Ladies and gentlemen, good day, and welcome to the Anand Rathi Wealth Limited Earnings Conference Call for Q2 and H1 FY 2024-2025 . As a reminder, all participants in line will be in 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Feroze Azeez, Deputy CEO of Anand Rathi Wealth Limited. Thank you, and over to you, Mr. Feroze.
Good afternoon. Thank you, Sejal, for giving me the opportunity to talk to the audience. Good afternoon, and thank you everyone for joining us for The Earnings Conference Call for the Quarter and Half Year ended 30th September 2024. With me, I have our Group CFO, Mr. Jugal Mantri, our CFO, Mr. Rajesh Bhutara, and our Head of Investor Relations, Mr. Vishal Sanghavi. In H1 FY 2024, our consolidated total revenues grew by about 35% year-on-year to about INR 495 crores, and profit after tax grew 35% to INR 150 crores. We have revised our revenue guidance to 980 from 910, and we have revised our PAT guidance from 280- 295.
The mutual fund revenue registered a stronger growth of about 70% year-on-year to INR 195 crores of the 495 in H1 FY 2025. Total AUM grew by about 57% year-on-year to reaching about 75,084 crores. Since our guidance was 72,000 crores for the full year, and we've crossed that number, so we are giving a new guidance of about 80,000 crores with God's grace. During H1, our total net flows registered a remarkable year-on-year growth of about 128%, reaching 5,700 crores for the six-month period. Equity mutual fund net inflows achieved a year-on-year growth of about 64% to 3,116 crores.
Share of equity mutual funds in the AUM increased to 55% from 50% the same time last year. Return on equity on an annualized basis stood at about 44.4% for the first half year of FY 2025. In alignment with our policy rewarding shareholders, we have declared an interim dividend of about INR 7 per equity share for FY 2025. Now, in our flagship private wealth business, in the first half of FY 2025, we've added 1,066 new client families on net basis, bringing our total number of clients to 10,977. Our client-centric approach has resulted in 0.28% client attrition rate for the first six months of this year.
We have added 63 new relationship managers over the past 12 months from September last year, bringing the total count to 374. We have had an immense pride in achieving zero regret RM attrition for the fifth consecutive quarter, which is about 15 months period. No regret RM attrition. Regret RM, by which I mean any RM which has cost 40 crores of AUM, has not left us in about a 15-month period. Our digital wealth businesses, which is a B2B2C business, registered a growth of about 32% year-on-year to reach 8,826 crores. The number of clients increased 22% to 5,554.
The OFA business, which is an abbreviation to Omni Financial Advisor, which is a PaaS platform, has 6,188 subscribers with platform assets of about INR 1.55 lakh crores at the end of H1 FY 2025. This means the mean of the year-on-year growth very distinguished the data, means a little differentiated data, so I want your attention. For the last 10 quarters, our profits have grown on a year-on-year basis. The mean growth has been 33.9. The median growth is 34.2. The standard deviation of these 10 quarters, year-on-year growth is 4.5%. Our performance has been consistent and also market agnostic, is the belief we have. How do we check market agnosticity?
If you look at the worst Nifty 50 performance after we've got listed, was in the quarter one FY 2023, where the Nifty fell about 9.6%, which was April to June 2022. Our profit in that quarter on a year-on-year basis grew almost to the mean, which is 33.6. Now I will hand over the call to Mr. Jugal Mantri to take us through the financial performance of the company in more detail. Jugal sir, over to you.
Thank you. Thank you, Feroze bhai. Thanks, Sejal. First, let me speak about Q2 FY 2025 consolidated financial performance. Our consolidated total revenue for the Q2 FY 2025 stood at INR 250 crores, compared to INR 189 crores in Q2 FY 2024, registering a 32% year-on-year growth. Trail revenue was INR 106 crores, registered strong YOY growth of 69% from INR 62 crores in last year's same quarter. Our profit after tax stood at INR 76 crores, registering a 32% YOY growth compared to INR 58 crores in Q2 FY 2024. Profit after tax margin for Q2 FY 2025 was at 30.6% as compared to 30.5% for Q2 FY 2024, which was slightly better. Now, I will take you all through first half of FY 2025 financial results.
The revenue for first half FY 2025-
... stood at INR 495 crores, compared to INR 368 crores in H1 FY 2024, registering a 35% healthy year-on-year growth. trail revenue was at INR 195 crores, witnessing a strong growth of 70% year-on-year. Profit after tax also grew by 35% year-on-year to INR 150 crores for H1 FY 2025, compared to INR 111 crore for H1 FY 2024, and profit after tax margin was 30.2% for H1 FY 2025. So this is all on the financial numbers. Over to you, Mr. Vishal or Sejal.
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 their 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. The first question is from the line of Sanidhya from Unicorn Assets. Please go ahead.
Hi, good afternoon, everyone. Good set of numbers. My first question is, can you explain the different yields? What are the yields on different product segments, like Equity MF, Debt MF, NPS and others?
Sorry, your voice was a little muffled.
Yeah.
Go again. I'm so sorry.
Yeah. It's good now?
Yeah, it's a little much better.
Okay. So, could you explain me on the yields, on different products, like Equity MF, Debt MF, NPS and others for us?
Sure. The yields are on equity mutual funds about 1.08, 0.9% post GST. On a yield basis, yields are always computed per annum. So if you look at the yields of all the mature structured products which is greater than 1,500 over the last 12 years, the yield has been 1.17% calculated per annum on average assets, on structured products. And then coming to debt, debt is about 0.43 post GST, is the yield on the debt funds.
Okay, and what's the part that others include?
The others is practically raw material, because we believe in these three instruments, largely equity, mutual funds and structures, which is what intergenerational wealth is all about. Debt is also a smaller portion. Others is just, are assets which are, in custody now, as raw material for its alignment over a period of six months, one year. So others is something which we don't track the yield, because that's not what we recommend, but those are broker code transfers of PMSs, and all products which are in pipeline to get aligned into the three products which I stated.
Thank you. The next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Yeah. Hi, sir. Good afternoon, and congratulations on good set of numbers. So, sir, first question was broadly on the industry front. Like, we have been hearing that a large AMC has tried to cut the distributor payouts on the back book of AUM. So have you received any such kind of intimation? And like, just to follow up on this, like, in such cases, like, how should we see to it that our yields remain constant in this scenario?
Yes, some AMCs might have tried to reduce the yields of the distributor, where the TERs have come down because of mark to market. But since we are the only wealth management outfit in the country, for sure, which uses only equity mutual funds for long only positions, we don't. We have not sold one PMS, we have not sold direct equity, we have not sold AIF long only. We are, we stand apart in terms of only using mutual fund platform for long only positions, because we think that's far better Sharpe ratio than most other equity participation vehicles.
So our bargaining power is significantly more because we have only one platform, and I think that's the reason why you will not see a dip, and that's why you see a 70% increase in trail in spite of this pressure, which does not impact us as much or not at all. Does that answer?
Yes.
That's it, sir?
Yes. And, sir, and secondly, sir, just like, so while the net flows in the equity mutual fund have remained steady, but it has declined on a sequential basis, whereas in the industry front, like if we look at the equity flows in the equity mutual fund, so they have remained elevated and they have increased also, like, on a sequential basis. So, like, anything to look into it, like, why has been there a decline in the net flows on a QOQ basis, I would say?
Absolutely. Very good question, Lalit Sahab. So now that we've been listed for about 12 quarters, I'm trying to reiterate how you should look at our business, whoever wishes to keenly look at our business and seriously wants to understand this business, which I'm sure you do, Lalit. See, this business is about 1,977 portfolios. The client's objective? Risk reward. Whatever is the allocation is a culmination of an allocation which is bottom up rather than top down. What do I mean by that is, if my total 5,700 crores is the net sale for the first half year, if markets run up, I am duty bound to realign one's portfolio towards structured products or vice versa, depending on which asset has a larger mark to market.
For example, if you have first April 2023, if you look at our results, the structured product proportions were 29%, if I'm not wrong. Now it might be 23%-24%. Vishal, give me the correct number.
24.6
Proportion is?
24.66.
24.66. Lalit sir, now what happens is, why is this proportion come down? Because there's more mark-to-market in equity mutual funds, because our model portfolios outperformed Nifty by 16.88% last year, and it has outperformed as of yesterday by 66.09% on Nifty. So when I reallocate money from equity mutual funds to structured product for a client who had agreed to have 65-35, it might have changes in the allocation from a sequential quarter-on-quarter basis. So having said which, to answer your pointed question, what does this imply? This implies that there is some degree of realignment happening because of higher mark-to-market. So you should look at, if you look at my net sale, which is what we were aspiring to have INR 1,000 crores per month, did we get there?
The answer is no. We got somewhere close to that, five thousand seven hundred. Ideally, I would like to see this at six thousand. Does it answer, Lalit Bhai?
Yes, sir, but that would be on the overall trend, but I was more talking about from the equity segment itself, like Equity Mutual Funds scheme itself.
Oh, no, let me further elaborate for 30 more seconds. Now, if I am at 24.66 of structured products, if the agreed allocation is 29% before the mark to market, that implies that 4%-5% needs to move back to structured products, right? If I have to restore the allocation of first April 2023 with a specific client. So it might mean that I might sell some mutual funds and buy structured products or vice versa, depending on the mark to market, is what I was trying to help you understand, and it should be looked at the overall asset perspective because it is bottom up rather than top down. I don't sell mutual funds thinking it's only mutual fund business. I don't sell structured products thinking that it's only structured product business.
You're creating the portfolio and allocations are an outcome rather than an input.
Right. Right, sir. And sir, just last one data giving question, like, like in this quarter, like what has been our primary and secondary issuance in the MLD, under structured product side?
Jugal sir, would you want to take that? So Jugal sir, are you there, or should I read that? It is not primary, right. Three two eight three is primary for six month full period, and secondary is 950 .
Mm, sure, sir. And with that, sorry, sir, just last question, like, has there been any change, like post the taxation change, what is the current tax rate, what is there on the MLDs?
See, the tax rate change does not impact my structured product business, because the Sharpe ratio of the structured product is 1.93. Okay? Out of the 16 products which are there in wealth management, if some, and there are about 15,000+ IFIs, which a client can cut a check through. If you look at arrange them in a descending order of Sharpe ratios, post-tax or pre-tax, you will see structured products right on top, the ones which we make. So 1.93 is the Sharpe ratio of structured products. The next best is mutual funds, 0.78. PMSs are at 0.3, 0.4. That's point, which I'm saying. So does it change our product allocation? The answer is no.
Second is, that if you look at taxation, taxation is always at family level, and the great part of Section 50AA is that it counts all the gains as short-term capital gain, and short-term capital gain gives you the provision to use Section 70- Section 74 for any setoffs which an equity loss can throw up. So having said which, the average taxation at a family level, which we believe is about 19-20% for the maturity which have happened after the tax changes.
Okay. But in general, like on, if we talk about only the structured product, then I was just trying to refer.
No problem, sir. Okay, now let me elaborate further. Unfortunately, I'm trying to compress an answer which is an hour's discussion with a client to about 30 seconds, 50 seconds. But yeah, having said which, with that limitation, let me give you one more data point. If in India's new tax regime, which is the new tax regime, even if you earn INR 50 lakhs, the post-tax, well, the tax rate is 24% on a graded fashion, if you put it on an excel sheet.
So if there is a gain of INR 50 lakh, as per the new tax slabs, if I don't take any provisions of those Section 80C's and those total provisions of Section 80DD, if you put on a weighted average basis, even if there is a INR 50 lakh gain, INR 49 lakh gain, the weighted average tax works out to 24% and not 33%. And in a family of five, you will always have an HUF, which is a major HUF, which does not have a clubbing provision under nine, under the Section 65. So it's a longer story, Lalit Bhai. So as a standalone also, it's not something which can be at a product level, it's at an HUF level, including all provisions in the family. That's the point I'm trying to make.
Okay.
I can take this one-on-one in a meeting or something like that, and help you understand what does Section 65 say, what does Section 94(8) say, what does Section 70 to 74 say, Section 112 say, and 111 say.
Sure, sir. Thank you, sir. That this is very helpful.
Thank you. The next question is from the line of Krishna from ULK. Please go ahead.
... Hi, am I audible?
Yes, sir, you are audible.
Thank you. Great to see that the numbers are spiking year on year. My question is not so much around the numbers, but it is around people management, if I may say so. I do see that for the last five to six quarters, there's been zero attrition in your organization. I don't think this is very intriguing for me to begin with, so because when my relationship manager calls me from my bank, by the time I add him to my contacts, he's already switched jobs. So I don't know whether this is business as usual in Anand Rathi, but I find this to be a little fascinating, so would appreciate if you could give me some insights there.
Sure, Mr. Krishna. Point one, yes. First I would want to clarify, it's not zero attrition at a company level. We have 1,157 total colleagues at current point in time. The zero attrition is registered RM attrition is zero for 15 consecutive months. That's point one.
Mm-hmm.
Point two, we basically believe that RM is the easiest to retain because it is not... Unless you do something wrong, a RM does not need to start his life back from zero in a new platform. And
Mm-hmm.
We about six, 10, 12 years back, Rakesh, Sir, I, and some of our colleagues had discussed why we quit the previous company, and then we realized there are about five, six reasons why a person needs to change a job. Now, I, this is my third job, unfortunately. My first job was ABN AMRO. I spent seven years, and there was a reason why I left ABN AMRO, because they told me to sell insurance, and I was not okay with it. So, if you can make sure that those five, six items are not done in a company, then people don't leave, is our belief, and that's the hypothesis which is proved, point one.
Because an RM needs to convince 50 clients, 30 clients to come along, which is a tough task, especially when the client portfolios, if you look at our client portfolios, their Sharpe ratios for the last 10 years of my 297 largest client is greater than the best Sharpe ratio of another competitor, okay? Mathematically provable. So, Krishna, so what I'm trying to say is, this was RM. Regret RM attrition is zero point one. Point two, RMs find it very difficult to restart life. Unless the organization is being very unfair, there is no reason why Feroze, as an RM, should go to a new platform and rebuild life from zero. And we just have identified those five, six things which industry does wrongly and that we don't do. That's about it. We don't do anything extra.
We don't do contests. We don't give RMs more than what is said. We don't give them less than what is said. We give them exactly the same formula from 2007 , when Rakesh Sir set up the bonus formula or the remuneration formula, that remained constant for 18 years, 17 years, which has not happened in the industry. So that's one of the key reasons, stability of remuneration is one of the five, six reasons, why this is the way it is. We want to be the Finland of the corporate world, which is the happiest country as they claim.
Thank you, sir. That's all, sir. No more questions.
Thank you. The next question is from the line of Samyak Shah, from Sameeksha Capital. Please go ahead.
Yes. Am I audible?
Yes, sir, you're audible.
Yeah, congratulations on the static number. I just want to know about alpha generated on our model PMS portfolio. So can you just throw some light on that?
Samyak Sir, sorry, again, I'm not hearing your question with some detail.
Yeah. So alpha, alpha generated on our models portfolio.
Yes, alpha generated on model portfolio, we like to compare ourselves to Nifty because that's the most familiar benchmark. If you look at Nifty, of course, some people might debate, "Why not Nifty 500? Why not Nifty Smallcap 250?" But Nifty 50 is what the tier two benchmark most fund managers in India have chosen, and that's our benchmark as well. When given a choice, most fund managers actually have chosen Nifty 50, surprisingly. Even small cap fund managers have chosen Nifty 50 as their tier two benchmark. Tier one is mandated by SEBI. So coming back to now the alpha, first, I gave you some color on the benchmark, because benchmark has to be something which is familiar. Nifty, Nifty 500, my clients don't even know the levels of it.
Coming to Nifty, Nifty last year, I think 16.88, like I said, is the alpha on Nifty of our model portfolio. We went small cap heavy. We were zero small cap schemes in December. In March 2022, 2023. On first April 2023, we were suddenly three small cap funds. So we were zero small cap for four years with whatever God's grace and some degree of mathematics, we had decided that we will be out of small cap just before, or no, just after the IL&FS crisis in September 2018. So we stayed without any small cap for four years, then we went straight to three small cap schemes.
Now we have two small cap schemes, and that resulted, that whole broader market call, with God's grace went right, and that gave us some serious alphas last year. And then this year, of course, the liquidity in the small cap space continues, and we track that on a daily basis, and that's why there's a broader market rally continuing, unlike most of these institutions, several institutions believing that its broad-based rally is overdone. Till the liquidity tide turns, we believe that there is some more juice left. And so the alpha this year, I'll have to tell you the precise number, I will tell you as of yesterday, just bear with me for a minute, Samyak.
Yeah.
... I'll tell you precisely as of yesterday, it is seven point three four.
Okay, till date?
Yeah.
Right.
It is 7.34 to date. Yes. For this quarter.
Okay, okay. Listen, and my another question is like, we have seen increasing finance cost, this quarter, so is it like one-off item on account of buyback or anything else?
Yes. Google search, that's a good point.
Yeah.
So actually, see, if you recall that we have done the buyback and the treasury got deployed. So now whatever this finance cost is there, it is; there is no borrowing we have. In fact, we have got the other income, and the fixed deposits are placed, so as and when there is a treasury requirement is there, there is a overdrawn on the FD line, so it is FD only used, and the cost is largely on account of that.
Okay.
We don't have any borrowing in the company.
Okay.
We are a debt-free company.
Yeah, good. Thank you.
Has that answered your question? Yeah.
Yes, yes.
Thank you. The next question is from the line of Aman Singh from Profit Mart Securities. Please go ahead.
Hello, am I audible?
Yes, sir, you're audible.
Thank you for the opportunity, and, congratulations on a good set of numbers. So I wanted to understand, as you rightly highlighted, year-over-year decline on equity MF net inflows for quarter two is due to the realignment of portfolio towards structured products. So, can you give us the gross inflow numbers in equity MF, so for a better comparison of how the book is growing, and also for the market share that we have of the industry?
Aman sir, one second. Like, you in the industry. Aman, in the meantime, one of my colleague pulls out precise numbers, let me tell you. If you look at our Equity Mutual Fund sourcing for the first half year, I think it's about INR 3,300 . I'll tell you some industry numbers. Now, here I have it in my hand. H1, FY 2025, the net flow in the category as per AMFI is three, right? Category three of AMFI, as it is mentioned in the website, which is the active managed funds. The total net flow is INR 2 lakh INR 3,094. SIP purchases for the same period of H1, FY 2025 is INR 1 lakh INR 33,925 crores. Net inflows minus the SIP purchase is INR 70,069 crores.
Anand Rathi's number, sorry, is 3,116, and our SIP purchase is 310. Which implies that our net inflow in equity mutual funds for the same period in the first half year of 2025, FY, is 2,805, which makes it a 4% market share in lump sum purchases, and 1.5% market share, including SIP numbers. Because we have not focused on SIP being an HNI platform, I think we have missed that opportunity so far. We have woken up to that opportunity, and you'll see SIP numbers going up. But if you look at lump sum purchases, INR 2,800 crores is what has come from ARWL on a total base of INR 17,000 for the industry. Does that answer, Aman sir?
and sir, that would be the market gross equity inflow market share, including SIP, lump sum, and everything for H1?
For the industry or for us?
For us compared to industry, the market share.
Yeah. The market share is 1.5. 3,116 on a 203,994.
So it would be net inflow market share, right? I'm asking about gross inflow market share.
Gross inflow, we don't track it at all.
Gross flow it is-
... next to impossible to track because there are a lot of switches, from, and the realignment even within the equity mutual fund portfolio. So it is next to impossible to track the gross number. Besides the equity, what is important is that even the net inflow in the first half, which we have, is INR 5,700 crore in the products which are being distributed. Compared to that, we had net inflow of INR 2,500 crore. So in fact, the net inflow in our products which are being advised, it has, it has gone up by 127% in the first half of this financial year.
Right. Right.
Thank you, Gopal sir.
Yes. So, as you explained in quarter two, there was some realignment from equity mutual fund to structured products. So, was it across the categories in equity mutual fund, or you made redemptions from a particular category, like you did in small cap a few quarters back?
Yeah, no, no. See, we release a new model portfolio every15 months.
Okay.
Okay, then that's the realignment. Okay? The model portfolio is a lump sum now. The same 14 schemes I own, the same 14 schemes my largest client as an RM owns. So it is never gonna be so transactional.
Okay, got it. Thank you so much, and all the best.
Thank you.
Thanks, Aman sir.
The next question is from the line of Dipanjan Ghosh from Citigroup. Please go ahead.
Hi. Good afternoon, sir. So just, on the guidance part, when I look at it, for the second half, you have built in almost, a high single digit sort of, AUM growth, guidance compared to 1H, when I look at it, the accretion. But when I look at your, revenue numbers, or even when I look at your PAT numbers, for the second half, you are building in, tad lower than what you have achieved in 1H. Now, you know, given that, you know, OpEx structure probably might, when I now subtract and get less than OpEx numbers, OpEx numbers seems to be broadly flat is what you're assuming between 1H and 2H.
So now, just on the revenue part, I mean, why would you kind of assume a relatively lower revenue number for the second half compared to your first half, even when you are assuming a AUM accretion? That's my question number one. The second question is now, when I look at your flows that you're getting into your business, just if you could give some color between flows from, let's say, the new customers and from the existing customers, so what that breakup would be and if that has changed in the last year or quarter out there? And my last question is more from a structural perspective. I mean, in the segment you're operating, do you see increased competition from some of the domestic boutiques?
and if so, you know, can that lead to some sort of maybe not immediate, but maybe a near to medium-term pressure on the cost side?
Great. So firstly, from a guidance standpoint, sorry, I missed your name.
Uh, Dipanjit.
Dipanjan. Thank you, Dipanjan, for your question. Firstly, I think, if you would have heard us in the past, we always try to undercommit and overdeliver. That's our principle, and that's the principle any business which is supposed to be in the trust business. We, to clients also, we try to undercommit and try our best to overdeliver. We don't show Sensex INR 2 lakhs and then sell equity. We show Sensex can go down every eight months, 10%, and then sell equity. So one is the principle and the DNA, which Mr. Rakesh Rawal, who is the CEO of our company, and incidentally also our professional guru, as in business, is to undercommit, overdeliver. So any guidance numbers have to be seen with that color, and we also believe in God, so there could be surprises.
That's why we always have some conservatism and not look at sequential growth. Half year to half year growth are not supposed to be seen in this business for the nth time. And I'm mentioning this in my calls, that it is a business of managing money, and revenue is an outcome. I can't decide this is the revenue I want, and that's how I will manage the money. Okay, and we have to respect the fact that we have collected 75,000 crores of hard-earned money, which on average takes 15-20 years for every family to accumulate. So revenue can't result in allocations. Allocations have to result in revenue. So that's on the guidance part. Right. Second, which was, third question was?
Existing clients.
Existing is having new clients. 65 old clients and 35 new clients, okay? We believe that we are one of the wealth management outfits. We like to believe that we are more secure as a group of professionals, saying that we don't push people to start big. We say you start with whatever, one crore, but as long as you have INR 8, INR 10 crores, INR 15 crores as your investable surplus, I would allow somebody to start with one crore. Earlier, I used to allow them to start with INR 50 lakhs also. And once I establish that my Sharpe ratios, the worst Sharpe ratio is better than the best Sharpe ratio of somebody else, there is no reason why I will not be able to consolidate. That's why two-thirds comes from existing clients and one-third comes from new clients. And the third question was, what was the third one?
Third question was more on the competitive intensity, how do you see that shaping up?
The competitive intensity. Our competition is anybody who has a Sharpe ratio less than me. Okay, there are two, how we see competition, of course, it might look too idealistic. There is a competitor to sales team, there is a competitor to research team. Now, for example, if there is anybody better than us in terms of risk reward to a client, that is a competitor to my product team, Mr. Chetan Shenoy and 145 people. Saying that, "Why is somebody delivering a better Sharpe ratio than me?" If somebody is delivering worse off than me, then it's a competitor to my sales fraternity. Because, bhai, agar paise bahar achhe nahi chal rahe hain toh tum la kyun nahi rahe? Agar achhe chal rahe hain toh, Mr. Shenoy, aapki research team kya kar rahi hai?
So that's how we see, and we learn from our competitors. So to answer your question, competition will come, but there is enough and more, money, which is, not delivering, the Sharpe ratios of even 0.5, and people don't even measure risk-adjusted return, of their portfolio. So if you measure and somebody's doing very well, better than us, we don't treat that as competition. We let that be. And so we have the courage to say no to some clients, which I don't think, wealth management outfits have the client. Once I say no to those 5% people who are doing better than us and learn from them, I have the conviction to get the 95 in, and that's been the principle, sir. That's how we see competition.
There is so much underutilization on a risk/reward basis. You'll be surprised. Even INR 100 crore clients have a Sharpe ratio of point three. So many of them.
But, sir, if I can just come back on the first question one. You know, my question was not from a guidance perspective, more from the perspective that, you know, barring asset allocation, if I just look at your mutual fund distribution business, do you see any risk to the yield? I think one of the first questions was regarding the back book repricing from one of the larger AMCs. I mean, is that more of a trend that you expect all the other incumbents to follow, or it's just more of a one-off event from one of the larger players? I mean, the question is more from a yield perspective, how you see that shaping up, or is there any risk to the MF yield?
... I, we personally think that, we generally like to manage risk. Risks will be there. There is. I can give you 100% that not just the ten risks which I have written on my notes in my phone, there will be some unknown risks, and risks are practically the ones which you don't see coming, right? So I have total 17. I call, the green risks are higher likely risks are 10. So after having provisioned that is why, Rakesh Rawal gives the guidance of 20-25% for the next 10 years.
Got it.
To answer your question, yield compression unlikely. We were the only wealth management or one of the few wealth management outfits which went all trail in 2016, when it was regulatorily mandated in 2018. And we have not had to change our distribution and advisory model from 2013, January 1, when it has been released. Most of our industry participants have had to be toying between advisory, distribution, PMS platform for the mutual fund business. I think if I'm not wrong, at least three changes have happened in most wealth management outfits from 2013 in their business model. When we look at regulation, we look at regulation not from what is written, but between the lines. And, probably on a one-on-one discussion, I can tell you what we read as a regulatory change.
Yield compression is the least of our risks, and even if there is a five-seven paisa risk of having 1% only trade commission, we are very well poised to handle that.
Got it. Thank you, and all the best.
Thank you, sir.
Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.
Yeah, hi, congratulations on the great set of numbers. Just a couple of questions. Firstly, you know, you've been mentioning about your alpha generation. You mentioned your performance versus the Nifty, but could you also give some color as to how many of your portfolio schemes would have outperformed their respective benchmarks, and what would be the average beta over their respective benchmarks?
I can tell you that, but that's something which I don't track as much, but of course, I track, but that's not a commitment I give. Because everybody has a tier one, tier two benchmark. If you want to know what is the outperformance on the respective benchmarks, which I think is itself flawed, it's two point nine one for this year.
2.91. Okay, great. And the other thing is from a structural, you know, perspective, how do you see the share of your structured products, say, over the next three, five years? How do you see that kind of changing?
I don't think there could be too much change. When we started in two thousand and twelve, November, our first structured product issuance at Anand Rathi, we had a 30% allocation. At the maximum allocation today, it's 35. So we went in 12 years to 40, came back to 30, we are now at 35. For most of the portfolios, we recommend this. So to answer your final question, it's gonna be a plan B in the portfolio, and that, to my mind, would be one third or close to that for the next 10 years. Unless the macroeconomics change, if the delta, vega, gamma, theta, rho, which are the first order Greeks of the long-term options, change dramatically, which I think is unlikely.
Vega and beta, which are the second order Greeks, which we track, to make a product, unless they changed over its heads, there is no reason why this allocation would change, or the same product, which we have done 1,500x each, will change. We don't believe in innovation. We believe in optimal innovation, because innovation for the heck of it is something which is detrimental to the Sharpe ratios of the portfolio. That's what our study shows.
Okay.
Does that answer help?
Yeah, yeah. That's it from my side. Thank you.
Thank you. The next question is from the line of Rohan Mandora from Equirus Securities. Please go ahead.
Yeah, uh...
Sorry to interrupt you, sir. May I request you to please use your handset?
Yes, madam.
Yes, sir. Please go ahead. Mr. Rohan?
Hello?
Sir, we are not able to hear you very clearly.
Sorry, I will join back. Thank you for a minute. Sorry.
We can hear, we can hear you, Rohan, now. I could hear you. Sejal, I could hear Rohan.
Sir, he got disconnected.
Oh, hi.
Due to no response from the current participant, we will take the next participant. The next question is from the line of Sunil Shah from SRE PMS. Please go ahead.
Yeah, thanks for the opportunity. Congratulations, Feroze, and the entire team at Anand Rathi, Jugal and all. So, I've been there in the company for, like, a reasonable period of time, and I'm really looking at being there for, like, another five, ten years. As you stated, Rawalji and all are targeting 20%-25% growth over the next decade. That's the sense, and we are clearly preparing our company in that direction. Really, really appreciate, you know, the client acquisition, to employee retention, to the products, processes, everything. So my only point is this one, and don't want to sound negative, but, are we working or preparing for, or Feroze himself, as creating a proxy of Feroze in the organization?
Because Feroze has been there for a long period of time and has all the firepower today also when I hear him speak. But my only that six sigma event or the black swan is, Feroze kind of decides to move on or whatever, are we preparing any proxy? Just an outlier, completely minus three sigma event, but are we working towards creating any such thing? This is just one thought, because that's the only risk which I see in the company at this point of time. So just wanted to bounce this, just create some thought, and just want to hear your thoughts as it goes. Thank you so much.
Thank you, Sunil sir, for your question. Thank you to be our investor for so long, in your PMS, PNFI, Vishal. So, Sunil sir, see, but I think I'm not. I'm just a postman, to be honest, and I'm not trying to sound modest. Rakesh sir, who's a backbencher, is the person who's actually put the strategy in place. Segment was chosen by Rakesh sir. The strategy mathematical approach was chosen by Rakesh sir, and his experience is what I try and articulate. Today, like you rightly said, sir, I joined in September 2012, so I finished about 12 years. Now, I speak like Rakesh sir, but he doesn't speak so much in the public is why, it's misconstrued that it's my language.
Point one. Now, I will give you a little more tangible answer. This is just a disclaimer. In 2015 July, I was chosen by Rakesh Sir to be the Deputy CEO, not for a purpose of a transition, because one of us can die, right? To be honest, right? A Six Sigma event, right? Not Six Sigma, it's a certainty that one of us will die sooner unless we take the same flight and something happens. So on a lighter note here, I've had a very strong long chat. So, Sunil bhai, so what I'm saying is, right? On a lighter note. So, so we are two of us, point one, and not one. Okay?
I might be doing the talking in the public domain, but his brain is significantly more than mine in the business because of he joining in 2007, 1st April 2007 . That's point one. Point two, if you look at it now, sir, up the chain, how many unit heads in, okay, barring the last four, five hires, have been there for more than 12, 14 years. My Hyderabad unit is taken care of by Pratima, she's 17 years. Our Delhi unit is taken care of by Manish Srivastava, who's 17 years. Adil came with us, we are again now co-head Delhi. So if you just went the second in line, the average period the unit heads have spent is anything more than 11, 12, 13, 14 years.
We've hired three people from Karvy, who came in 2015, 2018, 2019, and, 2016. So they would bring down the average because they've spent some period. Then coming to the product head, who heads this division of 145 people, which is the brain in the anatomy, if I have to draw up an analogy. Chetan Shenoy, who is the product head, has worked as a colleague of mine, from the first day I started in the corporate world in 2004. On February 10, 2004, when I joined ABN AMRO, that was one of the first people I met. So we have worked together as a group for really long periods of time. Like Chetan Shenoy, 20 years, my product deputy head, close to 14 years.
So if you look at all the product top 10 people, I actually have six people + 14 people. Six people have worked as a colleague to me for at least 14, 15 years from 2010, 14 years, and the next in line in the product, 14 people, have spent at least eight years average, so the only way to prepare for somebody's absence in an unfortunate, unfortunate event is to have near zero attrition both at product level and the RM level. That's what we've tried to do, but you really set us thinking, Sunil bhai. We will try and see if there can be a more cogent plan, and I will take this as a feedback.
Yeah, I know, really appreciate the detailed explanation that you shared with me. And good to know the tie to the people working. So thanks for all this. That really puts to rest all the doubts that I had in my mind. Thank you so much, Feroze.
Thank you.
Wish you a real long journey ahead in all aspects. Thank you so much. Take care.
Thank you. The next question is from the line of Viraj Mehta, who is an individual investor. Please go ahead.
Hello, am I audible? Hello?
Yes, sir, you're audible.
Yeah, hi, hi. Great set of numbers, and quite a notable growth for the last two years, reaching almost a 4,000 number. Great achievement for those. I have only one question, which is, any plan of corporate action going forward? Say, the bonus.
So, like we said the last time also, in the AGM, I quote my chairman saying that we will surely consider corporate action, is what was said. And that stands true today as well, in the same manner which was told in the past. But one very interesting data, we made a predictive model to see which other companies would give a bonus. Maybe, if you go invest with Vishal Ji, he can share with you predictive analytics of which other companies end up giving bonuses on NSE 500. We've done some interesting data, and any company which has risen has a larger probability of giving bonuses, and any company which has given larger bonuses have risen, so vice versa.
Vishal Ji, get up. I think we can do.
Is that an answer?
... Viraj sir, so I'm giving you an abstract answer, but we've done some predictive analytics in terms of the NSE 500 companies in terms of bonus. Not a specific Anand Rathi, but whatever I had heard Mr. Rawal saying in the AGM, I'm repeating the same thing. Yes, we will consider. We believe in rewarding the shareholder.
Thank you. I'll get your details from the website, is it?
Thank you, sir.
Thank you. The next follow-up question is from the line of Sanidhya from Unicorn Assets. Please go ahead.
Hi, please, just to follow up that, the number of clients that is other than maybe, this H1 , FY 2025 or say one full year, if you compare from, H2 , FY2024 and H1 , FY 2025. So what kind of client base that is like in terms of the AUM that they are bringing? In which category do you place and what %s would you assign to, like, INR 5 lakh - INR 550 lakh to INR 5 crores and INR 5- 50 or more than INR 50?
Sir, your name I missed again. Sorry.
Sanitya.
Aditya, is it?
Sanitya.
Sanidhya. Sorry, yeah. Sanidhya, see, how we look at it is the first filter is we try and see whether the client is from our segment. What is our segment is INR 5-50 crores of investable surplus other than the offices and home he occupies. That's the first check we do. Let's assume Sanidhya's balance sheet, apart from the home he lives in is INR 15 crores. Then I know the first tick mark that he has the potential to be my client segment. Then I will tell Sanidhya, "Saab meri story sun lijiye. Aur aap ek crore se chalu kijiye to ek crore se chalu kar sakte hai. Yahi cheez aath mahine pehle hum pachas lakh se bhi chalu kar rahe the," but I think we've come some distance.
Unlike most private banks who say that you start with five crores, which we think is a little unfair because so most of the clients, most if not all, will be in investable surpluses greater than INR 5-7 crores and below INR 50 crores. We don't like to go after rich people who have got into money just now, unlike most of our friends in the industry do. They think this guy has sold a business forINR 200 crores. They will go to him. We would not want to go to him because I don't want to fight a cost war, and we like to get intergenerational wealth, and INR 5-50 crores is the segment, starting with INR 1 crore. Does it answer, sir?
Yeah, that definitely answers. And what do you hear from those people? Like, what are their expectations in terms of returns? What are they looking for really? Like, INR 5-50 is the, I think, the best segment in the entire wealth management industry. That's my belief.
Absolutely. That's a good segment, provided I am building a business on the basis of math. So if you ask me, what do these clients have? They don't have clarity. Okay? That's why our business is taglined as uncomplicated. What is happening to a INR 15 crore client, if I describe? He's distributing. He has put INR 5-7 crores in real estate. He's got INR 7-8 crores in financial assets distributed across three different financial advisors. One is surely gonna be his bank. He is acting like a INR 2 crore client to four people, and that is resulting in people selling him products which may not suit his need. So what is their first requirement? They, they don't want it, but the need is clarity of objective. They don't want it. They want something fancy to start with.
When we meet somebody, "Aapke paas naya kya hai?" is the first question. Hum kehte hain, "Bhai, hum entertainment ke liye nahi aaye hain. Hamare paas kuch bhi naya nahi hai. Wahi ghisapi ta, baarah saal se chala rahe hain." Right? Hamara yeh maqsad hai ki aapki jo IRRs hain, and your beta is measured. Today, most of the advisors or most of the clients that between INR 20 crore balance sheet will not even know the beta of their portfolio, right? So what do they want? They want new products. What do they need? They need clarity of objective. They need clarity of mathematics. They need services which are peripheral. We've done about 6,000, 7,000 wills, and most of the wills which we audit are incorrect, even if they are a INR 500 crore will. So we've done 7,000 wills.
We've listed down eleven most popular mistakes. They need it, but they don't want it. So we have to create the need before we address it. So uncomplicated is only appealing to a person whose life is complicated, and you open his eyes saying, "There is itni complexity." I have seen portfolios, you'd be surprised, hundred ISIN. Okay, hundred ISIN with a Sharpe ratio of point one. I've seen ninety, ninety-two ISIN with Sharpe ratio of minus point two. Right? So that's... So what do they need? They need some mathematics, and since this segment is filled with professionals, professionals respect mathematics because they have to present to the board at CXO . So they work with mathematics a little more than a promoter does, because promoter is lesser answerable than a professional.
I, as a professional, am more answerable than my promoter. So that's why the segment is good, and we believe in mathematics. That's why our RMs, being introverts, do a good job, because they straight come to the point, show the mathematics, and does not ask him what you ate last night or how was your golf game?
Great, great. And do we do any insurance kind of products?
Yes, sir?
Do we sell any insurance kind of products?
No, no, no, no.
Great, great, great.
Not my head.
Great, great, great. Perfect. Thank you, sir.
And, investment-based insurance. Would we have sold some term plans or general insurance to protect the house? The answer is yes. Anything which is investment and insurance mixed, trying to ek cheez se do nishan, finance mein nahi hota. Muhavron mein rehta hai.
Yeah, exactly, exactly. That's great. Thank you, sir.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Feroze Azeez for closing comments.
I'd like to thank everyone for being a part of this call. We hope we have tried our best to answer the questions to our ability. If you need any more information, please feel free to contact Mr. Vishal Sanghavi, our Investor Relations head, and our Rajesh Bhutara, who is our CFO for decades. I would like to extend my good wishes for the upcoming festive season, and may you have a great weekend, and thank you for your time and patience.
On behalf of Anand Rathi Wealth Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.