your question is right. It will not create a level field to play on.
Got it. Thanks a lot. The best.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Ram Charan, Chief Financial Officer, for closing comments. Over to you, sir.
Thank you. I thank all the participants for their continued interest in the company. Please feel free to reach out to Anish Sawlani or Orient Capital in case you have any questions or follow-ons. Again, thanks once again for your participation and look forward to speaking to you soon.
Thank you, sir. On behalf of Computer Age Management Services, that concludes this conference. Thank you for joining us. You may now disconnect your lines.