Ladies and gentlemen, good day and Welcome to Aditya Birla Sun Life AMC Q2 and H1 FY 2027 earnings conference call hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines will be in the listen only mode, and 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 then zero on your touchtone phone. I now hand the conference over to Mr. Prayesh Jain from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.
Thank you, Rituja. Good evening, everyone. On behalf of Motilal Oswal, I welcome you all to the Aditya Birla Sun Life Asset Management Company Limited Q2 FY 2027 earnings conference call. We have with us Mr. A. Balasubramanian, Managing Director and CEO, Mr. Pradeep Sharma, Chief Financial Officer, Mr. Paritosh Chitora, Head of Investor Relations. We are thankful to the management for allowing us to host this call. I would now like to hand it over to Mr. A. Balasubramanian for the opening remarks. Over to you, sir.
Yeah. Thank you for hosting us, and good evening, everyone, and thank you for joining us on the Q2 FY 2027 results call. I hope you all had the opportunity to read through our earnings presentation, which is available on both the stock exchanges and our company website. Let me begin by sharing our perspective on the current macroeconomic environment. The global economy, as is known, demonstrated remarkable resilience in Q2 FY 2027. Growth sustained its momentum despite a challenging external environment. The prolonged geopolitical conflict and inflationary pressures and ill-known potential asset price corrections remain areas to watch, but the global growth outlook remains constructive. India continues to stand out as one of the fastest-growing major economies, powered by robust private consumption, resilient service sectors, and strong wage income investment alongside a positive contribution from net exports.
Growth momentum in the first quarter of the year came in well ahead of expectations. Government infrastructure spending and private CapEx and robust credit flows are sustaining investment. The IMF has raised its FY 2027 growth forecast for India from 6.4% to 7%, and the RBI revised its outlook upwards to 7.1%, a reflection of confidence in the economic underlying strength. Economic activity has held firm even as we keep a close watch on the southwest monsoons and its implication for the upcoming kharif season. In its October policy, the RBI raised the repo rate by 20 basis points to 5.5% and signaled a more cautious stance on inflation while reaffirming confidence in the growth trajectory. India's external position has been supported by healthy capital flows, including NRI deposits, FCNR(B) balances, and forex reserves over $730 billion.
These strengthen our external sector resilience and provide a cushion in times of global uncertainty and the related currency volatility. Moving to Indian markets, the quarter was marked by volatility amid elevated crude prices, high global bond yields, a weaker rupee, and shifting interest rate expectations. While large cap indices corrected, the broader market held up relatively well, reflecting confidence in India's long-term growth story. Steady domestic participation through SIPs and continued financialization of household savings helped cushion the volatility and underscore the structural strength of India's capital market. A busy primary market reflected strong appetite among issuers and investors for capital formation. Looking ahead, near-term volatility may persist, but earnings growth and domestic investor base continue to provide a strong foundation for the longer-term outlook.
Coming to an industry, the quarterly average AUM stood at INR 87.1 lakh crore as on September 26, compared to INR 77.13 lakh crore as of the same period last year, registering year-on-year growth of about 30%. The SIP contribution for the industry stood at INR 32,490 crores for September 26, representing year-on-year growth of 11%. The total mutual fund folios stood at 30 crores as of September 2026, growing by 17% year-on-year. During Q2 FY 2027, the industry saw total NFO collection of approximately INR 11,504 crores across asset classes, with equity collection driven by index, aggressive hybrid, and value funds. Despite market volatility, the industry continued to witness healthy net inflows in equity-oriented schemes, reflecting investors' growing preferences for disciplined long-term investing. SIP flows remain resilient and retail participation stayed strong.
Investor preferences continued to shift towards mid cap, small cap, and flexi cap funds, a sign of confidence in India's long-term growth prospects and of participation broadening across market segments. Individual average AUM for September 26 stood at INR 23.24 lakh crore, contributing around 61% of the total AUM. B30 cities with an average AUM of INR 16.37 lakh crores accounted for 18.8% of total AUM, growing by 13% year-on-year. Deepening our reach in B30 is a strategic priority for us, as this is where India's next chapter of wealth creation will come from. We are building our distribution network, digital capabilities, and investor engagement in these markets to be well-placed to capture the opportunities ahead. Coming to the ABSL AMC performance highlights.
At ABSL AMC, we are pleased to share that our overall average AUM, including alternate assets, which is EPFO mandate, crossed INR 11 lakh crore milestones this quarter and now stands at INR 11.06 lakh crore, a growth of 140%. This includes mandate money from AIFs in EPFO. Our mutual fund quarterly average AUM stood at INR 4.42 lakh crore, up by 4% year-on-year. Within this, our equity mutual fund quarterly average AUM stood at approximately INR 2.09 lakh crore, growing by 9% year-on-year. Our equity mix for the quarter stood at 47.4%. Our SIP contribution for September 26 stood at INR 1,095 crores, supported by 41.7 lakh folio contribution SIP accounts. Our total investor folio for September 2026 stood at 1.14 crores, up 6% year-on-year, with the new SIP registration for the quarter at about 7.04 lakhs approximately. Our equity fund performance continues to be consistent.
This has strengthened our investors' confidence and supported healthy inflows across the flagship offerings like Flexi Cap, Balanced Advantage Fund, Multi Asset Allocation Fund, and Aditya Birla Sun Life Small Cap Fund. In fact, our equity performance has now gone to almost three and five-year basis as well, coming in the reckoning of the peer group. This is also good news. I think should eventually help us in building stronger equity outflows. Strengthening and diversifying our distribution network remains the key priority. Through my yatra covering nearly 9,000 km across India, I've had a stronger and more meaningful conversation with our partners and gathered valuable insights from the ground. This has deepened our engagement with distributors in both existing and emerging markets, helping us build a stronger and more diversified distribution franchise. On the technology front, innovation remains at the heart of our customer-first approach.
During the quarter, we advanced our AI-first agenda by expanding our GenAI-enabled capabilities across chatbot, voice, and WhatsApp channels, creating more personalized, responsive, and scalable customer experiences. We're also leveraging data analytics to strengthen customer acquisition, investor engagement, partner productivity, and service effectiveness across our distribution ecosystems. Turning to our alternate business, we've witnessed strong growth during the year. Our PMS AIF assets increased from INR 30,300 crores to INR 6,50,000 crores, which of course includes the EPFO mandate that we have got. We currently have fundraising underway for our special opportunities and structural opportunities, Money Manager Fund and India Select Fund, especially in the business to business, both including fixed income as well as equity assets under management, equity categories. These offerings are aligned with investors' demand for differentiated and specialized investment opportunities. In our real estate business, our AUM stood at approximately INR 60 crores.
We have 43% year-on-year growth, and fundraising is currently underway for the ABSL Real Estate Credit Opportunities Fund Series II, which focus on senior secured lending opportunities in post-approval brownfield real estate projects across tier 1 cities. At GIFT City, we have launched our retail fund offering, enabling Indian and global investors to access inbound and outbound investment opportunities through a dedicated retail platform. Fundraising is underway for the ABSL Flexi Cap Fund, which is for inward remittance. In the coming quarter, we plan to launch six funds across both retail and non-retail categories, addressing inbound or outbound opportunities. Backed by growing product suite and GIFT City global investment ecosystem, we are well-placed to build a scalable offshore franchise in the coming years under the LRS schemes, as well as for the global investors investing in India.
Passives is one of the key anchors for our growth strategy, and we're committed to building a leadership position in the segment. In fact, we have introduced the Birla Passive as a new brand, a dedicated brand, and identified to strengthen our visibility to investors and distributors, and drive higher mind share and grow market share. During the Q2 FY 2027, our passive quarterly average assets under management stood at approximately INR 13,890 crores, up 10% year-on-year. Our investor base continued to expand with the total folios reaching around 17.9 lakh folios. We were the first in India to launch BSE Total Market Index Fund and BSE Total Market ETF. We're pioneering a new category in the passive investment landscape on the lines of Vanguard, the largest fund in the world.
We aim to build these funds into flagship product, offering investors broad-based exposure to the Indian equity market through a single and simple solutions. Our ETF franchise delivered particularly strong momentum. ETF quarterly average AUM grew by over 42% year-on-year and significantly ahead of the industry growth of about 27%. In the AIF segment, which is a new segment, which we had introduced sometime back. Our SIF segment, we launched Apex Equity Long-Short Fund and Apex Equity Ex-Top 100 Long-Short Fund, backed by our strengthened investment team with a specialist in long short and derivatives-based strategies. Our SIF platform now comprises of three products with approximately about INR 700 crores as of September 2026. Coming to the financials, Q2 FY 2027, the total revenue is about INR 526 crores as compared to INR 506 crores in Q2 FY 2026.
Q2 FY 2027 profit before tax is about INR 296 crores as compared to INR 316 crores in Q2 FY26. The Q2 FY 2027 profit after tax was about INR 221 crores as compared to INR 241 crores in Q2 FY 2026. Turning to our half-yearly performance, our H1 FY 2027 total revenue is about INR 1,142 crores as compared to INR 1,072 crores in H1 FY 2026. Our H1 FY profit before tax is INR 702 crores as compared to INR 688 crores in H1 FY 2026. Our H1 FY 2027 profit after tax is INR 530 crores as compared to INR 518 crores in H1 FY 2026. With this, I would like to open the floor for any questions. I will be joined by Mr. Pradeep Sharma, who is our CFO, for taking any of the questions that you may have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. 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. Participants who wishes to ask a question, please press star and one. The first question is from the line of Shreyas Pimple from Nomura Wealth. Please go ahead.
Hi. Thanks so much for the opportunity. My first question was on costs. On ESOP, they highlighted a new scheme of-
I am sorry to interrupt you, Mr. Pimple, but we are unable to hear you, sir. Your voice is breaking.
Is it done?
Can you please It is still breaking.
You are still breaking.
Hello. Is it done? Hello.
We would request you to kindly please come in a proper reception area. We are unable to hear you, sir.
Hello? Can you hear me?
Sir, your voice is still breaking.
Still breaking.
We would request you to please check your connection and join back the queue. Thank you. Participants, to ask a question, you may please press star and one now. The next question is from the line of Mohit Mangal from Centrum Broking. Please go ahead.
Yeah. Good evening, and thanks for the opportunity. My first question is that, in terms of employee expenses, we have seen a very big increase. Even if I say exclude the ESOP expense of, say, INR 10 crores, which was there last quarter, the growth seems to be very high. So what could be the reason for that?
Yeah, Mohit. So basically, this is on three counts, the YoY basis you are talking.
Yeah.
Basically, one is the ESOP cost. For this quarter, around 12-13 crores is the ESOP cost, which amounts around 13% increase. Second is actually last year. Last year numbers, there was an old provision reversal of 6 crores in last year numbers. Hence, this is actually resulting into some kind of growth, which is visible, which amounts to around 6%. That was one time in last year numbers, and it is being shown as increase. Third one is the normal increase on YoY basis, plus the few headcounts which we have built our passive team, et cetera. These are the three reasons, basis with the number it had the last year. For coming quarters, I think the number should be in the similar range of Q2.
Increment, blank increment.
That is already covered.
It is covered. Yeah.
Yeah, Mohit.
Yeah, that is helpful.
Yeah.
Secondly, sir, on the key schemes, the Flexi Cap, the Balanced Advantage Fund, just wanted to understand what were the gross flows during the quarter, and how did the investor preference for these schemes increase during the quarter?
While we do not give the strict gross flows and net flow types, to give you broad indication, we have identified four or five categories of funds are the key products, which is the general flows also from industry, which is right from Flexi, Balanced Advantage Fund, Multi Asset, Multi Cap Fund, and Small Cap and Mid Cap Fund. In fact, in each of them, we are seeing increased flows on a quarter-on-quarter basis, both on the gross sales as well as on the net sales number. That is something which I see as a trend. Though we see the category in which generally the level of interest is low, like ELSS scheme, where we have seen some bit of outflow along with the industry, even the large cap to some extent. But otherwise, the core funds, which are called the focus funds, we are seeing quarter-on-quarter basis improvement.
And that is something which I can see. Second, with respect to the given SIP contribution. So the way I measure is month-on-month basis, how the gross number is getting better than the previous month. That also is something I see as an improvement. Just to give you the broader thing, the way we see is, assuming the industry market share, say, in Flexi Cap Fund, so we are at, say, 3.5%, whereas the net flows market share is actually higher than 3.5% kind of thing. Just give you some bit of pulse.
Okay. So you mean to say we are around 3.5% in the Flexi Cap and Balanced Advantage Fund, right?
It now goes to almost about 4.5% kind of thing. Roughly about 4.5% to 4.8% kind of a number. Whereas the same numbers would have been lower in the previous quarter. That is something I see as a trend improvement.
Right. That is helpful. A few data keeping questions.
Yeah, even as the Balanced Advantage Fund as a category, just also add to that, even as the Balanced Advantage Fund as a category.
Yeah
While the whole category is not receiving significant flows at this point of time. Whereas we have flows because of improved performance.
Yeah.
There is some bit of allocation could happen from weak-performing funds to the better performing funds. Therefore, we have seen a positive influence as far as even Balanced Advantage Fund as well.
Okay. That is very helpful, sir. Sir, a few data keeping questions, sir. One is basically the non-mutual fund revenue for the quarter, SIP payment and segment-wide deals.
Yeah. Mohit, the SIP AUM is around INR 86,000 crores as of September 26.
Okay.
As far as yields are concerned, equity, it is in the similar range of 63 - 64 basis points.
Okay.
Debt is around 24 - 25 basis points.
Okay.
Liquid is in the range of 12-13 basis points, and ETF around 8 basis points. As far as other revenues are concerned, other than mutual fund revenues, alternates, this is on gross basis, it will be around 7.4%. We are seeing an improvement here. From Q1 it was 7.1%, now it is 7.4%. On net basis, it is 4.4%. Q1, it was 4%. So gradually we are seeing an improvement in the asset mix mutual fund versus the alternate assets.
Yeah. Right. That's very helpful. Thanks, and wish you all the best.
Thank you. Participants, you are requested to kindly press star and one to ask a question. The next question is from the line of Ram Mehta from IIFL. Please go ahead.
Good evening, and thank you for the opportunity. I had just one question on the mandate which we have won. Can you please help with the gross yields which we are expecting out of the EPFO and ESIC mandates? Thank you.
Yeah. Mr. Ram, actually these yields are actually expense neutral. Whatever expense which we need to incur additionally, that's it.
Yeah. The way I look at, Ram, of course, winning both the mandate reflects the fund's capability in managing money and so on, both on generating the return as well as managing risk. They go through various parameters, basis which the shortlisting happens, both technically and financial qualifications. Happy to share with you that we passed that test, which of course reflects our fund house credibility on the investment world. Then second is, while it's cost neutral, because the existing team only will be managing it. Of course, I would have dedicated team for this, no doubt, but the existing resources will be put into use, put in to manage the money. That's the way they've gone about selecting it. But the rub-off effect that it can come to us in the others, a private EPFO managed funds and so on, so forth.
Even when we look for mandate from overseas in the broader, the rub-off effect, that's something which can add to that is quite high. That's the way even our strategy also is bidding for this kind of mandate. It's quite a prestigious mandate and incurs any incremental cost should be fine. That's the way we have built it up. Of course, I'm sure over a period of time, when thing changes, it can add to a few basis points profit as and when they permit, of course.
Thank you so much. That's it from my side.
Yeah.
Thank you. The next question is from the line of Shreyas Pimple from Nomura Wealth. Please go ahead.
Thank you for the opportunity. I hope I time.
Shreyas, your voice is still breaking.
Hello.
Shreyas, we are unable to hear you.
Okay.
What you can, Shreyas, since you have some question, after the call and then address your question as well. Since we are not able to hear you properly.
Thank you.
If at all we can do that. Yeah.
Yes, sir. Participants, to ask a question, please press star and one. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi. Sir, a few questions. Firstly, some broader questions. How do you see the industry kind of moving with respect to flows? SIP has held up strongly but large lump sum flows have been a bit of a challenge in the recent past. How do you see that? On the other hand, we have seen very strong traction in SIF and flows. Do you see that the AUM or the flows are moving from mutual funds to SIF or some other categories especially in the medium ticket size where earlier this option was not there. The competing products were probably PMS and AIFs, which were at a much higher ticket size. However, SIF is at a much lower ticket size. But do you see that change happening, and would you say that from a medium-term perspective, SIF could be a product where things can be very different?
That would be our first question. I will ask other questions later. Yeah.
Yeah. No, thanks, Prayesh. From a broader view, I think general sentiment towards our comfort and sentiment towards investing in mutual fund remains. I have been traveling extensively wherein general negativity which otherwise we used to witness in the past during this kind of volatile time, uncertain time, generally doesn't prevail at the ground. Second is, there is a common question, of course, people understood SIP you are investing, therefore that will remain as a permanent way of gateway. Through that mutual fund will continue to get money. There is a segment of people who also want to come with the lump sum, with the fast track SIP kind of thing, fast track STP kind of thing. There is an interest which is there. Of course, beyond a point, money will have a limited availability. Then interest rates going up now.
So far it's coming in the bond market side, but not reflecting so far on the FCNR(B) deposit side, because the FCNR deposit is coming in with huge liquidity. Banking industry is not actually pursuing hike in interest rate on deposits. Therefore, I would assume the overall growth momentum for the mutual industry would remain. I also feel that wherever the significant flows have gone in the last, say, two, three years, people are realizing there is a bit of need to reallocate funds from one to other. That's one coming, especially when it comes to the question of Birla funds. There is a wider spread acknowledgement that is coming from all our partners and investors, and Birla's performance have been pretty good. Therefore, how to reallocate money towards Birla, that also is coming in, which is what I make a feel.
Well, industry will remain, and probably we should also start getting that reallocation of funds from one to other kind of thing may come in the absence of any incremental money being available. As far as the SIF concerns, SIF is being considered as arbitrage plus plus kind of thing. There are two ways you have to look at it. One is the hybrid fund is considered as a arbitrage plus plus kind of thing. Something is the option that money manager has got to go short in the market and take a view. Therefore, this category, the number of people are qualifying for selling this category, because there is a separate exam that they of course, along with the AMC exams, there is a chapter which also they have to clear for the SIF selling. So that's something, number of people undertaking the SIF license is rising.
Second is even the people who have been otherwise funding in the market on their own, now they experience the last six months, even our own funds have been in the top performing fund in the hybrid long-short category, which is taking into account the arbitrage plus options, plus IPO investing, and also managing the portfolio with some kind of hedging mechanism in future. I think people are noticing it, and the return has been, of course, much better than what you would have got in the other funds during the current market period. Therefore, people have realized some bit of allocation could go there. I think the way things are moving, definitely more and more allocations as an addition to the existing funds allocations would come into the SIF.
We, as a fund house, we didn't want to be the first one to launch in the month of March it is allowed. We want to actually have the skill set, a dedicated portfolio manager, and therefore we had three people now running this business for us, a dedicated team who breathes options, who breathes F&O at the same time looking at hedging as another mechanism by going short, wherever their views are there. So this seems to be giving good experience. I think people do want to try it out, and therefore we are actually pushing it. Whether it will become a large category, I would probably say the way the product functions is high probability it can fit between the conservative hybrid category to the aggressive hybrid category. It could come somewhere in between in terms of size.
Today, if you look at it, conservative hybrid category comes into equity savings fund, then comes to the Balanced Advantage Fund category. Then the third is actually aggressive hybrid category. This could fall between Balanced Advantage Fund hybrid category, aggressive hybrid category, to which extent people are looking at this as a subclass. Whether the large flows will come at this point of time, I think in the short while of about 6 months, the industry has become about INR 31,000 crores. Of course, largely this money has gone into who took the lead. But as we start seeing the performance track record with some kind of genuinity in terms of using the tool that has been given to the manager and true to the level kind of thing, once they start seeing it, we'll see this category gaining some kind of traction.
This will fall between Balanced Advantage Fund category and hybrid asset class category. Aggressive hybrid category, I would say.
All right. Thank you, sir, for that elaborate answer. Just one more point on this before I move to the next one. As a unit economics of SIF, how would it look versus, say, alternates or equity mutual funds? Would it be in terms of yield similar to what you would earn on equity mutual fund, or would it be more linked closer towards PMSs, AIFs? What would be the unit economics at a sizable scale? Would it be more profitable than mutual fund business?
Yeah. Sure. Pradeep is answering here.
Yeah, so actually, SIF categories are little higher than debt categories and lower than equity categories. If you see, these are in between equity and debt category.
Yeah. What Pradeep is saying is the current model.
Yeah.
Eventually, they will evolve with the three, four, five categories are there in this category, which is the long-short hybrid fund, which will be akin to arbitrage plus plus kind of thing, which will be more or less falling in what Pradeep is mentioning. If I go to the higher end of that category, which is basically long-short equity, and then the other than the next 100 long-short equity, and then the separate fund equity when it comes, that will of course come, the margin could come closer to about equity fund. Given the fact that we need to also take care of the distribution commission that is involved. And then the fixed income. There is another category they are permitted, which is the fixed income credit fund also can be launched under this category.
That may come like a dynamic bond fund where you will get about 50 - 60 basis points kind of gain. That's the way it could evolve. So right now it's too early to say in which direction it will be, but as the size starts coming in, even when we look at building each of these categories, we'll try and actually somewhere look at what the risk is involved and what is the purpose it serves, and accordingly, the pricing will get fixed.
Mm. Noted. Sir, the other question is on your flows. While we don't share flows data as such, but it would be great if you could share some insight into what was the exit rate for us, in the sense that whether our exit rate flow market share was better than our AUM market share. Have we reached that stage? And honestly, in terms of SIP, again, while there is some pickup in the data points that we have shared, but it's still not reflective of the strong fund performance that we have. So what are the initiatives that we are taking to increase both the overall flows as well as SIP?
Yeah. I think two, three things. In terms of our focused product, as I mentioned, we are seeing increased traction. The way we looked at is in terms of quarter-on-quarter basis, how the numbers can come, which essentially take into account the Aditya Birla Sun Life Flexi Cap Fund, the Aditya Birla Sun Life Multi Cap Fund category, even the Balanced Advantage Fund category, Aditya Birla Sun Life Multi Asset Allocation Fund category.
That's something we are seeing flows coming in. There's about six, seven products, including Aditya Birla Sun Life Small Cap Fund and mid cap we are seeing. Of course, as you rightly pointed out, the rate of growth on each of these things should move up. That's why I think the initiative that we are taking is to drive the engagement with distributing partners and communicate very strongly in terms of how we are doing vis-à-vis the market, vis-à-vis the benchmark, vis-à-vis the peer group.
In fact, 85% of our funds are in the peer group, in addition to beating the benchmark as well. So those are the communication need to be communicated in terms of narrative very strongly. Birla Sun Life as a fund house needs a lot of attention on these improvements that we have done. Therefore, it's basically driving it through the communication and engagement at the ground level is gone up quite significantly. Secondly, in order to drive the sales team for the SIP improvement, we even set a target for the whole team, both by way of setting a target and also incentivizing to get a larger success by way of SIP drive. That's something, again, we rolled it out for each of the location-wise improvement that individual should build on the base of this. And the third is, of course, visibility.
Generally, as a fund house, these last two, three months, we improved our, increased our visibility by way of brand expenses. That also something which we are doing, like Aditya Birla Sun Life Small Cap Fund education that we are doing. We have printed the entire country in select pockets of country.
Again, to ensure that our brand recall also gets constant support, comes both in the digital platform as well as on the physical platform, which is the traditional platform. So these are the initiatives that we are doing. Last but not the least is the proof of these things also comes in from our product recommendation. Some of the key large national distributors or bank distributors who predominantly go by the product recommendation to their investors wealth management team or maybe the PBG team. In fact, I'm happy to share with you in three or four channels, the large channels.
Of course, we have about 32 channels in which we have products are being recommended at least. But at least four or five channels gives a volume as well as have a high reach. In those channels, the products are being recommended, therefore, even the exclusive channel team members across the country, now they are getting an opportunity to increase their connectivity. Therefore, they can engage more and then also get more subscriptions. So these are some of the things we are doing. Hopefully these things, I think, should give us incremental continuous focus.
Also, any comment on whether your exit flow market share was higher than your AUM market share?
Yes. Basically, the way we looked at is, I think from each quarter on quarter, we did some analysis, again, is more for internal purpose. The ratio of exit with respect to the redemptions versus how much is being retained. The retained ratio, suppose somebody redeemed INR 100 crores, out of which, how much is getting retained? The number goes to almost about 25%-30% kind of retention that we have, which used to be somewhere around the past, or maybe 4%-5% in the past. That retention ratio is increasing. There are two ways that's something which we try to do. Of course, we cannot stop redemptions on those schemes which are currently not in favor. At the same time, performing in those schemes is very important to the extent the redemption can be reduced.
Second is, wherever the redemptions are there, I also encourage them to move into other funds that the delivery is going to remain invested in the schemes, in the fund. That's something we are encouraging. Therefore, switches also, to some extent, I would say the ratio has been rising. The similar way, even when I travel in the market, people do ask questions about incremental money being given. And there also something I see is an acceptance coming from people where we've been giving more allocations, but the experience is not that great. Even those kind of investors are also now expressing interest to restart some of the things that would have probably stopped in between. That also I see as one of the trend that is coming in.
All right. Thank you so much, sir.
Thank you. Participants to ask a question, please press star and one. The next question is from the line of Meghna Luthra from InCred Equities. Please go ahead.
Hi, opportunity. Just had a question. Since the mandate is-
I'm sorry to interrupt you, Meghna, but your voice is breaking. Can you please check your connectivity?
Yeah. Is this better?
Yes, please go ahead.
Yeah. Thank you for the opportunity. I just wanted to I have a question on the mandate. Since it's profitability neutral, can we expect some flows on the debt side or the ETF side, or what other benefits can we see from the mandate?
Yeah. No, the mandate, of course, every mandate that come from the government, we need to be competitive, both on the technical qualification as well as financial qualification. Therefore, it doesn't give any added advantage that, "Okay, we won this mandate, therefore all other mandates will become natural." But at the same time, there are many such mandates that could come from other providers of mandates who would actually outsource investment mandate to outsiders, other fund houses. So definitely, it puts us in terms of Yeah, it definitely helps. Second is, as I mentioned, there is a privately managed EPFO which run on their own. Then naturally it increases the entry barrier, which otherwise you would have. So that improves it. Therefore, it can help in increasing the flows coming from privately managed assets, which is the attempt that we are making.
Third, of course, when you're also looking at winning mandate globally, as and when that comes in, it helps in terms of overall credibility including public sector units. It actually adds to the overall credibility. So that's the way I call it a rub-off effect. It's quite large. That only we can also build our large size, the scale that we have, one of our main building scale is one of our key growth mantra. In that it helps. But the only thing is, as a fund house, we also ensure that while we have to manage this kind of money, we ensure the cost is also kept under control without compromising on the quality of service I'm supposed to provide to each of these mandates.
Got it. That's helpful. Secondly, if you can help give some color that the flows on Flexi Cap have been pretty strong and good in the last quarters. So what could be the mix over there? Is it the same mix that we are seeing on the equity front between, say, 50%, 52% MFDs and direct and between the national distributors? Or is the mix different for, say, a Flexi Cap Fund, which is quite strong performance fund?
Yeah. The way I see is in terms of flow of funds. Definitely, of course, Flexi Cap gets a little higher than other funds, given the fact that it is part of the recommendation list everywhere. Second is general acceptance on performance improvement quite visible and deep in their understanding. Therefore, they also give allocations towards this rising. Otherwise, broadly, when I look at it, MFDs and each of the channel partners as a fund house, roughly about 52% of our funds is come from MFDs, which is what our engagement is with them gone up quite significantly. Second, of course, the national distributors are above 20%. Then bank is about 10%, which is what I think I am mentioning that now the products are part of recommendation list. The incremental share coming from the banking channel is rising, specific to the Flexi Cap Fund.
Direct channel something, it remains about 18%. That we continue to drive both in institutional segment as well as on the HNI segment. To answer the question in terms of Flexi Cap, the recognition is good. Understanding of people that there is one or two funds of Birla Sun Life house, if you have to take large exposure, Flexi Cap is an automatic choice that comes in. That is something which I am seeing as an incremental growth number comes in that segment is rising. Same way, we are seeing in the Multi Asset Allocation Fund, where performance improvement has been quite good and quite visible. Same comes in the case of Balanced Advantage Fund and the Multi Cap Fund. Even Small Cap Fund used to miss some kind of flows. Even the Small Cap Fund, our flows have been better than each quarter, I would say.
Great. Lastly, is there any new addition in any of the bank's recommendation list during this quarter?
Yes. I think four or five banks have come. Of course, the latest addition is part of the largest private sector's bank, where they added more product. We are already part of the Kotak channel. Otherwise, ongoing basis, we keep seeing the addition keeps coming in.
Okay, great. Lastly, sir, what would be your pipeline on the equity side more specifically and even overall in terms of new product launches? Anything on the thematic sectoral funds that will be coming?
No, in terms of our product, currently, of course, in terms of pipeline, the SIF that we continue to push. We have finished our fund launches. Now we are promoting aggressively to get our rightful market share. Second is in the passive side, we have launched a product which I think will become part of the permanent flows, which is a BSE Total Market Index Fund as well as BSE Total Market ETF. Third is we have launched an ABSL Financial Services Sectoral Debt Fund, given the fact that yields have gone up and we launched it as one of the open-ended product. In terms of our alternate product, clearly ABSL Real Estate Credit Opportunities Fund Series II, right now we are in the fundraising, intend to close it by December. In the same way, credit opportunities fund.
From the GIFT City we have two products, one for emerging market fund, which is outward remittance and LRS. We have a great track record managing money in the emerging market. The same fund, we have relaunched it, hope to get somewhat of decent flows in that. The India growth fund, which of course will use the best of Birla to invest in the fund of fund from GIFT City. That again, for inward remittance in addition to Aditya Birla Sun Life Flexi Cap Fund inward remittance that we have. Other than that, of course, we have evaluated the product gap between what SEBI has offered and what the competition has got and what we have. We identified one or two funds in the category that we can, of course, launch it. We already filed one product with SEBI. I think it to file with SEBI.
I think once it is done, we will have one or two open-ended equity product on the basis of the gap, including the life cycle fund, we would plan to launch soon.
All right, great. Thank you.
Thank you. Ladies and gentlemen, we would request you to kindly limit your question to two per participant. The next question is from the line of Gaurav Jani from PL Capital. Please go ahead.
Thank you, sir. Firstly, if you could just quantify the ESOP cost that could come through in 2027, 2028, and 2029. Also, given I think we have launched a new ESOP scheme as of today from not on. So any changes because of that?
Sure.
Yeah, Gaurav. So the scheme which has been launched yesterday, that may have impact of around INR 14 crores to INR 15 crores per annum. So roughly around INR 3.5 crores per quarter. And earlier schemes which are already going on, roughly the yearly impact would be between INR 55 crores to INR 60 crores in coming two years. Means yearly impact, INR 55 crores to INR 60 crores yearly impact.
Yeah. This is also coming on the basis of our broader strategy for both employee reward and then we reward them for their long-term performance. So that is something we rolled out covering largely the investment team and some of the other members of the AMC.
Sure. So sir, this would be basically INR 55, INR 60 + INR 14, INR 15 crores for two years, right? I mean, just to clarify, this year and the next year.
Yes.
Okay, understood. Secondly, could you quantify the SIP AUM, please?
SIP AUM is around INR 86,000 crores.
Okay. And sir, lastly, I think on the direct side there is probably something to be desired as compared to our peers. What kind of steps are we taking to shore up our direct channel? I think in equity we are about at about 18%, which is probably one of the lowest. Just wanted your thoughts on that.
Sure. We of course build our direct team because we were not pretty early in the building our direct team when direct was introduced. At the end of the day, we do work with, of course, large distribution community as well as build our own base. I think we now have almost about 80 people dedicated in 14 location in which they operate, reaching out to our existing direct customers. We used to have a lot of large HNI base pre-2020 versus now. All those customers, one, who have been investing directly. We have stepped up our focus in terms of reaching out to them. Second is a lot of referral systems either through the existing systems, existing customers or through our own ecosystem, which includes ABG systems as well as ABC systems and ABCD systems. And work together in order to build director's customer base.
So that's something we are doing. And wherever, of course, gap areas are there, as you rightly pointed out, we ourself have identified as an opportunity that we need to step up our focus. So we divide them into three parts. One, the customers who are greater than INR 1 crore will be handled by these 80 people. And our operation team which of course is called a service to our sales, anywhere between INR 25 lakhs to INR 1 crore will be handled by that team. So we divided the team into two parts. And third is of course virtual relationship manager, AI chatbot connecting with customers and often promote our product. That's something we do. These are three channels through which I think we are driving it. But of course, it needs a little more aggressive growth momentum.
That's something we identified as a focus area for sharpening the execution skill on this.
Sure. If I could just squeeze in one, what would be your thoughts about, surely we are seeing performance in the one-year bucket improve phenomenally.
It's also kind of enhancing in the three-year bucket, not probably as much as the one-year because of the lag effect. So what are your thoughts on profitability versus growth? Would you not mind paying up extra to distributors and getting some more flows? What's your thought on that?
Yeah, we are quite balanced in our approach. At the same time, we also understand that we need to push aggressively on sales momentum. So we do the right balance between keeping in mind wherever there's a product in which we need to be a little aggressive in the beginning in terms of acquisition of money, and then subsequent to that, profit will come. The way we looked at is any incremental growth that comes in is not going to come at the cost of my profit margins, profitability going down. Maybe the margin on incremental assets, we'll try to, of course, maintain it, but still it'll add to the whole. That's the approach we take.
At the end of the day, the idea is actually to invest on the business and build our scale which we deserve, and at the same time, be mindful of the cost that we incur, that we keep calibrated on a continuous basis.
Sure, sir. Perfect. Thanks so much for your answers. That is it from me.
Thank you. The next question is from the line of Shobhit Sharma from Elara Securities. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. I have one question which is on the scheme performance. You mentioned the scheme performance has improved, and we have seen some indication on the SIP flows and the SIP count as well. Can you give us some color around the flow share? Have you seen rise in flow share from the fintech side or the MFD side? How are the early signs been? Any color on the scheme category where we have been seeing a humongous amount of flows coming in from each of these channels?
Sure. Shobhit, I just mentioned about this in my earlier answers of questions. Broadly, when I look at it, in terms of count, definitely roughly about 55% - 56% of the count is coming from the digital platform, and rest of it is coming from the traditional platform. When I look at the same in the form of amount, absolute amount in terms of contribution, definitely digital channel is fairly lower in ticket size, therefore that is roughly about 18% to 20%. And rest of it is coming from the traditional channels, which again I mentioned earlier. The traditional channels where we are seeing incremental flows coming from both MFDs as well as banks and the national distributors. Of course, the rate of growth on a quarter-on-quarter basis is getting improved. Which is what I think we are also trying to push.
Your second question was. This is the only question, sorry.
Incrementally, have we seen the flow share increasing because of the scheme performance which has improved, or traditionally it has been on the similar lines, sir? Specifically on the digital platforms.
Yeah. See, basically, the way we design the narrative is, first and foremost, the perception of improvement of performance should be changed. Second is performance improvement should be accepted and basis which people should start allocating flows. In fact, the first round of perception improvement, that got changed quite significantly. As you rightly pointed out, almost about 85% of the funds, 70%-80% of the funds is in the Q1 quarter result of the peer group, and 85% of funds are beating the benchmark as well as peer group. From one year it traveled to about two, now it's about three years. Even three years basis, 70% of the funds are in the Q1 and Q2, which is what is being noticed. Again, the core funds, which are essentially where the major allocation happens.
60%-70% allocation comes from the core category or maybe focus category we can call it, which I again mentioned the names earlier. Those funds, we are seeing an incremental basis, flows is getting better. Definitely, a few basis point improvement. Ultimately, if it keeps improving, it will lead to a larger share coming in.
Okay. Got it, sir. Thank you and all the best.
Thank you. Ladies and gentlemen, that will be the last question for today, which is from the line of Komal Sharma from Antique Stock Broking. Please go ahead.
Hello, sir. Thank you for the opportunity. The first question is to understand the expectations in terms of cost growth for the year. The second one would be the breakup of your investment book.
Sure. Investment book. First is cost.
Yeah. Komal, cost would be, I think, the inflationary impact would be there. But other than that, we have already factored in the ESOP cost, which was a little higher this quarter. I think that will continue as we discussed a little before. I think cost would be in line what is there in Q2 and except the inflationary impacts, both in employees cost as well as the other business cost. And the second question was on? Investment book. Yeah. What is the question on investment book?
Treasury investment book.
Yeah. What was the question?
The second one on the investment book. The breakup of the investment book-
Yeah
between equity, debt and FD.
Yes. So we have around INR 3,890 crores as of today, our investment treasury book, which is deployed across largely into debt mutual funds and corporate bonds, and partly some share into equity schemes, which is in line with the consistent investment policy which we have. Yes. And equity share is between around 17%-18%, rest is all debt and corporate bonds.
Yeah.
Got it, sir. Thank you.
Thank you. Ladies and gentlemen, as that was the last question for today. With that, I now hand the conference over to management for closing comments.
Thank you everyone for joining us today. If you have any further questions, please contact our IR head, Paritosh Chitora. With this, we conclude the Q2 FY 2026/2027 earnings call. Thank you.
Thank you. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.