Ladies and gentlemen, good day and welcome to the Q4 FY25 earnings conference call of HDFC Asset Management Company Limited. As a reminder, all participants' lines 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 and 0 on your touchtone phone. Please note that this conference is being recorded. From the management team, we have Mr. Navneet Munot, Mr. Naozad Sirwalla, and Mr. Simal Kanuga. I now hand this call over to Simal Kanuga, who will give us a brief following, which we will proceed with the Q&A session. Thank you, and over to you, Simal.
Yeah, thanks. Thanks Sejal . Good afternoon, good evening, everyone, and thank you for joining us today. Our presentation is available both on exchanges as well as our website. As usual, we'll start with a quick overview of the industry. The year-go concluded FY 2025 with AUM reaching INR 65.7 trillion, reflecting a 23% increase over the previous year. Of the INR 12.3 trillion increase, approximately INR 8.2 trillion was in the form of net new flows. The comparable number for the previous financial year was INR 3.5 trillion. This is the 13th consecutive year where industry has witnessed positive net flows. For FY 2025, equity markets witnessed two distinct phases, more or less cut into two equal halves. Nifty 50 rose by 16% in the first half, that was April to September of 2024, and declined by 9% in the second half, October 2024 to March 2025.
In terms of flows into equity-oriented funds, the first half saw net flows of INR 2.81 trillion, and the second half witnessed net flows of INR 2.74 trillion. For context, net new flows for financial year ending March 2024 were INR 2.62 trillion. During the current financial year, actively managed equity-oriented NFOs contributed INR 900 billion, that is 18% of the net new actively managed equity-oriented flows. The corresponding number for the previous year was INR 546 billion, which made up 23% of the flows of the previous year. Monthly SIP flows touched record highs of INR 265 billion in December 2024, with March 2025 logging in INR 259 billion. Comparable number for March 2024 was INR 193 billion. That is, industry has added just about INR 67 billion to monthly flows. In FY25, the industry witnessed inflows into debt and liquid funds, adding up to INR 1.35 trillion.
ETFs saw inflows of INR 831 billion, while arbitrage funds attracted INR 508 billion. We now move to us. We crossed INR 7.5 trillion in overall AUM, with a market share of 11.5% and 12.7% if we exclude ETFs on QA AUM basis. Equity-oriented assets at INR 5 trillion, 64% of our quarterly average AUM, well above industry average of 56%. For actively managed equity-oriented AUM, our market share is 12.8%, while for debt and liquid, it is at 13.1% and 12.5% on QA AUM. Individual investors' contribution to our monthly average AUM remains steady at 70%, compared to 60% for the industry. We held a 13.2% share of individual monthly average AUM for March 2025. The industry added 9.7 million new investors over the year. We added 3.5 million. Flows through systematic transactions for March 2025 were INR 36.5 billion, up 24% as compared to March of 2024.
We also continued to expand our physical presence, adding 25 new offices in January 2025, which means we have added 50 new offices over the past 15 months. That takes our network to 280 offices, with 196 offices in beyond the top 30 cities. We continue to constantly enhance and better our digital experience for our customers, and now 94% of our transactions are processed digitally. Quick update on financials. Our revenue from operations for FY 2025 came in at INR 34,980 million, growth of 35% YOY. Operating profit for the year added up to INR 27,261 million, growth of 43% YOY, with an operating profit margin of 36 basis points of AUM. PAT for the year was INR 24,609 million, growth of 26% YOY. Board earlier today has recommended a dividend of INR 90 per share, as against INR 70 per share last year, translating into a dividend payout ratio of 78%.
This, of course, is subject to shareholders' approval. We can now open the call for questions. Navneet and Naozad, both are very much in the same room. Sejal, we can start queuing up questions, please. Thank you.
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 Lalit Deo from Equirus Securities. Please go ahead.
Yeah, hi. Good evening, sir. I'm for Equirus Securities . Just two questions. First thing, on the revenue yield side, in this particular quarter, we saw that it has declined by about one basis point. Just wanted to understand whether it is a function of mixed gains or is there anything else to read into it? Further, if we look at the direct TER disclosure, there we were seeing that in some of the equity schemes, it has increased materially. Wouldn't that have helped in some of the inching of the revenue yield?
I mean, the management fees are the same in direct as well as the regular fees, so that would not really impact. We have broadly been in line with the last quarter. I think we have been saying in the last quarter also that equity is around 58 basis points, debt is 28 basis points, and liquid is 12 basis points. Revenue margins over the last four quarters, if I remember correctly, in Q1 was 46.3 with equity asset mix of 64. In Q2 was 46.4 or something with mix coming in slightly higher, 65.7 or so. Q3 was 47 with, again, similar mix. This time, the mix was slightly lower at 63.8, and Q4 margins were 47.2.
Sir, actually, second question was on the ESOP scheme. We have announced a new ESOP plan. Just wanted to understand how should we budget it from the cost perspective for the overall ESOP plan?
Sure. Firstly, as of now, we are seeking approval from shareholders for stock options, stock performance, stock units, PSUs. This is not what we are giving or allotting as of now. This is for future. This gives me an opportunity to give you a perspective on what this is about. At HDFC AMC, we recognize that our people are central to delivering consistent, long-term, sustainable value to our clients and shareholders. As part of our effort to attract, retain, and align high-quality talent with business outcome, the NRC, the Nomination and Remuneration Committee of the Board, approved these changes, which is that in 2020, we had secured shareholder approval to allocate approximately 32 lakh shares to employees over time. Since then, out of these 32 lakh shares, NRC has granted around 23 lakh shares.
The remaining 8.7 lakh have now been canceled, so no further shares will be allotted under that scheme. The NRC has approved a new scheme that is ESOP & PSU Scheme - 2025. This will now go for shareholder approval. We are seeking approval for 25 lakh shares, including Performance Stock Units, PSUs. It will be NRC's prerogative to allocate these shares over a period of time. Last time, we took approval in 2020 for 32 lakh shares, as I mentioned. Of that, we are canceling 8.7 lakh. The balance 23 lakh shares were allocated over the last five years, including 10.5 lakh shares to over 600 of our people in 2023. The previous scheme had vesting spread equally over three years. The new scheme will have deferred vesting, that is 10% in the first year, 20% in the second, 30% in the third, and 40% in the fourth.
10, 20, 30, 40 over a four-year period. We are of the opinion that this is better aligned with the interests of our shareholders and reinforces long-term performance. The NRC has also approved the issuance of PSUs within this overall limit of 25 lakh shares. 25 lakh includes both the ESOPs as well as the PSUs, which will be granted at face value and will vest 30% in the third year and 70% in the fourth year, contingent upon meeting clearly defined performance parameters, primarily based on revenue, profitability, etc. Importantly, and I must say this, PSUs will not be granted to me or my direct reports who are classified as head of department. The HDFC Group, I have always said, has consistently championed employee ownership across its companies, and this new framework reinforces that ethos while responding to the evolving expectations of talent and demand of our industry.
Let me reiterate that there is no intention of allotting entire 25 lakh shares at this instance. It will be spread over time, similar to our old scheme, and we'll come back to you after the shareholder approval and the discussion with the NRC on allocation, etc.
Gotcha. Thank you.
Thank you. The next question is from the line of Shreya Shivani from CLSA India Private Limited. Please go ahead.
Yeah, hi. Thank you for the opportunity and congratulations on a good set of numbers. My question broadly was around the equity segment and the trend in the retail and HNI, within that retail and HNI, as the breakup we get from MC. What I noticed was on a quarter-on-quarter basis, both the segments have contracted similarly between December to March. If you can help us understand, how has the behavior of customers in these two segments been? Have there been any differences or any qualitative comments you can make about these two categories? Because one would think that during volatile markets, the HNI exits much more and much faster, etc. Any comments over here would be useful.
As we mentioned in the opening remarks, if you look at last year and you split into the two phases, and then someone can say that a year or two halves, Nifty was up 16% or so in the first half, and the market was down, I think, 9-10% or so in the second half. If you look at the flows into equity-oriented funds, the first half saw net flows of INR 2.81 trillion, and the second half was INR 2.74 trillion. I mean, if you compare with last year, last year had net flows of INR 2.62 trillion in the entire year. Also, if you look at the SIP flows in the last four or five months, I think it's almost flat, around INR 26,000 crore or so. I think we are seeing greater resilience among investors.
I think it's a collective effort of the industry, collective efforts of all the, I mean, of the industry association, collective efforts by all the industry players, our distributors, advisors, and everyone to give the message to the investors that they need to invest with a long-term orientation. Clearly, I think that seemed to be bearing fruit, and we are seeing people continuing with their investments. In fact, if I draw your attention to gross flows and redemption numbers, which will give you some more insight into the investor behavior. As I said earlier, this was a year of two halves. In the first half of FY 2025, when market was up, gross inflows stood at INR 5.87 trillion, with redemptions at INR 3.06 trillion.
In the second half, when market was down by 9% or so, while gross inflows moderated to INR 5.1 trillion, redemptions also declined to INR 2.38 trillion. People are also going slow on redeeming, right? I mean, if you've got the point that I'm trying to make.
Yeah. Yeah. But sir, one of the things that we saw also with AMFI reporting the monthly data is in terms of the number of SIP registered and number of SIP closed or redeemed, whatever. In that, the number of SIP registered in the past two months, that number has been on a declining trend. So is it fair to say that while the ones who are invested are continuing to be in the game, but the choppy market has sort of dissuaded or it has dissuaded the newer customers from entering? Would that be a fair assessment right now?
Sure. Thank you for asking that. There seems to be, I mean, a lot of noise around this point, so I'm happy that you asked me this. AMFI has started publishing an additional data point on their website. You might have seen that is the number of contributing SIP accounts, which is a true reflection of investor activity. The contributing accounts in December 2024 were 8.27 crore, and the number for March was 8.11 crore. It would be a good idea to keep this number at the core. The more relevant, of course, is the fund flow through SIP, and I mentioned this point several times. SIP collections reached a record high of INR 26,400 crore in December 2024. Even in March 2025, contributions were strong at INR 25,900 crore.
It is just a 2% dip, or in absolute terms, around INR 500 crore dip on a base of INR 26,000 crore plus. It would be pertinent to note that the last working day for March 2025 was 28th, as against 31st for December 2024, so it is three days short. You know, I mean, every day matters for SIP trigger. Some part of this dip can also be attributed to this also. SIP collections in March 2025, I mean, we believe remain resilient at 98% of their record high. If you compare year on year, then it is a robust 35% growth YOY. This is despite, I mean, heightened volatility and global uncertainties. The resilient participation reflects the growing maturity, confidence, and I strongly believe it is a long-term orientation of Indian investors and commitment to the disciplined wealth creation.
While we appreciate that there may be periodic closures or pauses on a month-on-month basis, which are natural, the overall trend continues to remain strong. As I see it, there is clearly growing investor interest in systematic investing.
Got it, sir. This is very useful. Thank you so much and all the best.
Thank you. The next question is from the line of Moksha from Millennium Money Finance. Please go ahead. Moksha, I would request you to please unmute your line and speak. Due to no response from the current participant, we will move on to the next participant. The next question is from the line of Ronak Chheda from Awriga Capital. Please go ahead.
Hello. Am I audible?
Yes.
Yeah.
Yes, sir, you're audible.
Yeah. Yeah. Yeah. Thanks for the opportunity. Congrats on the result in such a tough quarter. My question is on the cash balances. Previously, when we've spoken to you guys, you had mentioned that we might be looking at using some of this cash to become an anchor investor in our efforts to build the alternative side of the business. Just wanted to know where are we in that journey? Can you elaborate? Is there something in the near offering?
I can answer on the alternate side, but on the cash balance, I do not know if you want to highlight anything on that.
Just to cover the cash balance, we've always made a priority to return value to our stakeholders, right? This year, our payout ratio is 78%. In fact, if you look at our sort of realized operating post-tax profits, given that we have a mark-to-market on other income, we have practically distributed the entire realized post-tax profits this year as dividends. That is on the cash flow status. A skin in the game from a SEBI perspective, we continue to have to invest in our own scheme based on the SEBI formula, so that continues. On the AIF front, we have mentioned in the past, Navneet will add, but we have committed significant capital to seeding our Fund of Funds, which is our first initiative on the alternate platform.
We are going to soon launch the credit fund, and where again, the balance sheet of the AMC will be a significant investor. Maybe I have no recap.
No, sure. You have already mentioned as well that the alternative platform continues to gain momentum. As you mentioned, we closed our first Category II AIF Fund of Funds. The portfolio construction has been progressing very well. As we mentioned earlier, we got over 400 investors, and we believe that over the next couple of quarters, we would have more offerings within the alternative space. We have got the approval to launch a Category II Credit Fund. We are expanding our presence in the alt space with the launch of HDFC AMC Credit Opportunities Fund. The team has been in place for over a year, and we would be approaching investors and then distributors for that product. On the wholly owned subsidiary side, HDFC AMC International IFSC Limited, we went live with three funds in the third quarter of FY 2025 and have since witnessed good response.
It is positioned to enable international investors to tap into India's growth story, and we are also gearing up to empower Indian investors to explore global opportunities as we build out these capabilities. We remain committed to seizing any emerging opportunities to drive growth and extend our competitive edge. As you asked that, yeah, over a period of time, this will be a good deployment of our capital.
Sir, would it be possible for you to quantify the amount of money we are planning to use from our own balance sheet for the next near-term fund which we're going to launch?
I mean, in the fund, I mean, last time in the Fund of Funds, whatever we got, we put 10% from our balance sheet as it's in the game. In our Credit Opportunities Fund, we will do the same. Over a period of time, as we come with more offerings, we would have an opportunity to deploy capital there.
Okay. Thank you so much.
Just to make one more point on that, while you mentioned about the capital going into alternate or the GIFT City opportunity, I mentioned it earlier also that with a healthy cash position, we are well placed to take advantage of strategic opportunities. We also remain proactive in evaluating any M&A opportunity that can accelerate growth or extend our presence in the relevant segment. It gives us a lot of strategic advantage.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Dipanjan Ghosh from Citigroup. Please go ahead.
Thank you. Good evening. Just a few questions from my side. First, you know, over the last, let's say, 15 days from the end of the quarter, we have seen fab revival in markets or bounce back, whatever we want to call that. In terms of incremental flows, are we seeing any sort of revival? Still early days, but if you can give some color on that. The second question is, you know, if I look at your ticket size of SIPs, it seems from a March exit basis, it's down around 12%, probably a little bit higher than what we have seen.
Hello? Is it?
Yes, sir. It was from the current participants.
All right. Is he available back online, or should we move to the next question?
I think he's fine.
I think he's just connected.
He's been out, but he's trained in the last few days.
Oh, he might have logged in.
I think he was also asking about SIP average something. That is maybe because of that STP decrease just a little. He might have just divided the systematic numbers for us. Okay. Maybe we can just wait for the Dipanjan to come back again.
Sure.
Take the next question.
Sure, sir. The next question is from the line of Bhavin Pande from Athena Investments. Please go ahead.
Hi. Good evening, everybody. Thanks for the opportunity. First question, on the distribution side, we can see that on the equity AUM distribution mix direct specifically has seen an uptick. In your opinion, how do we look at it from a long-term horizon?
Your question is the direct as a percentage of total AUM is increasing, right?
Yes, sir.
One that because of the lower TER, automatically you would assume that direct as a percentage would keep increasing because, I mean, you have a lower TER, as simple as that. Overall, I mean, the distribution pie data provided should not be viewed as a direct representation of market share within specific channels. In the last like one year or so, or maybe a little lower than that, the direct channel has seen a notable increase. It has grown from 25% to 27.8%. This is driven by fintech platforms, RIAs, and of course, large family offices and high net worth individuals who invest with AMCs directly. Additionally, we have to keep in mind that with everything else being same, the share of direct plan will keep on increasing by default, as I mentioned earlier, due to differential TER between the direct and regular plan.
Okay. On the secondary market share side, does our flow market share continue to be higher than the stock market share, both in lump sum as well as SIPs?
Yes.
For fund performance, how do we sort of look at it?
No, I think it's very encouraging, and I think we have navigated the market cycle very well. We have seen significant volatility over the last couple of months, and I think portfolios were positioned rightly. Some of the funds which went quite cautious, I can take the names of, let's say, our Mid Cap fund or a Small Cap fund, where we clearly noticed froth in pockets of market. I think the fund managers took the right call. In the last couple of months, we have seen significant uptake in our performance in those funds. Across the board, I think we feel very proud of the performance that our investment team has delivered.
Okay. Indicatively, so far, SIP gains continue to be at par with what we saw over the last year or four months, or they are tied higher given the recovery in markets?
You're asking the overall SIP? No, it was about April. I think we would want to par that. I don't know. We don't want to comment on any data to do with April.
Okay. Okay. That helps. Thanks a lot, and good luck to you.
Thank you.
Thank you.
Thank you. The next follow-up question is from the line of Dipanjan Ghosh from Citigroup. Please go ahead.
Hi. I hope I'm audible now, and apologies for the confusion earlier.
Yes. Go ahead.
Yeah. First question, on the SIP number, and I said to you, SIP ticket size on a March exit basis, it seems that it has gone down by around 10-12% on a year-over-year basis. What I understand is the industry numbers have also kind of been a little soft on the SIP ticket size. It seems that for you, the decline has been a little bit more, and also your SIP market share also over the last two quarters has been a little soft. Just to get some idea of why is this differential in ticket size trajectory between you and the industry? That would be my first question. My second question is a follow-up on one of the previous participants' questions in terms of the yield number. Normally, seasonally, always in the fourth quarter, historically, we have also seen some adjustments that happen.
First, has there been any adjustment in this quarter, or the entire 0.9 basis points of decline can be entirely attributed to the mix change out there? The last question is on the OPEX part. I mean, do you exclude ESOP, or even including ESOP, for that matter, the expense guidance of 10-15%, does that hold true going ahead?
Sure. It depends on the systematic number, and I must clarify, as you are aware, systematic numbers that we report include both SIP and STP, Systematic Investment Plan and Systematic Transfer Plan. The decline that we have seen in our systematic transactions can largely be attributed to STP. You would know that STPs are higher in value terms, and hence you are seeing that effect. On the yields, where are you seeing the decline, Dipanjan? I mean, the yields?
No, I'm just taking your operational revenue, which is like, let's say, INR 9 billion almost for the quarter.
You're talking only revenue? Yes, operating revenue. Operating revenue. Yeah, that's.
Only operating revenue. Only the operational yields, not the operating margins.
Dipanjan, it was 47.1 to 47.2 basis. Basis revenue. No, revenue. No, basis point. So basically, if you look at yield, it was 47.1 in the last quarter, 47.2 in this quarter. It is a three-day. It is also a number of days issue, Dipanjan. Q3 had 92 days, Q4 had 90 days. That itself is an impact. Plus, AUM has been overall lower than last quarter. Is that in absolute revenue?
That's right. Okay. No, I guess the revenue decline, I understand, is a function of a few less number of days. But average AUM is, let's say, whatever you have reported, somewhere around INR 77.40 billion, and your end-year revenues are around INR 9 billion. If you kind of do a simple math on that and analyze it, I think the number comes out to be around 46.3. Anyway, I'll maybe take it offline.
That's 46.7. Yeah, 46.47 basis. I don't know what the—but we can discuss it offline if required.
Sure. Maybe on the expense part, if you can give some guidance.
You are saying of.
Oh, operating expenses. As in overall expenses, the guidance of 10-15%, does that still hold with the new ESOP plans being rolled out? Or kind of going for shareholder approval?
Part of the ESOP, currently, it's too premature to comment on the cost aspect because the specific quantum of allocation of ESOP, PSUs, timing of issuance will all be driven by NRC and due cost. First thing is that we'd like to highlight that this will be a one-time non-cash cost, right? The way it works in accounting is based on the Black-Scholes valuation, you amortize that cost over the vesting period, and it does not impact the company's cash flow. That's on the ESOP.
Sorry. But ESOPs, how should one think of the growth in expense if, let's say, the next year continues to be a little bit soft on incremental volume?
We do not give specially forward-looking guidance, but you know us to be always prudent when it comes to spending, right? It is within the way we think about cost. Having said that, we are very keen and want to capitalize on our opportunities that stand in our position, right, and broaden our capabilities. Our focus will remain on building a leading future-ready asset management company. In that regard, if we are to continue to invest for the future, we will. The past trend of growth in expenses of employee costs as well as other expenses is well available. If you look at CAGR over three years, five years, you have the numbers. They are very, very much in control. Our total expense as a basis point of AUM is about 10 basis points for FY 2025. This is aided by, obviously, the rapid rise in AUM.
Despite increasing the number of people and 50 branches over the last 15 months and investment in technology, etc., we have managed to keep the cost at 10 basis points. I would just like to add a note of caution here that 10 basis points is not what one would like to build future estimates on because if and when during a period when if AUM growth moderates, this number might look different.
Got it. Thank you, sir, and all the best.
Before I just report, just one thing, Dipanjan. The ESOP that you are referring to, as of now, it is just taking an approval, right? It is after the NRC will decide, then allocations will happen, and after that, that will come. Of course, at that point in time, we'll give all the details.
Thank you. The next question is from the line of Melwin Mehta from Sterling Investments. Please go ahead.
Thank you very much. Am I clear?
Yes, sir.
Thank you very much. Quick question on this kind of having the asset management company having investment in the fund. Just to clarify, is it only at the start of that fund formation, or is that continuing as the fund grows larger and bigger?
No, it is. Actually, in our funds, it is a regularity. Basically, there is a skin in the game circular whereby, depending on the risk of the particular asset class, there is a certain basis point of AUM that we need to keep investing. More capital that we are able to raise, our investment in that fund keeps going up.
Can that be kind of shared with an external agency, or is it absolutely necessary for us to fund that?
No, in sense, it is skin in the game. We have to put in our own money. It is our own balance sheet capital.
It has to be from the balance sheet?
It is at the regulation, yes.
Okay. Is it 10% for all funds? Is it 5%? Sorry, I'm a bit ignorant here.
5% was for Alternative investment Fund of Funds that we launched and the Private Credit Fund that we are about to launch. This is a different thing. This is in our mutual fund business where there is a SEBI circular on skin in the game. Depending on the profile of an asset class, there is a certain basis point of AUM that we have to invest from the AMC's balance sheet.
Got you. Got you. Is this a recent announcement?
The skin in the game has been around for almost.
some time back. Yeah, we were there.
Okay.
Investment in the AIF are voluntary from our balance sheet. There is a minimum criteria that we are of course investing way above that criteria.
Thank you very much. Given the kind of strong HDFC brand, which makes no introduction, at least in the Indian context, is raising more foreign money to invest in India a priority, or clearly the management is focusing on the domestic market?
You are asking investing globally by domestic investors? No, it is global money.
That was my second question, connected question. I'm asking two questions here. One is HDFC's brand basically given the domestic market, but also raising money from abroad to invest in the domestic market. Part B was obviously given HDFC's brand in the domestic market to basically launch global funds, which will be obviously where the investors will be the domestic Indian investors.
No, you are absolutely right. With that in mind, we set up a wholly owned subsidiary, HDFC AMC International IFSC Limited. I mentioned earlier that we have gone live with three funds in the third quarter of 2025. We would be coming with more number of funds in months to come. It is positioned for both, one, to enable global investors to tap into Indian markets, and second, over a period of time, also to empower Indian investors to invest globally. We are building out capabilities to enable both.
Okay. Thank you. Thank you for that.
Thank you.
Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.
Yeah. Hi. Good evening, everyone. Firstly, on the SIP closures, right, you alluded to the fact that it's not an alarming sign yet. Any behavioral difference between online platforms and the advised or the mutual fund distributor route? What we are hearing is the closures are more on the direct side rather than the advised side. Could you give some color there towards the trend there?
In the year-over-year, if you look at it, there has been a significant increase in the monthly SIP from around INR 19,000 crore to INR 26,000 crore. In terms of accounts, I gave you the number earlier. I mean, over the last couple of months, as of now, I mean, looking at the investor behavior gives us confidence that investors are a lot more resilient. They are showing more maturity, more confidence in the long-term potential of markets. The industry continues to put huge efforts to ensure that investors invest in a disciplined manner. Are there big differences among different channels? Not that I can honestly comment more on that.
Okay. Okay. Any.
Investors have come in the last couple of years, and this is a good test, the volatility of the last few months. We are encouraged to see the response of the way investors have behaved in the last few months.
Yeah. Any trends that you can see on the debt side where the interest rate cuts, the duration, the longer duration of pickup in any of that category?
I mean, this is the first year where we have seen positive flows both in debt fund as well as liquid fund net flows trending positive. Debt mutual funds in general have not—I mean, despite that, I would say that debt mutual funds have not quite caught on with retail investors. The investor is still working very hard to change that. In AMFI, we started a campaign, debt funds here around a year back or so. That was a good step aiming to raise more awareness, especially around how debt products can support long-term goals like retirement planning. We believe that debt serves as a strategic tool in managing market volatility, helps investors optimize for stability and overall returns while balancing risk. We have seen an encouraging trend.
Those who have invested over the long term have benefited, and corporates continue to use short-term debt products for liquidity management, and we have seen flows in this year. I remain optimistic and hopeful for favorable change in the debt fund taxation. I mentioned it earlier also. Along with sustained awareness efforts, this will help unlock the full potential of India's debt market.
Is the institutional money kind of coming to the longer duration? Is there some initial trends where people have started looking at debt mutual funds or hybrid with a higher proportion of debt? Any of those trends are visible right now?
In India, when we say institutional, that's largely corporate treasuries. I think their investment would more be at the shorter end of the curve. Individual investors have shown interest in long-term bond products like our long-term bond fund has seen healthy flows in the last year or two. We have seen that trend from individual investors. Otherwise, corporate treasuries are largely on the short end.
Okay. Last question. There has become—we have seen a sequential improvement there. I believe the markets were flattish. Equity markets were flattish on an FT basis, and small cap, mid cap were down. What kind of explains this increase in other income sequentially?
It is a function of our balance sheet. A lot of the investments are also in debt mutual funds of our own, right? There were a couple of rate cuts, so we had some benefit of that on the duration of the mutual funds.
Got that. Got that. Thank you.
Thank you. The next question is from the line of Krishna Manotra from NJ India Investments. Please go ahead.
I'm from the [audio distorion ].
Sorry to interrupt, sir. I would request you to please use your handset.
Hello, Anikant?
Yes.
Yes, sir. I would request you to please be a little louder.
Okay. I just had one question. There is currently buzz going around in the market regarding thematic and sectoral fund rates. Most of them have not performed in the past six months or so. The data I have is we have a higher yield in the thematic and sectoral fund compared to the Mid Cap and Small Cap fund. Going forward, if we consider that lower inflow to the thematic and sectoral fund, can we consider the equity yields going down further?
No, overall, that's still a very small part of our overall product portfolio. Our product portfolio, and also in line with the views of our investment team and the product team, we have launched a couple of products in the last few years. That's still a not meaningful part of our overall equity portfolio.
Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead.
Hi. Good evening. Thank you for taking my question. Just coming back on the SIP discontinuances, I know that the overall flow number has been very resilient, and it seems to suggest obviously something has structurally changed or at least looks like. There is a little bit of worry in the sense that we continue to see higher SIP stoppages versus the new creation. If this sustains, then should we be actually worried that at some point of time, this will flow through in the SIP flow number? Is that the correct way to think about it, or are we missing anything of here? Also, secondly, I think there was also this narrative around AMFI cleaning up this number because some of the direct platforms or online platforms continue to show SIPs which were not getting triggered or which were not getting paid also in that number.
Has that played out? Some sense on these two things will be helpful. Thanks.
Madhukar, the SIP seed counts have grown over the earlier baseline in the four-month period from December 2024 to March 2025. I mentioned earlier, the one number that everybody should track is that the peak collection—I mean, over the peak collections in December, gross SIP collections are down just about 2% from December 2024. December 2024 was a peak, and it is down 2% in March 2025. A large number of these ceased SIP or the SIP close are part of a super set, which had missed more than three installments. Now, the real paying SIPs, that number, that column that has got added, and I think you are referring to that number on the AMFI website, the real paying SIPs have not suffered too much because of any negative investor sentiment.
I would repeat that despite the sharp fall in the market, monthly SIP collections holding to within 98% of the peak number is a strong testimony to the investor sentiment and collective effort that the industry has made. Honestly, I mean, two years back, had you asked me to project the SIP number, nobody would have projected the number where we are today. A year back, when we were at INR 19,000 crore, I mean, few people would have projected that we would be at INR 26,000 crore given what has happened in the market in the last six months. We feel very encouraged.
Yeah. That is bang on, sir. That is completely true. I agree with you completely yourself. Just one follow-up. Is this cleanup sort of done? You said more than three months if people have not paid. That number has actually—they have removed that, it seems. Are we largely done with that, or can this have maybe a couple more months of it?
Because there's been so much noise around it, the way you should see is, one, that the amount that has been collected is what reflects in that INR 26,000 crore or the gross flow. That's an important number. The second important number is the people who have credited that amount in the month. Both these numbers are very relevant and give you a true reflection of what's happening on the SIP front.
Understood, sir.
Actually, there is a number published of contributing SIPs on the AMFI website. You do not need to. Yeah. You can just look at that number who have contributed in this month. Yeah.
Yeah. Yeah. No, that is also very robust. There is no problem with that. Yeah.
Thank you.
Got it. We had done the distributor payout rationalization. I think I just did some back of the envelope calculation. If we were to account for the 90 and 92 days in the quarter, then it seems that the equity yields are holding up or are slightly better on a QoQ basis. Would that be a fair assessment?
They're more or less in the same zip code of the equities. It's a bit on the third basis point maybe, but yeah, they're more or less. We mentioned around 58 basis points.
Okay. Okay. Got it. Thank you. Thank you, sir.
Thank you. The next question is from the line of Ankit Bihani from Nomura. Please go ahead.
Hi. Good evening. Am I audible?
Yes.
Yes, sir.
Yeah. We have seen a flow from NFOs into equity schemes for the industry decline sharply over the past two, three months, though NFO flows have been quite strong in FY 2025, accounting for around 15%-20% of the overall equity flows. What is your take on NFO flows going forward and its impact on overall flows into the equity schemes? Should we see some slowdown there?
We have seen some cycles. I think we see some quarters where NFOs contribute a larger part to the overall flows. There are quarters when they are low. At our end, I think we believe our product suite is very comprehensive, and we cover a wide spectrum of investor needs across all categories. For the industry overall, I think fund houses who do not have a product in certain categories, they would continue to launch. I mean, as I mentioned, those flows are a little, if I can use the word, yeah, volatile on account of NFOs, what you get.
Understood. Thank you.
Thank you. The next question is from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
Hey, hi. Good evening, everyone. My question was on the SIP or the STP plus SIP number that you disclosed. The industry number, as you were saying, is almost flat on a quarter-to-quarter basis versus the decline that we've seen. Adjusting for the STP issue, would it be fair to say that it's kind of mirroring the broader industry trend itself?
Yeah. I told you that the industry's SIP number for December was 26,500 or something, and March was 25,900. This was a decline of 2%. Our decline during the same period was less than 2%. The fall that you are seeing in our systematic number is on account of impact on STP, the systematic transfer plan, yeah.
Got it. That was the only question I have. Thank you.
Thank you. The next question is from the line of Gaurav Sharma from HSBC. Please go ahead.
Yeah. Hi. Am I audible?
Yes.
Yes, sir.
Thank you for taking my question. Sir, again, harping on this SIP. While we understand that the gross inflows have been steady for you as well as the industry, just wanted to understand whether segmentally, is there any change? There has been moving towards the Flexi C ap and Large C ap moves from the Mid Cap or Small C ap in the last six months, if you can provide some clarity around that. The second one is related to this Specialized Investment Fund. Any timeline for any further communication we have received from the regulator, when we can expect the launch of these funds? These are my two questions.
First, on the SIP flows, I mean, in a very short period of time, investors may not switch from one category of fund to another fund. Incremental flows have a tendency to see a trend depending on how the markets have been and how the investors' views have been. As I mentioned earlier, again, at our end, the systematic number that we report are both SIP and STP, and there's some bit of fall on the STP side. SIPs are higher in value, so you see that effect depending on the market. On the SIF side, see, the purpose of introducing SIF was to offer investors who were leaning towards unregulated or unregistered products a regulated alternative with mutual funds who are very well-governed, and our transparency levels, our risk management, our overall governance is very different. To provide a very secure framework under the regulatory umbrella.
That was the genesis behind coming out with the whole SIF regulation, as SEBI chair had mentioned earlier. With the regulatory framework now in place, we are actively evaluating potential opportunities in this space. The team is working on creating the right set of products that leverage our investment capability, our risk management, and product capability on one side, and the evolving investor needs on the other side. I mean, just like any other thing, whether be it active funds, be it passive funds, be it alternatives, PMS, they all revolve around we want to be a one-stop shop offering a wide range of savings and investment products. The strength comes from a combination of factors: large and well-diversified investor base on one side, and the deep investment, risk management, and product capability on the other side.
Understood, sir. That was my only question. Thank you so much.
Thank you.
Thank you. The next question is from the line of Mohit Mangal from Centrum Broking Limited. Please go ahead.
Yeah. Thanks for the opportunity and congratulations on a good set of numbers. My first question is on the tax rate. I think this quarter we had around 23.5%. I mean, if I look at the full year, it's good, 25%. For the entire, I mean, maybe two, three years, should we assume the tax rate to be 25%? The reason why I'm asking is that because in financial year 2024, we just had around 21.5% tax rate. How should we do that, see that going forward?
This year, the tax rate is higher than last year simply because the capital gains tax rate was increased in the budget. We obviously create deferred tax liabilities on our mark-to-market gain. That is the reason for the tax rate. Now our tax is very close to the corporate tax rate, effective tax rate.
Okay. All right. Going forward also, I think we should assume that this would be kind of maintained.
We typically do not give guidance going forward. As a tax person, obviously, tax rate will change.
Understood. Next is in terms of the number of branches. I think we opened around 26 branches this year. Going forward, do you think you'll increase the number of branches or you'll keep it constant? Any kind of color on that?
On the branch expansion side, you rightly noted, I mean, we have opened around 50-odd branches in the last 15 months or so. We keep evaluating our physical presence across the country. We also keep investing in our digital capability and keep taking a view. This is also driven by looking at the different geographical spread where our presence is and where the potential for the business is. I must add, I might have mentioned earlier in earlier calls that we approach branch opening very thoughtfully. When I'm focusing on building business in a city or town through branches in neighboring areas, a decision to open a new branch is made only after achieving a desired AUM. They generally break even in a.
Understood. Thanks, and wish you all the best.
Thank you. The next follow-up question is from the line of Melwin Mehta from Sterling Investments. Please go ahead.
Thank you very much for allowing me the second round. Am I clear, operator?
Yes, sir.
Thank you for that. Probably this is for Navneet. About half the question is actually an AMFI question and half as you as a leader of HDFC. In terms of these direct plans, as you rightly said, kind of having a take-up, how do you see the MFD market kind of evolving in, let's say, in the year or two period and a little bit of a longer-term period? Do you think the automatic route would then the natural expectation is to either the RIAs will take up, or do you think India is a market where MFDs would be basically around for a longer time?
India is a market where I think all of these channels will flourish. I think whether it's MFDs who have worked very hard over the last several decades, the industry used to be substantially smaller than the size we are seeing now. I think we have to credit all of those hundreds of thousands of distributors who worked very hard in bringing the industry to where it is currently across the length and breadth of the country. There are national distributors, the platforms who have a large base of sub-brokers or distributors who worked very hard, banks who sell through their branches and relationship managers across the country, the fintech channel, which has done wonderfully well over the last couple of years in terms of bringing new investors, particularly through the SIP route in the last couple of years.
Of course, the registered investment advisors, while their numbers have not grown, but as an industry, they also continue to work with the regulator and all of us to have increased in their reach over a period of time. There is room for all of them to grow. I am ready for that over the next several years as penetration increases in India, all of these channels have a role to play.
Thank you, Navneet. Are you expecting the RIAs, which are more regulated at the moment, and MFDs, which are very, very light regulated, are you expecting the MFDs to be regulated slightly more than where they are currently and RIAs to slightly be reduced in terms of their compliance requirements?
That was the right way to put it. I think MFDs are also, I would say, well regulated in terms of adhering to the code of conduct and all the business practices which are guided by AMFI. Of course, asset managers who deal with the mutual fund distributors, all of us are deeply focused that we have the right set of practices in the industry. As I mentioned earlier, they are smaller in number currently, but given the needs of investors over a period of time and with some of the recent changes in the regulation, I see a tremendous scope for them to grow as well.
Yes. Because only recently, in my India trip, I got a call from two insurance agents. I just feel that the insurance agents are very, very lightly regulated compared to our industry.
I mean, I won't be fair on my part to comment on some other industry.
Yeah. In terms of given that most people in this world are not kind of natural investors, and there is an element of sales required, which I think the insurance industry does very well. There, I say, even sell strong unit products. Whereas our industry seems to be regulated in very harsh terms.
No, I mean, we have always mentioned as an industry that greater level of transparency, better disclosures, better customer centricity is always good. Typically, we are managing somebody else's money, and trust is central to everything that we do. That applies to the entire ecosystem, whether it's asset managers or our distributors or our advisors or everybody else in the ecosystem. For us, I mean, trust is central to the way we see growing this industry.
Thank you very much.
Thank you.
Thank you. That was the last question. I would now like to hand this call over to Mr. Navneet Munot for closing comments.
Oh, thank you so much.
Thank you. We can close the call. Thank you.
Thank you. On behalf of HDFC Asset Management Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.