Ladies and gentlemen, good day and welcome to the Anand Rathi Wealth Limited Q2 H1 FY 2023 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Feroze Azeez, Deputy CEO. Thank you, and over to you, sir.
Thank you, Rutuja. So, good evening, good afternoon, everyone. Thanks to join us for the earnings conference call of the quarter and the half year ended September 13th, 2022. I'm joined with Mr. Jugal Mantri, our CFO, Group CFO, Rajesh Bhutara, who's our CFO, Vishal Sanghavi, who's our head IR, Chethan Shenoy, Director and Head Product and Research. We're also joined by the SGA team, which is our investor relations advisors. Let me begin with sharing a piece of good news from our perspective. In the recently published report by AMFI for the financial year FY 20 22, we were ranked among the top three non-bank mutual fund distributor as per gross commission.
Over the previous financial year, the growth in the mutual fund trail revenues was almost about 72%. In the B2C category, we were the highest if you exclude the aggregator B2B business models. Now coming to the strong performance we've had in this half year, not just on the flagship business, but on all three of the businesses, including the digital wealth and the omni financial channel vertical as well. Our flagship business, private wealth grew by about 15% year-on-year on AUM, in spite of a very lackluster market and a 3% downtick on Nifty over September 30th both years. A 9% increase quarter-on-quarter on the AUM.
On the back of huge penetration into the wallets, especially during sideways movements or bad markets and uncertainties, you're able to establish your credibility as a wealth outfit much better during bad times. Penetration has resulted in AUM increase. Clients refer you more clients during when their friends are struggling with other managers. That's why our net mobilization numbers have doubled when compared to the pre-same period previous year. It gives us immense confidence during sideways movements and not such great times and more volatile times if you're able to do well. During good times, the AUMs also increase because of the market movement and also due to the sentiment where people want to invest more money.
Bad times, penetration and references become higher. The other two growth verticals do very well during great times. Both the two correlated variables help you during opposite times. That's why you see almost about a 111% jump in our net mobilization numbers for the first half year. Of course, you would have read that we had a great increase in our client base. In terms of year-on-year, we've had a growth of 19% in terms of client addition. We are inching towards our target of 10,000 families in a calibrated fashion. The pace of client addition is seeing a very sharp tick as well.
On the digital wealth vertical, the AUM has increased by about 23% to INR 949 crore, which is a business which helps us standardize and scale it using the help of technology. It also helps us embrace the changes in technology, which can be there in our business on the private wealth side as well. Clients have grown by about 14% year-on-year to 4,065 clients in the digital wealth vertical. The OFA business is a strategic extension for capturing wealth management landscape to service retail clients through mutual fund distribution by using a SaaS platform or providing them technology platform.
As on the September 30th, we had close to about 5,500 mutual fund distributors associated with us with a contract administration and reporting of about INR 85,900 crores. Which we currently only monetize as a subscription fee. Later in the life of this business, when we find appropriate, could be an important monetizing tool. I personally think that I will stop here and I'll request Mr. Jugal Mantri to say a few words and take us through the financial numbers as well.
Thank you very much, Feroze . Good afternoon to all. Let me also first begin with a happy note to share that the board of directors has declared an interim dividend of INR 5 per equity share, which is 100% of the face value. This is in line with the company's endeavor to regularly reward its shareholders.
Despite all the external challenges, the company and its subsidiaries have posted a strong performance for the quarter and half year ended September 2022, backed by an overall improvement in operational efficiencies. Our consolidated AUM as on September 30th, 2022 stood at INR 35,842 crores, which registered a growth of 16% YOY and 9% Q-on-Q. Our consolidated revenue for the quarter ended September 30th, 2022 stood at INR 138 crores as against INR 104 crores in Q2 FY 20 22, registering a growth of 33%. While revenue for first half in financial year 2023 stood at INR 272 crores as compared to INR 202 crores in the previous, first half of financial year 2022, registering a growth of 34%.
Our PBT for the quarter stood at INR 58 crores, registering a growth of 40%, whereas PBT for H1 FY 2023 stood at INR 110 crores, registering a growth of 37%. Our PAT for the quarter stood at a healthy INR 43 crores, registering a growth of 41% as compared to INR 30 crores in Q2 FY 2022. PAT for H1 FY 2023 registered a growth of 37% and stood at INR 83 crores. PAT margin stood at 31.1% in Q2 FY 2023 and 30.4% in H1 FY 2023. EPS, earnings per share for Q2 FY 2023 stood at INR 10.3 per share, and for first half FY 2023 stood at INR 19.8 per share, registering a growth of 41% and 37% YOY respectively.
Return on equity for first half ended September 30th, 2022 stood at a healthy 43%, which was 41.7% in financial year FY 2022. Another area where we witnessed a strong momentum was the addition in number of client families. We have added almost 1,250 HNI client families compared to same period last year. Our total client families as on September 30th, 2022 stood at 7,928. In the last 12 months, we have added 37 relationship managers on the net basis. We continue to remain optimistic about the business potential and will drive towards our vision while assisting our clients achieve high quality experience in the journey of wealth solution. With this, we will now open the floor for questions- and- answers. Thank you. Over to you, Rutuja.
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. The first question is from the line of Rohan Mandora from Equirus Securities. Please go ahead.
Yeah. Hi. Good afternoon, sir. Thanks for the opportunity and congratulations on good set of numbers. The first question was on the gross inflows. If you could share what was the gross inflows for the quarter and split it across equity debt MF and the primary and secondary indications, sir.
Okay. Gross or net you mean?
Gross and net both are essentially.
See, we only look at net because mutual funds, when they exit one fund and they're recalibrating their portfolios to our model portfolio, there could be very large gross numbers, right? In a mutual fund, if I have five schemes, when I'm changing three, then the gross number will be very deceptive. Net number, I can give you some color on that. Gross number is very distorted. That's the answer gonna be. Of course, from the MLD standpoint, gross numbers and net numbers can be given to you, and I'm sure Jugal and Rajesh will be able to add there. Now coming to the net number, which is almost about INR 2,500 crores for the first half year. A large portion of that, which is almost 2/3 of it, goes into equity mutual fund.
Because we believe that when markets fall, and if you've seasoned your investors to expect a market fall, because that's the nature of the beast, they don't look for reasons for the fall, but they are in a hurry to actually take action. Last six months, markets have on average been lower than they were in the previous six months. Hence, we've had a net mobilization largely in the equity mutual fund side of almost about INR 1,500 crore-INR 1,600 crore. From an industry standpoint, if you leave SIPs out, the total net mobilization in the equity mutual fund has been INR 79,000 crore for the first six months.
If you leave the SIP number of average INR 12,300 crores, then the total net mobilization in terms of lump sum, which is the business we are in, unlike several other aggregators, was total about INR 6,000 crore- INR 7,000 crore. Out of which, INR 1,400 crore-INR 1,500 crore or even a little more has been our market share, in terms of net mobilization. It gives us immense pleasure because we are buying low, and creating a potential for higher return for our clients. Otherwise it's an academic statement to buy low. Jugal, if you may want to add a few points and if there's some gross numbers which Rajesh Bhutara you will have on the MLD side.
No, you are bang on the number. In the first half, we have added about INR 1,650 crore in mutual fund, equity mutual fund. There was some exit in debt of about INR 200 crore. Net addition was about INR 1,500 crore in equity mutual fund. In case of MLD, there was addition of about INR 725 crore. A small addition was there in other products to the tune of INR 300 crore. All put together, there was net accretion of INR 2,500 crore in the first half.
Sir, MLD gross?
The MLD gross issuance was about INR 2,300 crore.
Okay.
Okay.
and primary and secondary within that?
It's all primary.
I see. It's all primary.
Out of INR 2,300 crore, it is largely primary only.
Sure, sir.
Sure.
Sir, second question on Mr. Amit Rathi has resigned from the directorship. Just want to understand the reason for same, and are we looking at any replacement for him on the board?
Rohan, as you are aware, since you have been associated with us, Mr. Amit Rathi since last three years has been playing non-executive role in Anand Rathi Wealth Limited. He was non-executive director on the board. Having been decided to pursue his ventures in the financial services and to avoid any conflict of interest or overlapping, he has opted to be relieved from his position as non-executive director. We have got independent directors, more four independent directors, which are more adequate and as per requisite requirement of the company's law. We don't see that there'll be any requirement to have any addition on account of any non-executive director on the board.
Okay. Sir, thirdly, if you can share, what was the trail income coverage of fixed costs for total?
Rajesh.
The trail income in fact. See, we have seen good traction in the trail income also. As of now, the trail income which is getting covered, so this is largely about 85% of the fixed costs that get covered by the trail income.
Sir, I would like to add one thing, Jugal.
Yes, please.
We've had a 33% increase in trail income between the same periods of the first half year of this year. The increase is 33%. Overall revenue increase is about 35% in spite of markets not supportive. If they had supported, the ratios could have been far better. Our internal target of having 50% trail and 50% upfront revenues from different sources remains, and we are inching towards that. That is what our stance is, internal target of getting to 50/50. Of course, like Jugal said, 85%-90% of the trail revenue covers the fixed cost currently.
Sure, sir. Thanks. I'll get back in the queue if there are more questions. Thank you.
Thank you, Rohan.
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Amit Shah from Motilal Oswal Financial Services Limited. Please go ahead.
First question is, what is your growth outlook on clients within the INR 50 lakh to INR 10 Cr bracket?
Growth outlook in the INR 50 lakh to INR 10 Cr bracket. Is that what he said?
Yes.
See, our focus segment is INR 5 crore-INR 50 crore balance sheet size. We don't look at INR 50 lakh to INR 10 crore. If somebody's got, apart from the assets he currently consumes, the house he lives in is not counted. If the person has between INR 5 crore-INR 50 crore balance sheet size, putting all assets together, then it's my target segment. In that segment, we think our growth of 20%-25% in client set is what is our projection from our business standpoint. Of course, the pie is expanding at a similar pace from this segment perspective.
Getting the similar growth numbers for our business should be possible given the fact that now that we have been a listed company for close to a year, it creates a perception or at least creates a basic governance, kind of a mindset, and that helps you acquire more clients. 20%-25% growth in the target segment, which we currently operate. Do we mandate a client to start with INR 5 crore? The answer is no. We start them with INR 50 lakh to INR 1 crore as well, because if we are able to deliver what's the expectation we are creating in the minds of the client over a period of time, he gives us a larger wallet share because we are very mathematical when it comes to giving our advice.
Right. Sir, what would be the cost of AUM acquisition in this bracket versus the above 50 Cr bracket?
See, cost of acquisition of AUM?
Cost of AUM acquisition. I'm not looking for a direct number, but, whether this would be higher than the INR 50 crore and above bracket or not. Just if you could give some color on that.
See, the cost of acquisition and AUM addition is negligible. What it is now if I have RMs, I don't have a separate acquisition engine, which acquires the clients. RMs are the person who take references from existing clients, and I don't pay existing clients to refer me people. Over a period of time, every decision we take, we give mathematics for our clients better prudence, in terms of decision-making. For example, now, if somebody says that he's got 40% of his money in real estate, I would compute the per annum return of his real estate portfolio, which he would have never computed. None of us as Indians compute what is the per annum return of a real estate portfolio and still have half our monies there. Quite a few HNIs do.
When I compute and show him that he's got 8% compounded return in multiples of value, it'll look larger. When he sees 8%, it is an eye-opener for him. He's putting his property on an anvil to sell, which I don't pay any cost for. When he sells those properties, he consolidates money with us. If he says, "I'm doing very well in mutual funds," I take a transaction dump from him and tell him, "If you followed my model portfolio, you would be richer or poorer." If he is richer, he sells his mutual funds from competition or transfers broker code to us. Everything is mathematical, so there's no cost which can be ascertained to asset acquisition.
For client acquisition, if you say what is the cost, I would say there will be some cost because I do physical events as well. Pre-COVID, we used to do a lot of physical events in five-star hotels where you get 200 HNIs in a room and give them a presentation. Those are now far and few between, but every event used to cost us an average of INR 5.6 lakhs. Which, in this financial year would be INR 4 lakhs-INR 5 lakhs such physical events, which could have gone up to almost 30-40 events before COVID. Our cost remains low because we have done about 100-odd webinars where there are about 30-40 participants each as an average, and there's no cost to that currently.
Great. Lastly, sir, how do you see the digital wealth segment scaling up, and what do you see are the key challenges?
The digital wealth, if you ask me, the key challenges there are to have a ever-changing technology, to make sure that we're not just succumbing to what market does in the digital space. Because in the digital space, people are focusing on reporting. We are looking at technology to create advice more than report, because reporting is one element of it, and execution. So technology for execution and reporting has reached the epitome in the industry of fintech business. But advice creation mathematically and using technology for that is what I think is the challenge which the industry faces. From our perspective, for us to have a digital wealth presence is to create a standardized offering, which is what we have. We just run four portfolios.
In spite of having a private wealth outfit with 8,000 families approximately, I try and fit all the clients to four portfolios which are centrally managed and implemented in different markets. If you speak to my Delhi private banker or RM and speak to a Bangalore guy, he's gonna give you very, very similar, if not identical advice. If I have a standardized proposition in the private wealth business, it makes sense for me to see how I can power my RM to not manage 50 clients, but manage 200 clients with technology. It's always gonna be a phygital model. It's not gonna be a pure digital model, assuming a U.S. Kind of an extrapolation to the Indian context, which is the behavioral patterns are very different. U.S. has been investing in capital markets ancestrally.
In India, my dad never invested in equity. Extrapolating the technology strategies there to this side of the continuum of the world may not be as relevant. Coming back to your pointed question on the technology side, the biggest challenge is to use technology to create advice. Our key strength has been standardization. In spite of standardization not having a huge appeal in an HNI, it's difficult to tell him that, "Sir, I will not customize. I will standardize." Finance will reach clients only if you standardize. You can't run 8,000 different portfolios and leave the judgment to 270 RMs and assume that he will get the best efficient portfolio, right? That's our strategy. If I have a standardized
If I've been able to bring 270 RMs to the same page, that we all give away our individuality and create similar portfolios, I am the best poised to use technology to scale. Because the toughest part is to convince the client that you don't need customization. Customization might sound fancy, it is more marketing, but finance will never reach you if you customize a portfolio, because the guy who's sitting there in Bangalore or in Coimbatore will not know the best finance to create risk rewards which are efficient. It's like an asset management company saying the sales guy will be the fund manager.
Right. Great. Thank you for the color, sir. That's all from my side.
Yeah, absolutely. Sorry, a longish answer to a very pointed question, but wouldn't have articulated that in a few words from my perspective.
No, no. It, the color helped. Thank you.
Thank you. The next question is from the line of Mayank Agrawal from InCred Capital. Please go ahead.
Hi. Thanks for the opportunity. Mayank from Intrade. My first question is regarding the RM addition. You have not added RM for last two to three quarters. What is our strategy going ahead? In this also, we have learned that you also add some AM to RM. What would be your plan going ahead? How many AM would you be making RMs? How would your ratio between RM and AM, the AM would be converted to RM going ahead? Secondly, second question is on data point. Can I get a revenue breakup between mutual fund, other security and other, which you have usually gave last quarter? Yeah. Thank you.
Sir, I didn't hear your second question, though.
What is the revenue breakup between mutual fund, other security and IT-enabled and other? Basically you gave the data up to last quarter.
Yeah, sure. Firstly, let me throw some light on the RM addition. Our RM addition strategy is gonna be completely driven by how many people whom we can currently absorb and make them sizable RMs. Over the last one year, given the uncertainty, we have gone a little slow. We've still added about 30+ RMs from the AM fraternity, largely. Lateral hires also happened. Currently we continue to follow the principle of one relationship manager mentoring one AM, which has worked beautifully for us. We have a small group of people who need to reach INR 40 crore-INR 50 crore of assets, and that 70 RMs is the limit we put.
If those RMs cross the bridge, then I have more capacity to transmit the rest of them from the AM to the RM fraternity. Even if I delay an AM's promotion by three to four months, it just solidifies his and increases his chance of success when he actually transforms into an RM. What will we currently look at? We think that this ratio, because we have not promoted as many, there is more ripe individuals who are currently potential RMs. You may see an inverse correlation between the RMs promoted to what can be promoted because the rest of them have you've created a larger pipeline in the interim period. From an AUM breakup standpoint, I can just tell you conceptually, and Jugal Ji is the best person to answer very, very pointed numbers.
When we look at a client strategy, we look at 2/3 of the money in mutual funds, one-third in MLDs and some work in progress, which is raw material coming for alignment into these two products, largely, as we recommend only these two, three products today, including debt, equity mutual funds and MLDs. You would see a very similar proportion. It's not academic that these proportions are not being followed in the marketplace. That's why you will see almost about INR 18,000 crore-INR 20,000 crore of mutual fund assets, about INR 9,000 crore-INR 10,000 crore of MLDs. There is a lot of money which is work in progress, which first moves to our Demat account, and then we align it to our strategy, where the client gets efficiency as the prime driver and decision-making criteria.
Jugal sir, if you may want to add a few things and give pointed numbers.
I think what you said is that in terms of the relationship manager addition team, one thing which is absolutely clear is that besides 271 relationship manager, we have got a strong force of 265 account manager. As you rightly said that the addition to the RM fraternity, that is a graded process, and these people are upgraded and added to the RM fraternity over a period of time. Just to answer what Mayank has asked, to reaffirm that, we have got a very, very strong force which is up for elevation in next 18-36 months' time, and that itself has got the potential to double our RM force to almost 500+ number of RMs.
Okay, thanks. Thank you.
Okay, bye.
Bye.
Thank you. The next question is from the line of Devesh Agarwal from IIFL Securities. Please go ahead.
Good afternoon, everyone, and many congratulations for good set of numbers. Given that I just wanted to understand better the MLD gross inflows number that you shared. When you said INR 2,300 crore is the number for the first half. And if I recollect rightly, in the first quarter it was INR 1,500 crore. For the second quarter, are you talking about INR 800 crores of gross inflows in MLDs?
In the first quarter, the gross issuance was INR 1,100 crore.
Okay.
In the second quarter it is INR 1,235 crore.
Was it, sir, INR 1,100 crore plus INR 400 crore of secondary issues?
Out of INR 1,100 crore, INR 350 crore was secondary issue. Right. This quarter, the secondary number is INR 180 crore.
100 and?
80
80. Okay. Broadly, the yields that we are getting this time is around 7.5% on the entire MLD portfolio.
Yeah, around that.
Around that. Right. Perfect. Sir, secondly, basically in the past you have said that the first half is usually.
Yeah. You please continue, Devesh.
No, no, sir. Please continue.
No, no. The yield which was about 7.5% in the first quarter, that is around 7% in the Q2.
All logistics.
Okay. Sir, generally you had said in the past that our first half is relatively weaker and second half is much stronger. We have already achieved INR 83 crore of PAT in the first half versus our guidance of INR 155 crore for FY 2023. Is it this time you think that the two halves will be equal or you are looking to upgrade your FY 2023 guidance?
I don't see any reason that second half will be equal with. Historically, what we have seen that will definitely, that holds true, and I am sure that the second half will also move in the similar fashion, as it has happened in the past also. As far as guidance concerned, we have already achieved 50%, 53% of the guidance which have been given on the profitability front. But internally, our belief is that as long as your performance or the likely performance, if it is in the range of say 10% of the guidance, given, though it can be like, 5%-10% of overachievement, let the guidance remain same instead of keep on tweaking number on every quarterly basis.
That is why we are sticking to the guidance which have been given in the beginning of the year. Hello?
Yes.
Devesh , just to reaffirm that the guidance which we have given, we are still holding that and we don't see any reason to believe that this year's second half will not be in line with what has happened in the history.
Understood, sir. Thank you so much and all the very best. Thank you.
Devesh, I would like to clarify one thing.
Yeah.
This is a very important thing. When you said yield is 7.5%, like Jugal s aid, yield is 7%.
Yes.
Yield and yield is a number which generally in our business is referred to the per annum income of a specific instrument. Okay? When you look at an upfront of something which is a five year instrument, if I calibrate the yield on the market, average market value of all the 1,000-odd products which have matured is about 1.17% per annum. Okay? That will be the yield. Yield is always per annum generally.
Got it. Annualized.
All right? Annualized yield, what happens in a mutual fund, like for example, I, on my 11 mutual fund model portfolio, which I buy for myself and most of our clients end up buying the same 11 mutual funds, I make 1.11% post GST. Okay? With that 7% number it might make you believe that you're earning more on mutual fund, on MLDs. If your mutual funds commissions are on market value, face value recognition of 7% is on face value, right? If the product gives you a 13% IRR, then if you look at the market value, average market value, because 92% of our MLDs which have matured have given the desired coupon. None of them have ever lost capital. In spite of 1,024 maturities being done from December 2012, we have made issuances.
Point I'm trying to get to is, anybody looking at our business thinking that yield of MLD is 7% may be looking at that is not the yield. Yield has to have. Now, when I look at bond portfolio, bond yields mean the per annum yield at the purchase price in the secondary market. That's what I wanted to clarify. We, out of curiosity, work backwards to find out the bond maturities, what did I end up making per annum. If tomorrow, if I don't want to do an MLD, an equity mutual fund will give me the same yield. It's only accounting difference from an upfront to a trail basis. Does that clarify, Devesh?
Yeah, that is very, very clear. Just wanted to know one more thing. The average duration of our MLDs is now five years, what we are selling?
Yes. What we have is all our decisions are driven by client objectives. We, after COVID and given the way markets reacted, thought that an MLD, which is a three-year MLD, has a lesser probability of success because the two-year additional. That's why August 2020, we did lot of mathematics and realized that even if one year gets wasted in a five-year product, you still have four years to achieve your targets on Nifty because these are Nifty-linked MLDs. If I take a three-year product and like you see the one year got wasted, right? Last October to now, market has not done anything. If I buy a three-year product, then I have to make up for the lost ground in two years. The probabilities of success for my client goes up as five years.
That's why it's five years. It might optically look like I wanted to make more money upfront is why it is five years. I'm clarifying it. Everything in our company emanates from client objective. Period.
Perfect. Thank you so much.
Thank you. The next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.
Yeah. Thanks for the update and congrats on the very good numbers. Am I audible clearly?
Very clearly, sir. Yes.
Okay, thanks. My first question is this, 11%-12% of our AUM which sits in others. What is that and what kind of revenue do we generate over that?
See, others could be PMS transfer. When we look at, we don't recommend PMS because we have mathematically seen efficiency doesn't happen in PMSs because of the higher standard. The client has PMSs, so I take a scope for cold transfer. If it is PMSs, there is revenue which comes to me. If it is tax-free bonds which are work in progress. If it is stocks which are work in progress, those are the three large categories in the others which we take as raw material to convert to our strategy. Because when I meet a client, he has a INR 5 crore-INR 7 crore balance sheet. He says, "Okay, I give you INR 1 crore, which is liquid. I have INR 1 crore mutual fund.
I'm transferring broker code to you, but the other INR 2 crore is sitting in the Demat account. Take it. I have one PMS, I can transfer it to you. I have insurance policies with different people, exit them over a period." That's what is my work in progress, WIP. Coming back to your pointed question, what do I earn on it? There are three different categories, largely, out of which direct equity and tax-free bonds we don't earn. In PMS transfers we start earning from day one. Unlike in mutual funds, COBs, change of brokers don't give commissions from first day, PMSs do. It's reasonably different. Yeah, that's still work in progress.
That goes back to my specific yields of 1.5%, which I make on these two products, plus the debt mutual fund, which gives us INR 0.40 crore-INR 0.50 crore a trade.
Okay. The second question was on the quantum of MLD. We did about INR 2,300 crores of MLDs. Now, if I look at our AUM of roughly INR 35,000 crores and 30% of that being in MLDs, that's INR 10,500 crores. Now, with an average five year kind of maturity, we would. I'm simply dividing it by 5. The annual rollover, just the rollover part of it would be about INR 2,000 crores-INR 2,100 crores odd and then whatever the growth we are doing in it. But in the H1 itself, we have done INR 2,300 crores. So is there a risk that in H2 the quantum of MLDs would be significantly lower?
In fact, the maturities are very, very healthy. Let me not put a number to it. What happens is that whatever you issued three years back is not coming back as capital, it's coming back with an appreciation. Are you with me?
Yeah.
If you ask me how is our maturity pipelines over the next few years, very, very healthy. Second, what kind of proportions do clients rollover? When we had done it during IPOs, it was 78% of our clients are repeat buyers. Does that continue? Does it become stronger with credibility? We have improved credibility further because we have been issuing for 10 years. 10 years. To say that I've been issuing for 10 years, I've finished 1,000 maturities, which is, might be the largest, I don't know the number, but one of the largest issuances plus maturity. The credibility increases, so repeat buying becomes more and more solidified. Unless I tell him to put 5% as a company into equity mutual fund, which we did last year, monies get rolled over.
As per the gaps which are there in the products which we do as the decision-making criteria. Somebody's given me INR 100 crore if you have a balance sheet of INR 100 crore, if you have decided 55 goes into equity mutual fund, 30 goes into MLDs, and 20 goes into debt, or 10 goes into debt, anytime he adds fresh funds, the allocation happens as per the gap in the decided allocation. That's how strait-jacketed advice in our company has gotten.
Yeah. Okay. I'm not looking at any case in the next six-
Sorry, you were not audible at the last part. Jugal, please feel free to add whatever you want to add.
Yes.
It's perfect. I think Nirmal must have understood that, when you are talking about the MLD value, whether it is INR 9,000 crore-INR 9,500 crore of as of now the book which is there, and as Feroze brother has told that even if you take a mean appreciation of 60% on the AUM in the next five years, your INR 10,000 crore can become INR 16,000 crore. Now if you divide by 5 you will see that annual issuance, even if there is a rollover of 90%-95% of INR 3,200 crore annual maturities, which could be, that can translate into the assured business of around INR 3,000 crore new MLD issuance. Is it clear, Nirmal?
Yeah, that's clear.
Okay, very good.
Yeah.
Thank you.
Now-
Does that answers your question, Mr. Nirmal?
Not sure.
Hello?
My audio-
Mr. Nirmal, your voice is breaking, sir. As there is no response from the participant, we'll move to the next question, which is from the line of Senthil Kumar from Joindre Capital Services Limited. Please go ahead.
Good afternoon, sir. Thanks for the opportunity. I want to understand the management's outlook on AM guidance of INR 39,000 crore for FY 2023. In the first half of FY 2023, AM increased by 16% to INR 33,842 crore. I could see 17% drop in private wealth AM inflow in the second quarter on a sequential basis. Another thing is, you know, only 14% incremental AM guidance is achieved in Q2 of FY 2023 against the 27% in first quarter. On the back of that, is the management confident of achieving AM target in the second half of FY 2023?
Let me take that.
Okay.
Jugal, you wanna add something first?
No. You can go ahead. I'll edit. No issue on that.
See, our AUM addition comes from two sources, right? One is the new money you bring in and the change in the market value of the underlying, INR 35,000 crore approximately, right? Over the last one year, the mark-to-market have not been a huge contributor. Average, they end up contributing over the long term of 10 to +10. Since we've not got support from there, that's why you are at 16% AUM growth. Are we confident to achieve the guidance on the AUM bit? Very, very confident. Of course, not if the market fell 20%, right? Because it has two components. Are we confident to add similar numbers in terms of net mobilization? Not for this six months, but for the next 10 years and growing.
Because there is an element of external variable which will dictate the AUM, net mobilization, which is fresh money, we think will become better in the second half, from the INR 2,500 crores. Our internal target for the first six months was INR 500 crores per month. Of course, we marginally fell short to, INR 2,500 crores. The target continues to add. If the markets don't disappoint extensively, we will surely meet, we should most likely meet our AUM guidance. Jugal, sir.
No, I think you have very aptly answered that we should not look at the AUM which is driven largely from the Nifty performance. Reason being, in case if you look at the AUM on the August 17th, when market is around, say, INR 17,900 crore, you will find that the AUM is up. Whatever we have been discussing, it is higher by another 4%-5%. As you rightly said that the Nifty, which was, say, around INR17,500 crore on March 31st, and it is almost 2.5%-3% down compared to that. In spite of that, in case if we have achieved the growth in AUM, besides taking any credit on account of the average appreciation in the equity related portfolio, that is quite impressive.
Once, that gets factored in, definitely will be much more than the target or the guidance which has been given by you. Is it clear, Mr. Selvakumar?
Yes. To achieve a target of 39,100%, we have achieved 35,843%.
Your audio isn't clear.
Am I audible?
Yeah. If you can speak up a little, it'll be very audible.
To achieve AUM guidance of INR 39,000 crores, in the first half we have achieved INR 35,843 crores. Remaining balance of the second half, we have to achieve INR 3,157 crores of AUM. In this INR 3,157 crores, how much the proportionate mix between the two components, as you said, new AUM inflow and the market movement? The breakup between the two components, how much the management is expecting from this together?
See, like I told you, our internal target for this year is to bring INR 500 crores of new money every single month.
Mm-hmm.
Okay? Market movement can sometimes give you a fillip. Unlike the last quarter, market didn't give you a fillip. AUM is a picture, photograph, right? But the new money you bring is like a movie. It's a continuous variable. To answer your pointed question, I told you our internal target in terms of the fresh monies which need to come on a monthly basis. If that's 6 into 500, that's 3,000. That's our internal target to add new money. Now, whatever is the differential, we have to hope and pray that the market movement or the value of the MLDs also go up, debt also goes up. Overall, client portfolios, if they grew by 6%, 7%, 8% also this financial year, we'll be able to meet that number. Anyways, AUM is the most fluid number.
As you look at a five-year investing, four-year investing, our AUMs are best poised because we are now in the non-bank B2C category, we are the largest equity mutual fund holder, okay? With some, as of now. That's what CAMS data tells me. Now, if we have a target of capturing in the next few years or even a decade, a 3%-4% of the market share of the entire equity mutual funds in India, will we get it linearly? The answer is no. Today, from whatever we have as a market share on the equity mutual fund, which is close to 1%, we want to take that to 3%-4% because that's what we want to master in, right? The equity mutual fund.
Because we don't do PMSs, we don't do AIFs, we don't do private equity, we don't do unlisted stock, we don't do REITs, we don't do InvITs. Because all those I don't buy myself, so I don't give it to my clients. Our focus on AUM addition is gonna be paramount. Of course, the fluidity because of its market, mark to market nature is why I'm not giving you a pointed answer, but I've definitely given you my internal target to achieve on the net mobilization.
Okay. Thank you. Thank you. That's it from this end.
Thank you. The next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Yes, good afternoon, sir. Thank you for the opportunity. Sir, just wanted to understand on the MLD issuance part. Of the INR 1,200 crore of MLD which has been issued in Q2, could you tell us, could you break it down between the issuances of our parent company and the IDBI's MLD?
Sorry to interrupt you. Your audio is not clear at all, so I'm not able to pick up. I'm sure Jugal, are you able to hear sir's question? No, no, Lalit. We are. This is a completely jumbled up voice which we are getting.
Hello.
Hello.
Hello.
Yeah. Yeah. There was an echo. Now I think it is done.
Mr. Lalit , can you please speak little bit louder? We cannot hear you, sir.
Now, is it audible?
Perfect.
Please go ahead.
Yes, sir. Sir, on which we have done in this quarter, could you break it down between the group company issuances and the Edelweiss issuances? Like how much would we have distributed?
Yeah. Rajesh, can you give us the split? Jugal, if you can add something. Yeah. The ratios are. Rajesh, if you can give the precise numbers.
Yes. Hello?
Okay. Let me tell you. Whenever we launched a product, we approved them in October, November last year. In a few months where we had the product, five, seven, eight months we have done. One or two months we've not done their issuance because there's a name change from Edelweiss to the PAG entity.
Okay.
We are waiting for that whole thing to happen. We are very selective about which issuer we take. That's why for the last 3-4 years we had no issuer other than the internal one, sister company, which is ARGFL. The ratios were as much as 1/3, 2/3. 2/3 internal, 1/3 external. That's the approximate weightage between the two issuers which we had. From zero external to 1/3 external or even 40% in a few months is what conceptually the order of magnitude numbers were.
Sure, sir. Since last quarter we had highlighted that the employee expenses would typically range about 45% of the overall revenues. However, in this quarter it has further improved to about 43%. Just wanted to understand from the trajectory from here on. Would we see that this number could further improve? Or like what could be the outlook on this front on the employee expenses, right?
Jugal Sir.
We are working on an operating leverage ratio of about 1.8. Okay? Wherever you see that the revenue goes up, the cost will have the positive impact on the cost. This number was. The broad range will remain, say between 42%-45%. That would be the employee cost range. Okay? In case if we have the similar quantum jump in the revenue, definitely there could be some improvement on that cost front, but that would be very marginal.
Sure, sir. Thank you, sir.
Thank you. The next question is from the line of Pallavi Deshpande, an individual investor. As there is no response from the participant, we'll move to the question, which is from the line of Rohan Mandora from Equirus Securities. Please go ahead.
Yeah. Sir, thanks for the opportunity. Just one question. In terms of new flows that we had got, what proportion of that was coming from new clients that were acquired during the quarter?
Yeah, sure. I can tell you the approximate number. When we acquired close to 150 clients a month, the average ticket size which people start with is INR 80 lakhs-INR 90 lakhs. I'm just telling you approximate numbers. Maybe one-third from new clients and 2/3 from existing ones. Does that answer, Rohan, right?
Yes, sir. Thank you a lot.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Jugal Mantri, Group CFO, for closing comments.
Thanks, Rutuja, and all the participants for your active participation. I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with our IR head, Mr. Vishal Sanghavi, or our CFO, Mr. Rajesh Bhutara, or Strategic Growth Advisors or investor relations advisor. Lastly, on behalf of the management, I would like to wish everyone a very happy Diwali and a prosperous new Samvat year to each one of you in advance. Thank you very much.