Please note that this conference is being recorded. From the management team, we have with us Mr. Navneet Munot, Mr. Naozad Sirwalla, and Mr. Simal Kanuga. I now hand the conference over to Mr. Simal Kanuga, who will give us a brief following which we will proceed with the Q&A session. Thank you, and over to you, sir.
Thanks, Neerav. Good evening, everyone. We'll start with some industry-level data points for the year that has gone by. The industry closed the year with AUM of INR 53.4 trillion, YoY growth of 35%. Net flows for the year came in at INR 3.5 trillion. The largest contributor to the net flows were actively managed equity-oriented funds. They attracted INR 2.4 trillion in FY 2024, a notable increase from INR 1.6 trillion in FY 2023. The contribution of NFOs to this number was INR 546 billion. Over and above actively managed equity-oriented funds, equity index funds saw net new flows of INR 247 billion.
Net flows into debt funds were INR 83 billion, debt ETFs at INR 109 billion, so that adds up to INR 192 billion, though debt index funds had net outflows of INR 90 billion. So all in all, net flows of INR 102 billion in debt, that is active and passive combined.
The industry continues to set records in terms of monthly SIP flows, with overall contribution for FY 2024 reaching INR 2 trillion as against INR 1.6 trillion in FY 2023. The SIP flows in the month of March 2024 reached INR 193 billion. Furthermore, equity-oriented ETFs attracted flows of INR 293 billion in FY 2024. The unique investor base for industry expanded to INR 44.6 million. That means industry added INR 6.9 million new investors. Now moving to us. We concluded the year with an AUM surpassing INR 6 trillion, showcasing a growth of 39% year-on-year with a higher tilt towards equity-oriented assets. During FY 2024, we expanded our product offerings in sectoral/thematic space by launching five new funds.
On passive front, we enhanced our bouquet by launching five index funds and two ETFs. Our systematic transactions, that is both SIP and STP, saw flows adding up to INR 23.9 billion in March of 2024.
This number was INR 17.1 billion in March of 2023. Notably, our SIP AUM now represents 37% of the actively managed equity-oriented AUM, more or less in line with that of the industry. We witnessed healthy growth in our unique investor count. We saw addition of 3 million new customers during the year, and the total number of unique investors now stands at 9.6 million with 16.6 million live accounts. For FY 2024, industry added 6.9 million investors, and of that, 3 million reposed their faith in us. Lastly, we continue to hold the pole position when it comes to market share in individual investor AUM, and second highest in terms of B30 AUM. Moving to financials, our revenue from operations for FY 2024 came in at INR 25,844 million, growth of 19% YoY.
Operating profit for the year added up to INR 19,000 million, a growth of 22% YoY, with a stable operating profit margin of 35 basis points. PAT for the year was INR 19,458 million, growth of 37% YoY. We would like to highlight that the effective tax remains lower, primarily due to decrease in deferred tax charge for the current quarter, mainly attributed to the holding period of certain investments transitioning from short-term to long-term. Finally, board earlier today has recommended a dividend of INR 70 per share as against INR 48 per share last year, translating into a dividend payout ratio of 77%. This is, of course, subject to shareholders' approval. I'll hand over the call now to Naozad before we open for questions for his comments on our operating revenue. Naozad, would you take this?
Thanks. Thank you, Simal. Good evening, everyone. So firstly, there is a one-off in this quarter due to year-end true-ups. We, of course, try to estimate distribution costs with utmost care and precision, but they are still estimates. As we see it, the same should get aligned during starting this current quarter. You would have noticed a fall in the direct TER of some of our schemes during the last quarter, and the same has been reinstated to an extent starting April 1, 2024. For example, for the Small Cap Fund, its direct plan TER decreased from 72 basis points on 31st December to 58 basis points on 31st March, and subsequently increased to 63 basis points on April 1.
In case of Hybrid Debt Fund, direct plan TER decreased from 127 basis points on December 31st to 119 basis points on 31st March, and subsequently increased to 124 basis points on 1st April. Similarly, for the Credit Risk Debt Fund, the direct plan TER decreased from 97 basis points on 31st December to 91 basis points on 31st March, and consequently increased to 96 basis points on 1st April. The direct plan TER for Transportation and Logistics and Dividend Yield Fund increased by 7 and 5 basis points, respectively, between 31st March and April 1. Over and above, we also saw a similar kind of adjustment in case of some of our other debt funds.
To sum up this point, there is a one-off which has led to a bit of extra margin compression, and we see most of it getting realigned starting first quarter of the current financial year. This would just be a fraction of a basis point statistically, but that itself is a meaningful amount for us, especially when the scheme is looked upon from the perspective of a particular quarter. Finally, I can tell you that our management fees on equity stand at around 59 basis points, 27-28 basis points for debt, and similar 12-13 basis points for liquid. This is for the period starting 1st April based on the current AUM. So assuming AUM and asset mix being constant, we should be back at around 47 basis points from the current quarter onwards. I think we can take questions from here.
Yeah, Neerav, I think you can start lining up questions.
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 touch-tone 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, you may press star and one to ask a question. The first question is from the line of Dhaval from DSP. Please go ahead.
Yeah, hi. Thanks for the opportunity.
Sorry to interrupt here. Voice is not coming so clear. Can you please speak through the handset?
Yeah, is it better now?
It's still coming muffled a little bit.
Is it better now?
Yes, thank you.
Okay. Thanks for the opportunity. So just had one question relating to the yields for the quarter. You explained this one-time readjustment. I just wanted to understand what led to this relatively large readjustment in the quarter? And in the past, we haven't seen this kind of an impact. So I just wanted to get a little bit of background around this. And if you could just repeat the sort of broad expectation of yield based on the current mix that you talked about at the end of the commentary? Yeah, that's the only question. Thanks.
Okay. Let me try and explain this. So the regular plan TER is computed based on the steady prescribed formula, while direct plan TER is reduced to the extent of distribution commission, right? Now, what the distribution system is held and how much the commissions are moving are variable, so that there is an estimate of there's this estimate that comes into play. If we underestimate commissions on an overall basis, we need to reverse the expense ratio, so on and so forth. So without getting into accounting complications, again, I would like to reiterate what we said earlier, that we are now at 59 basis points in equity, 27-28 basis points in debt, and similar 12-13 basis points in liquid. So that's how it so estimated revenues for, say, April to June quarter, therefore, should be based on these numbers and not the Jan-March quarter numbers.
As I stated, it is a one-off and has already got corrected to an extent or realigned.
If you can repeat the guidance or expectations that you talked about.
No, he's asking about the so it is 59 basis points in equity, 27-28 in debt, 11-13 in liquid. So based on that, if you look at current AUM and the current asset mix, that number would be approximately 47-odd basis points.
Understood. Very clear. Just one last housekeeping point is on dividend policy. Should we expect this to be the revised dividend policy for the company, or I mean, just how do you think about dividend payouts from here on?
I think over the last two to three years, you would have seen that we have increased the dividend payout ratio year-on-year, and that's the way the board has been thinking about this. We don't have a stated dividend policy as a percentage matter, but if you see the historical trend last two to three years, the payout has been going up. We obviously cannot second-guess what the board would do going forward, but at least from the trend, you can see that the board has been forthcoming in increasing the payout ratio.
Got it. Thanks, and all the best.
Thank you.
Thank you. Participants, you may press star and one to ask the question. Next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead.
Hi. Thank you for taking my question, and congratulations on a good set of numbers and actually an even stronger sort of operational performance. So two things from my side. First, can you talk a little bit about the competitive intensity that you are witnessing? Flows were very strong in the last quarter, and are you seeing increased payouts? And as a result, you had to sort of pay out more, which is why this adjustment is happening right now, or just in general, get a sense of sort of competitive intensity in the market? Second, on your staff costs, there is about a INR 47 crore impact of ESOP charges. I wanted to get a sense of what the ESOP cost would be over the next few years. So those would be my two questions. Thank you.
So, Madhukar, on the first one, I think competition intensity, I think the answer is constant. It is as good or as bad as it has been. The distribution commission payouts haven't really gone up in this quarter. The trend continues to be same over the last few quarters. This adjustment, as Naozad explained, has nothing to do with any kind of excess brokerages that have been paid or anything on those lines. I'm sorry. I'm just answering on behalf of Navneet. So Navneet has got an extremely bad throat. He's in the room, running a bit of temperature, so just kind of saving his throat a bit. So that is the first one. I think on the ESOP one, Naozad, would you want to take that?
Yeah. So I think when we sort of granted the stock options last year at the same time, we had given a broad guidance that the total taxable cost of last year's grant was about INR 55 crores. The way the amortization works is typically 60-odd% gets accounted as an expense in the first year. Then it drops to around 30%, and then 20%, and then it rolls off. This year's cost includes about INR 47 crores of one-time ESOP costs. This is, of course, a non-cash charge. For the next year, I think this number is around INR 20-odd crores, but it's just a non-cash charge from ESOP accounting.
Right. Got it. Thank you.
Thank you. Next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, hi. Firstly, could you just give some numbers as to what were these yields that you've given at the beginning of April on asset-wise? It would be great if you could give some color on as to how they were there in the Q4. And secondly, from a more granular growth perspective, what are your thoughts on plans in terms of investing into some branch expansion, or how do you see the channel mix evolving in the next two or three years for us? And lastly, on HDFC Bank per se, what has been the traction there, and how do you see the further momentum in HDFC Bank from the next two or three years' perspective? Yeah, those would be my three questions.
So Prayesh, if you look at, for the quarter, our revenue reported is INR 6,955. And if you look at the quarterly average AUM, right, it was INR 6,129. So if you look at that, based on that, it's around 45-46 basis points is what the number is. Now, as against that, I think Naozad earlier mentioned that number starting as of and that you can take it on the closing AUM. So that is, we opened 1st April at the 31st March closing AUM. So on that number, if you look at it, we spoke about 47-odd basis points. So does that kind of answer your question?
I was looking for more breakup in terms of equity. What was the equity yields and debt yields in the quarter?
I think we'll just leave that at composite number.
Sure, sure, sure, sure.
Because you will have to, so you can theoretically go and look at the expense ratios of all our schemes and do that multiplication. But I think this is where it is. Kind of Naozad gave a breakdown about some of the schemes where the expense ratios had fallen, particularly during the quarter, and have again gone up starting 1st April.
Sure, sure, sure.
The branches, Prayesh, as you are aware, that we started the year by opening 24 new branches on 2nd of January. With that, now we are present in 254 locations. Out of that, 174 branches are in B30. In fact, the new 24 branches, most of them were in B30 locations. We have always stated that while we continue to invest in our digital infrastructure to support our partners, but we also need physical presence for the warmth and the relationship and knowledge sharing that we need to do at the local level as well as the servicing. We'll continue to invest in both.
Got it. On the HDFC Bank?
So on the HDFC Bank, I think, as we mentioned, for the last couple of quarters, we have been progressing pretty well. Our teams have been engaging across all levels. We have done a lot of mapping of their clusters with our clusters, their branches with our branches, their people with our people. We are engaging with various teams in the bank to have a greater synergy and to leverage the most from the potential that has arisen. The opportunity at hand is very big, and we'll do everything in our capacity to capitalize on it. I think I mentioned in the last call or maybe before that that we have put in a dedicated resource to look after this channel. And I must say that the engagement levels are very, very high. I just mentioned about the expansion in the physical branch network.
This also helps us in terms of servicing these branches. Happy to state that our flow market share in bank's book is higher than the book market share. That's encouraging.
Got that, got that. Thanks, Nav. I'll come back on the queue.
Thank you. Participants, you may press star and one to answer the question. Next question is from the line of Mohan Lal from BOB Capital Markets Limited. Please go ahead.
Yeah, hi. Thanks for the opportunity. So my first question is in terms of the operating expenses. In terms of AUM, it has been around 12 bps, maybe lower than the last year, but I see that it is kind of constant when you look at three to four years. So can we actually assume that it is actually a little difficult, even in a good market, to go below 12 bps in terms of the operating expenses in terms of AUM?
I'll take that. So see, our total expenses, as you said, were around 12 basis points per FY 2024, right? This was led by a people increase, investment in technology, and digital. So we are quite optimistic on the opportunity in front of us, and we do believe that we have just scratched the surface and are fully committed to embrace any opportunities for investment and expansion.
We opened 24 new branches early this year and constantly evaluate additional opportunities for growth and expansion. Keeping in mind the ongoing evolution of technology, we are steadfast in our commitment to continuously enhance our digital capabilities. So this year, we saw total costs go up by INR 72 crore on an absolute basis. That's 12%. And if we exclude the non-cash charge for ESOP, the costs increased by INR 65 crore. That's around 11%. We managed INR 6 trillion of AUM, 254 branches, 1,509 people on rolls, around 500 people off rolls. And for all of this, our total spend is, I think, INR 684 crore for the year. So put the number again. Back five years ago, in FY 2019, we had spent a total of INR 482 crore, right, if you exclude the fees and commission. There was an accounting change during that year.
And so our increase over the last five years aggregated 42%. So I think the question of how this will look going forward, we don't want to make any guesses here, but we'd like to state that we have managed this cost well over the last several years, and there is no reason for us to believe that we will falter on this front. So prudent spending is something that is well ingrained in our culture. Also, let us clarify that we will not shy away from investing in the business, and we'll actually go all out and hunt for opportunities to invest. Focus is to create top-of-the-line asset management company over time.
Actually, if I can just add, right, basically, three or four years back, we were at 13, 14 basis points, and every bps for us now is INR 60 crore. So we have come down from 14-odd to 12 now.
Right. No, no. That's what I'm saying. So basically, in a good market, I mean, it's fair to assume that below 12 bps, it's not possible. And 12-13 bps is something that we should expect going forward.
Don't want to make a guess there. Let's see how it goes.
Okay, fine. Lastly, in terms of we recruited close to around 228 employees over the last 12 months. We just wanted to know whether it's only because of the branch expansion or basically, in the general course, we recruited these employees?
I think a large number of them are the salespeople on the ground as we have been expanding. Also, in some of the other capabilities that we have been building, whether it's alternatives, a lot of people in technology and digital and client services. As Naozad mentioned earlier, that we won't shy away from investing, and that includes hiring people.
All right. All right. Thanks, and wish you all the best.
Thank you.
Thank you. Next question is from the line of Saurabh Kumar from JPMorgan. Please go ahead.
Hi. So first is, I'm sorry.
Sorry about your voice breaking. Can you please come to a better reception area?
Is this better now?
Yes. Please continue.
Yeah. Okay, three questions. First is on your run rate revenue. Basically, you said your run rate will now be INR 47. Based on that, can we assume that if the current mix assumes, then your EBIT should come back to the 36-odd basis points now?
35, Saurabh, right? Last quarter, means if you take all this, I think it should remain in that range. So assume that 47, assume that 12, everything else being constant, then you get to 35.
Okay. Okay. I think I got to 36. Okay, fine. 35 is okay. The second is, sir, is essentially you mentioned that your flow market share is higher. How much higher can you quantify? How much higher will it be, right?
On the flow side, we have always mentioned we don't share that data. There is so much online data already available. Actually, from a competitive perspective, we don't share that. Yeah.
Okay. Okay. On the HDFC Bank channel, how much will it be higher versus book share?
We talked about HDFC Bank channel, by the way.
Yeah. So I think, Saurabh, out there also, it is higher than what our book share has been generally in the 25%-30% range, but the flow share definitely is much more.
I mean, much more will be like 50% more, 100% more?
So Saurabh, see, I'll tell you where the thing is, right? If you look at our overall share also, I'm talking about ex-HDFC Bank also, it's much healthier because of various factors that you are aware of. And so if overall share is higher by, say, for example, if our share was X and it is X plus 20%, in HDFC Bank, it is better than that. That's why I'm saying 20 is just an example. That's not a number.
Okay. Okay. Understand. Okay. And lastly, so if you just think about your active equity market share over a period of time, so you obviously come down from 17. It's now going up. It's nicely gone up to around that 13%-odd mark. So is 17 what you were in, let's say, at IPO during 2018 still aspirational, or you think that is now a very different—I mean, that would be difficult to achieve? Because now you have the distribution. You have the performance. You think that 17 you can claw back to?
Oh, that'd be fine. Remember, correctly, we were at 20 , 10 years back in 2010.
Yeah, yeah. So let's say from 2018.
As a benchmark. I mean, on a serious note, the market dimensions have also changed, right? I mean, you have the largest distributor in India, which is a closed I mean, the largest bank distributor in India, which is almost a closed architecture. You have a few other large banks, which are highly guided architecture on the retail side. Some of those things also kind of impact the overall growth because you have to compare the right denominator with the right numerator. But from, I think, given all the strength that we have, the way we have invested over the years in business, our aspiration is always to keep increasing from wherever we are and while we feel happy about whatever incremental gains that we have made, but the hunger is a lot more. That's all I can say.
Okay. And just one final question, if I can. So your slide seems to suggest that of the incremental users which have been onboarded in the industry, your incremental market share is near 40%. Is that more direct, or is it because of the bank?
It's a combination of everything across all channels, both direct as well as distributor and within the distributor across all channels. So we've been gaining market share and gaining new unique investors into our fold.
Okay. Got it, sir. Thank you.
Thank you.
Thank you. Next question is from the line of Saurabh from Multi-Act Equity. Please go ahead.
Yeah. Hi. This is Akshat from Multi-Act. So I just wanted to understand on one point, the 47 basis points revenue.
Akshat, sorry. Can you speak a little louder, please?
Yes, sir.
Hello?
Yes.
It's better?
Yes, please.
Yeah. So the 47 basis points revenue yield when we think about that and within that equity, when we are understanding that it is 59 basis points, that would be under the assumption of current AUM. But since all the top three or four funds are now above INR 50,000 crore mark, so when we see a mark-to-market gain in these AUMs, so what could be the potential impact of 8%-10% mark-to-market gains in these funds on the 59 basis points that we have for the equity as of now?
So I mean, this is what I mentioned. In every quarter, there is no escaping margin dilution due to the telescopic pricing. We did see our active equity-oriented AUM rising by INR 1,432 billion during the year. That is like 62% YoY. And some of our large schemes, if I look at Balanced Advantage Fund , saw its AUM increase from INR 520 billion to almost INR 800 billion, resulting in a TER reduction of 13 basis points. And similarly, our Mid-Cap Opportunities Fund grew from INR 350 billion to over INR 600 billion. That's leading to a TER decline of 19 basis points. But this is a happy dilution. I mean, I'll be happy if the market goes up 10% and we have more gain because this number is just a statistic. More important is the actual profit that we make or actual revenue that we make on this.
I mean, I will any day take higher AUM with lower margin rather than the other way around for obvious reasons.
Right. So when we say higher AUM with lower margins, is the revenue yield or operating profit?
Increasing.
On operating profit basis, the incremental AUM would still be around 35 basis points, or even that could be lower?
No. Operating profit, if you look at it, it would not be lower, assuming that the AUM rises because the AUM will give us extra revenue, right? And thereby, the absolute operating profit will go up, and if you kind of divide it by AUM, it would remain there. So if let's assume that the equity markets go up by, say, 100% in a year, of course, despite the dilution, the operating profit margin would expand. Okay? Operating profit is highly dependent on the asset mix, right? The dilution is, as Navneet pointed out, this is a healthy dilution in the sense that our revenues go up. Maybe the statistical margin doesn't look that attractive.
Okay. Yeah. Thanks.
I mean, all this dilution happened because the AUM this year grew by INR 1,432 billion. Just to put that number in perspective, that was our AUM, if I remember correctly, on 31st March, 2020.
Right. Right.
Equity AUM.
Right. So when we say margin, we mean yields, right? So the only concern is that the incremental AUM that flows into equity, be it due to flows or due to mark-to-market, our incremental revenue on that would be around 40-45 basis points. And our operating margins today are at around 35 basis points. So the incremental cost for this AUM, do they stay at around 7-8 basis points, or they are higher? And hence, this is slightly dilutive to the 35 basis points of operating profit yield that we have today. That is.
No, no. I think so. No, no. That is not the way this would work. See, look at it. It is strategy-wise. So let me put this in numbers. So let's assume that we are running a particular strategy, which is, say, INR 50,000 crore of AUM. On INR 50,000 crore, as Naozad earlier pointed out, say, our margins are. I'm just taking that illustrative number, say, 59 basis points, right? Now, 50 becomes, say, for example, INR 55,000 crore. Now, margin gets diluted, say, from 59 to 57. So my revenues now are 55,000 into 57, which is higher than 50 multiplied by 59, right?
And then even if you divide that by 55,000, it might look like that 57 basis points, but the absolute earnings is higher. If you look at the costs that are debited to the P&L of the asset management company, they are very different so-called numbers, right?
The numerator there is very different. Once you divide that by the total AUM, that will give you the resultant basis points of spending on our cost. The residual or the difference between the two will give you the operating revenue. Even in the example that you are citing, the operating profit margin would look equal or better based on the numbers that we discussed.
Sure. Understood. Thank you.
Yeah. Thank you.
Thank you. Next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
Hi. Good evening, sir. Hope I'm audible. So a few questions. First, with the 59 bps that you mentioned, I would assume that is as on the closing AUM of March 31st. So that's the first question. Second would be, I would also assume that the current yields on your fresh equity flows, it still continues to be lower than the blended book. So qualitatively, can you give some color in terms of the divergence or the delta between the fresh versus the blended? How that divergence would have changed over the last few quarters compared to, let's say, April 1, 2024, versus, let's say, last year April or the year prior to that? How that would have changed? Third would be on the MFDs.
If I look at your equity growth through the MFD channel versus others, there has been a significant divergence both for the quarter and also for the year. Is it that your flow market share accretion in MFDs would lag the other channels? Also, in respect of this, I think you have gained in the direct side. Given the current construct where your yields on fresh is lower than blended, every time you gain market or every time you mix in direct increases on the equities, you tend to benefit on the blended yields. Assuming this trend changes on MFDs or business through banks, HDFC Bank revises, can that lead to some amount of margin pressure out there? Those are my questions.
So I think Dipanjan will try to answer. The first question of yours was 59 basis points on 31st March. Yes, that's right. We opened it on 1st of April at 59 basis points. Current yields still lower in terms of flows? Absolutely. The flow is lower than the flow margin is lower than the book margin. So the flow margin, as we mentioned on the last call, ranges in the 50-60 basis points versus the book at 59-odd basis points that we made a mention of. Third point that you talked about is basically the distribution mix. Now, distribution mix, this is the flows that is coming into us. And this is not about the market share that we get from each of these channels.
Now, we have also mentioned that in the past that the book on direct was at the start of the year around 23-odd%, but we have always mentioned that the flow from direct channel is materially higher, somewhere in the 27, 28, or even 30% in some of the months. So because of that, now you are seeing a higher and higher tilt falling in favor of direct plans or the direct as a channel. That also includes fintechs and RIAs. If you look at the pie chart that we have depicted in the presentation, that actually gives you the breakup that we have kind of our AUM across varied channels, banks, MFDs, national distributors. But that does not really mean anything in terms of our market share in those respective channels.
Lastly, our margin, whether money comes in direct or through any of the channels, is constant, right? The management fees, as per regulation, has to be a constant number. So our margins are not kind of getting impacted by whether the flows come in from direct or from any of the distribution channels.
Okay. Maybe just on the last point, if I understand correctly, the direct TER is your gross TER minus the blended distributor payouts on the backbook, not on the fresh business. Now, given that fresh business payouts are tagged higher compared to the blended payouts on the backbook, I mean, very mathematically, isn't the net realizations on incremental direct flows better than the net realizations on incremental regular flows?
No more, I think, because the management fee number between both is 45% by regulation. That's not the case.
Got it. Okay. Thank you and all the best.
Thank you.
Thank you. Next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Yeah. Thank you, sir, for the opportunity. So just two questions. One, you have added that we have added people on the alternative side. So just wanted to know what are the different strategies if we are looking for FY 2025 and FY 2026 on the alternative side and any product pipeline for the next few on the MF side?
Certainly, the total headcount increase was a little over 200, a large number of them for in sales, and also as we expand other channels, like I had mentioned, whether in the digital side, whether on the alternatives on the investment and the distribution side, the servicing side, and technology, etc. Your specifications on alternatives, so last time you mentioned, we gave the update on our fund of fund. We have commitment to the tune of INR 9 billion from over 300 institutions, family offices, and HNIs, and hope to raise more capital to further expand our product proposition within AIF. We have hired two senior resources on private credit side. We do see that category as an opportunity over the next few years. We will soon launch a product there.
I understand. All right. Thank you, sir. On the AMC side, are we looking at any new product launch or any scheme launches over there?
We are looking at some more thematic funds. So actually, we are going live with the next NFO, the Manufacturing Fund, later this so actually, next Friday. On 26th is when the NFO opens. So that is something on the cards. And then we'll gradually evaluate if there are any other opportunities that our investment team is comfortable with.
Sure. Thank you, sir.
Thank you.
Thank you. Next question is from Abhijeet Satre from Kotak Securities. Please go ahead.
Yeah. Hi. Good evening, everyone. My first question is that I mean, what we have seen is that incrementally, I think retail money is sort of also fluctuating across categories and kind of quick to change preferences, right? So to that extent, incrementally, I think you guys are gaining a lot of share in larger-sized funds such as Balanced Advantage or Large Cap or even Mid-Cap. So I mean, at some point of time, do you want to optimize your yields given how funds move across categories, or will it always be a blended number and whatever the number comes out across different funds?
You are saying optimizing by what? Like we encouraging flows in a certain set of funds?
No. No. See, this is in the context of the fact that the fund performance is very strong, right, to the extent that a lot of these people come and ask for these funds, right? So does it make sense to optimize for yields in the way that you are able to, let's say, better protect your yields at an overall blended level?
Oh, you're talking about the commission?
Yeah. Yeah. Exactly. Yeah.
Of course. I mean, it's a balance between two. On one side, you have to keep the competitive environment in mind. And on the other side, as you rightly mentioned, we also want to optimize. You're absolutely right. So I mean, you keep looking at both and try to you don't want to lose out on market share when your performance is good, when your products are approved, and when there is demand or pull for the product. At the same time, we remain very, very mindful of the profitability that we want to maintain on these products. Yeah.
But just broadly, directionally, I think where the incremental money is flowing, should we be really? I mean, everything else remaining constant, just the blended yield number will have further more pressure this year. Would that be a correct assumption?
So Abhijeet, I think we monitor yields internally product-wise, right? And we are definitely very, very cognizant of the fact that we need to balance it well. Plus, we don't want to have a very wildly fluctuating distribution commission policy, right? You need to kind of align yourselves because these are the same set of your partners who help you when your performance is slightly muted and otherwise. So I think we balance that quite well. Yields under pressure, I think Navneet kind of expanded on that, right? That is a fact of our business. The telescopic pricing is what the regulator has kind of defined for the industry. But honestly, more we think about it, we are not really perturbed about increasing AUM, falling yields because hopefully, over a period of time, it'll get well compensated.
Got it. Second one.
Abhijeet, that lower TER in that product relative to, let's say, some of our peers would also lead to that much of alpha. Wouldn't the sell-ability of that product increase over a period of time in our favor?
Sure. No.
So what I'm trying to say is other than looking at from a very narrow perspective of.
Yeah. Yeah. No, the observation was that I mean, when we look at fund flows across fund houses and across categories, there is a very wide divergence to the extent that few funds are very clear winners and are gathering a substantial share. So to that extent, I mean, is there a case for better pricing power? is what I was coming from. But I got your answer. Yeah.
Yeah. Abhijeet, but if you look at most of our products, and I think you can look at just the change of AUM, and I know a lot of you do that exercise in terms of change of AUM and change of NAV, if you look at it in all dominant categories, be it Large Cap, Mid-Cap, Small Cap, Balanced Advantage, Focused Funds, Large and Mid-Cap, Multi-Cap, all these categories, we've been getting healthy flows.
Understood. Understood.
See, my second question was that any comment or color around how the newer fintech channels are now driving flows, any interesting trends out there?
Yes. I think over the last couple of years, they've become quite prominent, particularly on gathering new SIPs and bringing new investors to the industry. It's a key distribution channel for all AMCs, and it's growing at a rapid pace. In fact, as a group, they have registered 17.7 million SIPs in the current fiscal. We are available across all fintechs and have a healthy market share in new flows and new SIP registrations. We have a dedicated channel which drives the fintech strategy. We have our backend well in place to integrate our platform with theirs. This is already operational and smooth. So with increased product range, all the products that have been launched with strong performance that we have got with all the marketing efforts that we make and our communication, content, etc., we are confident to get a fair share of this channel.
Got it, Navneet. Thanks a lot.
Thank you. Next question is from Shreya Shivani from CLSA India. Please go ahead.
Thank you for the opportunity. Most of my questions have been answered. I just want one clarification and probably a guidance on the debt AUM. So you've mentioned in the previous few calls about leaving aside the debt index fund that your market share has been stable. What I can gather is from the monthly numbers that have come out that the market share on annual basis between March 2023 to, say, February 2024 or March 2024 has also largely been stable. So any outlook or how should we look at this segment going ahead? Would it be a more stable segment in terms of market share, or any strategy, anything that you can help me understand the segment better?
This is the third consecutive year where debt funds as a category have seen net outflows. So this year was a net outflow. Last year, as well as the year before last, the industry has witnessed net outflow in this category for a variety of reasons, including maybe the overall market environment and also maybe the taxation change this year would have also impacted a bit. Maybe some more money would have come this year but for the change in the taxation. But you might have noticed as an industry, we all believe that there is tremendous potential in fixed income category. This is a long-term track record. Some of our strategies are very old and have an outstanding track record over a period of time of managing credit risk, rate risk, liquidity risk. They offer good value to investors from an asset allocation perspective.
As an industry, you might have noticed the Association of Mutual Funds in India, AMFI, has a Mutual Fund Sahi Hai Investor Education campaign. We have just started a new campaign called Fixed Income Sahi Hai. This is to create more awareness about this category of funds. And maybe over a period of time, everyone in the industry and particularly the players like us who have a longer-term great track record and a brand and pedigree to invest more to cater to that demand as well. I mean, if we compare with the bank deposits, over the last six or seven years, fixed income AUM as a percentage of bank deposits has actually come down. So over a period of time, I strongly believe that there is potential for us to grow in that segment as well.
Got it, sir. And while you mentioned about the net outflows from the industry, I think a couple of months in the last year, like January, February, and probably November or so, there was a positive inflow in that segment, right? I mean, that is a general, I mean, should we count it as something that going ahead, this would be a positive sign or a green shoot, or it was just one-off month for that matter?
Yeah. So some of the investors who take advantage of the interest rate movement in some of the short-term term categories, they moved in the first quarter anticipating a peak in interest rates, peak in policy rates. And we saw some flows. But as I mentioned, the year as a whole, the industry has seen net outflows.
Got it. Got it. That's useful. Thank you. Thank you for explaining. Thanks a lot.
Thank you. Anyone, you may press star and one to ask a question. Next question is from the line of Raunak Singhi from Reliance Retail. Please go ahead.
Hello. Am I audible?
Yes, sir. We can hear you.
Since the current market in India and U.S., I have just came across a news that the U.S. Fed rates will decrease in the last half of 2024. So how do you see this as a potential to increase your debt fund structure, which has been a lower share segment and all, compared to the other peers of your group?
Sorry, I didn't get your question.
I think there is a bit of disturbance behind you. But you are saying the U.S. Fed rates and the implication on the Indian debt funds?
Yes. Yes. Yes.
Navneet, these are asking for U.S. Fed rates and what will happen for the Indian debt funds. So what's the view on U.S. Fed rates and?
Yeah. I mean, there is definitely some correlation. Global interest rates or global liquidity scenario is also one of the factors. But also, the domestic inflation dynamics, fiscal and monetary policy, all of those are also important factors. Our team has a view that interest rates are close to the peak. And over the next couple of years, I think investors should benefit by allocating some money to the fixed income funds. We have seen positive flows into our long-term debt fund this year as some of the investors have committed for longer-term looking and locking into the higher rates which are prevailing and the higher current yield which is there in the portfolio currently. My next question will be what's the share of the ETF among your total assets under management?
You're talking about our assets under management? Raunak, you are asking what is the ETF share in our AUM?
Yes. Yes. Yes. That's around 2%. Okay. Okay. Thank you.
Thank you.
Thank you. So we don't have anyone on the question queue. That was the last question.
Sure. Thanks. Thanks, Neerav. Thanks, everyone, for joining the call. Look forward to speaking with all of you next quarter. Thank you.
Thank you.
Thank you. Thank you very much. On behalf of HDFC Asset Management Co Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your line. Thank you.