Ladies and gentlemen, good day, and welcome to the Q2 FY 2023 earnings conference call of HDFC Asset Management Company Limited. From the management team, we have Mr. Navneet Munot, Managing Director, Mr. Naozad Sirwalla, Chief Financial Officer, and Mr. Simal Kanuga, Chief Investor Relations Officer. As a reminder, all participant 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 then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand this call 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, Steven. Good evening, everyone. The results along with business update presentation is available on our website and also on the website of the exchanges. As usual, we'll begin with a quick overview of what has happened in the industry during the quarter. Industry closed the quarter with an AUM of INR 38.4 trillion and equity AUM of INR 19.3 trillion. Quarterly equity net flows for industry continued to remain strong at INR 504 billion. Of course, that was lower as compared to INR 783 billion for the quarter ended June 2022 and INR 685 billion for September 2021. We would like to definitely qualify that equity flow number includes index funds, and currently index funds include both equity and debt index funds.
However, we can get some perspective from AUM of Debt Index Funds. The AUM of Debt Index Funds stood at INR 575 billion for quarter ended September 2022, increasing from INR 417 billion at the end of last quarter, that's the June quarter. A net addition of INR 158 billion to the AUM. As this is fixed income, large part of this growth is through inflows. If we net this number off from inflows, quarterly inflows into equity and equity-oriented funds, including equity index funds, but excluding AUM growth in Debt Index Funds was INR 346 billion for quarter ended September 2022. The comparable number for quarter ended June 2022 was INR 642 billion.
Of this number of net flows, excluding Debt Index Funds, which is INR 346 billion, NFOs contributed to the tune of INR 104 billion. On the debt mutual fund front, we continued to see outflows. Industry lost INR 293 billion in the current quarter as against INR 1,178 billion in the previous quarter. We should add Debt Index Funds and Debt ETF numbers here. For the current quarter, debt funds, including Debt Index Funds and Debt ETF outflow number was approximately INR 60 billion. Liquid funds witnessed net inflows of INR 191 billion and others as a category which is ETF, arbitrage, fund of fund investing overseas saw inflows of INR 71 billion.
Individual investor folios now stand at 137.3 million and individuals as a category are contributing to the larger part of the AUM and now account for 57%. In terms of AUM, B-30 contributed 17%. If you look at equity AUM, the number is 27%. SIP flows for the month of September remained robust at INR 129.76 billion. We'll now move to us. We closed the quarter with an AUM of INR 4,222 billion, so INR 4,222 billion. Our market share in quarterly average AUM on overall basis and excluding ETF was 11% and 12.3% respectively. More or less similar to what we saw at end of June 2022.
In terms of actively managed equity-oriented AUM, our market share stood at 11.5%, same as that of quarter ended June 2022 and this is despite flurry of NFOs during the quarter. We did not have any NFO in this category. Of the industry net sales that came in during the quarter, nearly INR 104 billion was contributed by NFOs. We propose to launch a thematic fund, Business Cycle Fund sometime in November. Our quarterly average market share in debt and liquid category was more or less constant at 13.7% and 13.2% respectively. Our systematic transaction book saw healthy growth.
We processed 3.91 million transactions totaling INR 14.3 billion in the month of September 2022, up from 3.73 million transactions totaling INR 12.8 billion in the month of June 2022. We continue to enjoy a favorable asset mix as compared to that of the industry and also favorable ratio in terms of AUM from individual to non-individual investors. Before we move to financials, a quick update on new launches during the quarter. As we have stated in our previous calls, we are in process of expanding our product range on the passive side. During the September quarter, we launched 6 ETFs including a Silver ETF. Even in the current month, we actually closed 2 more Smart Beta ETFs.
We now have a couple of strategies live on PMS side and also recently launched our Category II AIF fund of funds which is investing across VC and PE funds. Now, we move on to financials. For the first 6 months of the current financial year, we have reported revenue of INR 118.18 million and profit after tax of INR 67.83 million. Revenue degrowth of 3%, but an operating revenue rising by 2%. Total profit degrew by 2%, while the operating profit from core asset management business was flat.
It will also be pertinent to mention that the employee benefit expense includes non-cash charge. The number for the current financial year is INR 212 million, and the corresponding number for last year was INR 343 million. In terms of quarterly numbers, revenue from operations was flat, while profit after tax has seen an increase of 6% on YOY basis. Our operating profit margin as basis point of AUM stood at 36 basis points for half year ended September 2022, with operating revenue margin at 50 basis points.
Thank you very much, and we'll be happy to open up for questions now. As Simal suggested, both Navneet and Naozad are very much in the same room.
Thank you very much.
Yeah.
We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 Kunal Thanvi from Banyan Tree Advisors. Please go ahead.
Hi. Thanks for the opportunity. So I had 2 questions. 1 was on our, you know, revenue yield if we see sequential, there has been some improvement from, say, 50 basis points to 51 basis points in this quarter. Wanted to understand the key reason behind it. Is it, you know, expansion of TER in debt or equity? Or is it simply because of the better equity mix that we have seen in this quarter? That is one. Second is on, you know, overall debt side of the business if we see for the industry and for us. We've been seeing a lot of outflows. Maybe if you can share your thoughts on, you know, what are the factors that are leading to, you know, this kind of outflow for the industry and for us.
Thirdly, if I can squeeze in the last one is on the SIP market share gain. Like, we've seen too, like from last 2 quarters after bottoming out in Q4 of FY 2022, we've seen some improvement in our SIP flow shares. If you can, you know, put some comments, you know, what are the reasons behind it? What is that's different we are doing in terms of distribution? We understand that performance has improved in last 1 and a half, 2 years. Apart from performance, are there any other levers that we are working to improve the SIP and overall equity market share? Thanks.
Hi, Kunal. On the margins, I think you rightly mentioned it's due to the better class mix. Equity proportion in the overall AUM has gone up and that has resulted in the margin improvements. Your second question was on the overall outflows in the debt market. I think if you have a rising interest rate environment, that's when you get outflows from the debt fund historically. We have seen that in past as well. If you ask me going forward, I see a great opportunity emerging out of this. Once rates start stabilizing, we have stated in past this could be a start of acceptance of debt funds by retail investors. I think if we look at the industry's progress over the last couple of years, there has been tremendous focus on.
I'm talking about the retail investors or the individual investors. There has been tremendous focus on the equity funds. Equity ownership among retail investors has gone up. Not so much on the fixed income side, but I think with yields where they are currently, over a period of time, I think there is tremendous potential for us to reach out to large number of individual investors and offer our debt products. I think also, Simal mentioned in his opening remarks, it's important to see the number of debt outflows in conjunction with flows into the debt ETFs and the debt index fund. If you add these 2 numbers, the net outflow number would come to approximately INR 60 billion or so.
There have been outflows, but there are inflows into the debt ETFs and debt index. There are outflows from the open-ended debt funds, but there are inflows into the debt index and debt ETFs. Your third question was on the systematic transaction. As you know, I mean, systematic transactions at our end include SIP as well as STP. You know, I mean, we used to be a pioneer in that space. Over the last several years, the HDFC as an AMC has been investing very heavily in promoting the concept of SIP. Last couple of years, of course, we lost some bit of market share for a variety of reasons that we would have discussed over the last several quarters.
We have stepped up our efforts couple of quarters back, and I think it's a mix of variety of things, including better engagement with our distributors, our partners. It's our enhanced marketing and communication efforts, persistent and digital platform. I think our transition from client services to client delight, which I've been talking about for last several quarters. Then of course, the improved performance, which is getting recognized by investors and our partners. I think a combination of all of these things. As a house, again, as I mentioned, we used to be a pioneer. We lost market share, but across all channels, I think at our end, there is tremendous focus on getting our market share back, on the systematic transactions front.
Sure. Thank you so much, and Happy Diwali to the entire team. All the best.
Happy Diwali. Thank you so much.
Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Hi, good evening, everyone. Just a few questions from my side. Firstly, just extending the point on the yield front. While definitely the mix that would have played out, is there any trends that we've seen early on the debt yields moving higher in with regards to charges or possibility of charging a better TER? That is point number one. Secondly, our OpEx to AUM ratio is possibly higher than what we've seen in the past around 10+ basis. What is the outlook going ahead with regards to this number? I understand you all have guided in that range only, but it's still just beyond that range. Do you think that, you know, we can see a better number out there? Thirdly, on the what's the strategy on the alternate assets having...
You know, like in last few quarters you have mentioned that you have formalized the strategy and you expect scale-up in this space. What is the kind of traction we've seen and what are the plans going ahead? And my last question will be on the tax rate, which is slightly higher at 26% plus. Any thoughts around this? Yeah, those would be my 4 questions. Thanks.
Thanks. I mean, the first on the yield on the debt side, I think it's been pretty stable. There's hardly any change on that front. Second, on the overall expenses as percentage of AUM, so yeah, it's been like that, 13, 14 basis points. Maybe over a period of time as AUM increases, there would be scope for improvement there. But otherwise, as we have been guiding that, there are few items like technology on people, on business promotion, as the travel is back, as business promotion is back, some bit of expenditure has gone up. And we are investing in future. We are very optimistic about the industry in general and for us to gain market share over a period of time.
We would be very keen to invest at this point in time. On the alternative side, I think as Simal mentioned earlier, we have already launched. There are multiple things that we are doing on that front. You will see enhanced level of activity in alternative space over the next several quarters. We have it on our radar and look forward to building a state-of-the-art alternative business that I've been mentioning over the last several quarters. We launched our Category II AIF fund of funds this quarter, and going forward, we will further expand our portfolio on that side. Just, I mean, related to that, PMS business, and we are fairly clear in our mind on how we want to build that business.
In line with this, we launched India Ascent strategy in addition to the All Cap strategy that we launched last quarter. On the non-mutual fund business side, I think both PMS and alternatives, we have ambitious plan over the next several years.
Yeah, on the tax front, frankly, it's about 26%. There is nothing materially different there. A bit of disallowances in our provisioning, but it's within 9%-25% range, which is prevalent.
Yeah. Thanks. Just, Navneet, could you just give some thoughts on how do you see the yields? You know, in the previous quarter, when the yields moved up, possibly after a long time, you mentioned that it was, you know, kind of not something which is structurally any change in the yield structure. We've again seen an increase in this quarter. We are happy to see that number. How do you, how do we see this going ahead?
That's, I mean that's a result of the asset mix changing, as we've mentioned earlier. On the fixed income side, it's been pretty stable. On the liquid side of our business, that's been pretty stable. On the equity side, I think we have discussed this earlier, and maybe I'm just repeating what we would have said earlier that, one, I mean the increase in AUM as per the formula of the sliding scale of TER, this gets adjusted over a period of time, as we moderate commissions for new flows to an extent. In this quarter, over the last couple of months, a couple of our scheme AUM would have surpassed the INR 5,000 crore multiple, and that would have had impact of couple of basis points.
As we have been guiding continuously, our book margins are at a substantial premium to the flow margin, and the new business is happening at lower margins. Of course, we are seeing some green shoots in terms of how NFOs have been priced as compared to where it was, say, in the H1 of the last financial year. Statistically, the pace of dilution of yields may slow down going forward as the gross flows as a percentage of AUM may be lower as compared to the last year. Yeah, otherwise, as we have always maintained, the loss in yield should get compensated by favorable asset mix, which we have seen in this quarter. Furthermore, I mean, the growth in our business over longer term should more than make up for fall in yields.
Thank you so much, and wish everyone a happy Diwali. Thank you so much.
Happy Diwali. Thank you.
Thank you. The next question is from the line of Ameya Gawande from Metis Capital. Please go ahead.
Yes, sir. Good evening, everyone. I just have a couple of questions from my side. First is from 5 years perspective. As industry is growing and evolving at a fast pace and has a lot of space, what will be your strategy in this competitive environment for growth in the market share and achieving the operating leverage?
5-year strategy, I mean, over the last 5 years, we have seen the pace at which the SIP book has grown. We have seen the way, the overall equity AUM has grown. I think the financialization of savings is a trend which has just picked up, but we have a long way to go. Whether you look at our AUM as percentage of GDP, whether you look at our AUM as percentage of market cap, whether you look at percentage of money that we get as proportion of the overall household savings, I think we have a long way to go. But mutual funds are really becoming one of the preferred vehicles for, investing for a large number of investors.
I think the number of unique accounts have grown very substantially in last 15, 18 months, from little over like 2.5 crores to almost 3.5 crores. To us, this is just beginning. As we have mentioned, I think in some of the earlier calls that we have set a very ambitious mission for ourselves, which is to be the wealth creator for every Indian. As I said that, as of now there are just like little over 3.5 crore unique investors. If you look at the number of people who have PAN, people, I mean, who have passports or people, I think, I mean, of course, the bank account numbers are much, much higher. Over a period of time, we believe that the total addressable market for the industry is very, very large.
Within that, the strategy for us, I think we have the best-in-class product range. We have one of the best, I would say, a long-term performance track record of several of the funds within that. We've continuously been expanding our product bouquet to ensure that we remain a one-stop solutions for investors. Whether it's on our distribution side, we have an outstanding franchise, I mean, across the country with 228 branches and the number of distributors that we serve. Across all channels, we remain highly focused to have the best possible market share across all channels. I think we are investing heavily on the digital side, in technology and in marketing and in all of these spheres to ensure that we make the most of the opportunity that industry presents.
Thank you, sir. Also, I would like to have your thoughts on the risk due to global economic environment, like whether it may be inflation, interest rate hikes or geopolitical tensions. How it might hamper the business and the mitigation part.
You're talking about the fixed income part of our business because the yields are going up and globally.
Yes, sir.
Liquidity is tightening?
Yes, sir.
Of course, I think we have seen outflows from the fixed income funds. The interesting part that you mentioned earlier is that we are clearly seeing interest of retail investors in that index fund and the ETFs. Going forward, of course, given the higher commodity prices or the higher inflation, the accelerated tightening by the major global central banks, they are putting upward pressure on yields. Going forward, maybe higher supply of state development loans, which has been muted till now, is likely to pick up in coming quarters. This can put further upward pressure on yields, given the high SLR holdings of banks and robust credit demand on the other side. We are seeing financial conditions tightening globally with U.S. yields rising, particularly post the Jackson Hole Symposium.
I mean, as I mentioned that on the fixed income side, over the last 5 years or so, if you see the fixed income AUM as percentage of bank deposits, I think that percentage hasn't really gone up. We have seen significant growth in the industry on the equity side, but not so much on the fixed income side. Maybe elevated yields will give us an opportunity to present that asset class also to a much larger set of investors than what we have currently.
Yeah. Thank you so much, sir, and all the best for the future endeavors. I wish everyone happy Diwali.
Thank you.
Thank you. The next question is from the line of Saurabh from JP Morgan. Please go ahead.
Hi, sir. Just 2 questions. 1 is, you know, the scheme performance has improved. Have you seen any market share improvement on a flow basis happening towards HDFC AMC? The second question is, you know, on the margins you did mention that the flow margins are lower than the back book. I was wondering, I mean, you've kind of reverted to your 35 basis points, you know, long cycle level. How would you think about, you know, the degradation in margins going ahead? Thank you.
Margins 0.2 basis points here and there, as we have been saying, I think it all depends on asset class mix. It depends on flows into certain funds. I mean, NFOs versus some of the older funds, so on and so forth. On the scheme performance, of course, I think with the improvement in our scheme performance across the board, we are seeing uptick in market share and flows, I think both in the SIP as well as in the lump sum flows across all channels. Whether it's the MFDs, whether it's the large national distributors, banks, FinTechs. I think across all channels, at the margin we are seeing improved market share.
We should see this reflected in your overall equity market share, maybe with a quarter lag, hopefully next quarter or?
Yes, yes. This quarter also the market share is flat over the last 2 quarters. More or less flat. You have to keep in mind there was a large amount that was gathered through the NFOs. In the last quarter we did not have an NFO in active equity. We will have a Business Cycle Fund in this quarter. Last quarter, a couple of other NFOs that collected over INR 10,000 crore, INR 100 billion rupees, and we did not participate. Even adjusted for that if you see our market share, it's pretty visible that we are improving across the board.
Okay. Got it. Thank you.
Thank you. The next question is from the line of Mohit Surana from CLSA. Please go ahead.
Hi, sir. I just have 1 question. In terms of your employee OpEx ex ESOP costs, it's for the past 2 quarters up 21%. If I compare 2Q of this year versus 4Q of last year. Just wanted to know where we are investing more in terms of our manpower cost, or I'm reading it wrongly that you know the 4Q base was very low to start with. Just wanted some thoughts over there.
First of all, I mean, you will appreciate this is a people business. I mean, that's I would say a key focus for me to ensure that we retain our people, we are able to attract the best possible talent in our company. I think if you look at overall numbers, I think for 6 months ended September 2019, that is pre-COVID, our employee cost was INR 1,145 million. As against that, the employee cost for 6 months ending September 2022 is INR 1,618 million. For the first 6 months of the current year, if we take out cost of ESOP, then the number is INR 1,406 million, which is an increase of 23% absolute or 7% on a CAGR basis.
As I said that we have to invest in our people. I mean, the growth in financial services, the sector has led to healthy demand, especially for high-quality talent, and it would not be prudent to let good talent go away. We will try our best to balance between the 2.
Sure, sir. Appreciate your answer.
If you look at the overall sector, this is not exceptional. We have to ensure, I mean, even at the cost of repeating, I think we have to ensure that we retain our quality talent.
Got it, sir. Thanks a lot for your response.
Thank you. The next question is from the line of Ronak Chheda from Orega Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. I just had 1 question. You mentioned about debt ETF, you know, partly taking share from debt schemes on industry level. As I understand, for HDFC that might not be the case, and hence we must have lost a higher share than the industry. What are your thoughts and how do we address this issue going forward?
Sorry, I didn't get it. You are saying, I mean, debt ETF is taking away. Is it like because we are not doing debt ETF, is it taking the share away? I'll just tell you what we are doing is, we have got approvals to launch various debt index funds, so we'll be doing it. Actually these debt index funds or debt ETFs are more of target maturity funds. It is equivalent to what in the erstwhile era we used to call it as an FMP. This is obviously open-ended index funds. But all of them have kind of predefined maturity. Because of the predefined maturity, lot of investors are not worried.
When they are looking at holding till maturity, they are pretty much okay that they would more or less make up equal to the YTM or the entry levels. We will have number of debt index funds coming out of our stable over the next quarter or 2.
Okay. Till that period, we would be losing a higher share on a debt side than the industry. That understanding would be correct, right?
No. In fact, if you remove the debt index and rest of the categories, our market share is pretty decent. I think it's been. We've been holding on to our market share. That's a category where we have not been present, but we'll be launching several products in next few months.
Actually, even if you look at our presentation that is there, right, and if you look at our debt slide, that includes the debt index funds also. Despite that, despite increase in debt index funds, our market share on overall basis has been fairly stable. We have not lost market share because of that.
On a YOY basis, we must have done, but not on this, right? Sequentially, we might not have done. On a YOY basis, we might have lost share.
I'll tell you on a YOY basis also, if you look at debt AUM, our share was 14.6% on quarterly average. We are as of now, this quarter we were on 13.7%. It's basically just about 1%. See, there are like, as you know, right, on the debt side, there are large corporate, large treasuries, large institutional investors. They might kind of take some money out at varied points in time. Plus, of course, we have seen some bit of interest rate not exactly conducive to the debt funds as a whole, right? These are the couple of reasons. The marginal loss in market share on a YOY basis on a Q-on-Q, it's been flat despite the growth that we spoke of on the index side.
Got it. Thank you so much.
Thank you. The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
Hi. Good evening. Just 1 question from my side. Your SIP market share has obviously improved over the last 2 or 3 quarters. Just wanted to get some color on, you know, the channel of origination, how much it led to MFs or digital-centric channels. How do you see the customer stickiness on SIPs across these channels? Any qualitative colors will be useful.
Yeah, improving across all channels, and our focus is like ensuring that we get our fair share across all channels, which includes, as I said, MFDs, which account for. If you look at like the H1 of this year, MFDs would account for around 15% of the new SIPs. National distributors would account for around 20-odd%. Direct would be like 10%. FinTech actually account for almost 1/3 of the new SIPs that get created. Then you have some of the banks which have closed or guided architecture and then the other banks. We watch our market share across all of these segments. Our endeavor is to ensure that we are getting our fair share across all of these channels.
We are making incremental improvement across all of these channels. The number that Simal mentioned is systematic transactions which include both SIP as well as STP.
Sure. Just 1 small follow-up. I mean, you released the, obviously with the mix.
Sorry to interrupt. If you can hold the device a little further from your mouth, sir, because your audio is sounding a bit muffled.
This is better?
Yeah.
Just 1 small follow-up. I mean, you obviously mentioned the mix across some of the channels for the H1 of this current fiscal. If you can, you know, give some color on, you know, either on a YOY basis how this mix would have changed or maybe, which are the contributors or which channels are the places where you're actually gaining the market share. I mean, if you can give some color on that. That will be also my question.
I think that across all channels, which includes MFDs, institutional distributors, I mean, other banks which are other than those banks which have a closed or highly guided architecture. Direct, small amount that comes from what we call RIA registered investment advisors and FinTech. In all of these channels we have improvement year on year from the base. I mean, the other way to look at it, the top 10 entities account for around 60% of the industry total. I'm talking about the new SIP count and not the amount on the count. In all 10 of them we have improved our market share.
Got it. Thanks then. All the best.
Thank you.
As I mentioned in response to an earlier question, this is 1 of the big focus area at our end.
Thank you. The next question is from the line of Devesh Agarwal from IIFL Securities. Please go ahead.
Good evening, sir. My first question is I wanted to understand how big is this ETF, debt ETF market and what potential are you seeing in this?
I think it's almost now touching. I'll tell you liquid and debt ETF adds up to INR 68,000 crore. Of these INR 68,000 crore, 1 asset management company which runs the Bharat Bond ETF, they are themselves INR 50,000 crore just about. Like, on the debt ETF side, that is, that is the story. It's basically dominated, I mean, that is basically 1 asset manager. On the debt index fund side, the AUM stands at around INR 57,500 crore.
Okay. Coming to the alternative again, this time we have lost the AUM out there. What exactly which fund have we lost which led to a sharp decline in our PMS AUM and what was the financial impact of that?
No, 1 large institutional investor has taken money off the table. We had 1 large client relationship, a large global institution. They've closed the mandate. Of course, relationship with the institution in question is strong and we'll continue to engage with them. On the other side, we definitely are working through various modes to build on our international business. I mentioned earlier about our setup in GIFT City. That would be a big step in that direction and you'll hear more from us on this front over the next few quarters.
Right, sir. Any financial number that you can give around this mandate that we lost? What would be the impact on the revenues?
I mean, if you look at our overall revenues, it's not material.
Okay. You did mention that you will see a lot of traction on the alternative products, especially with the launch of AIF II funds and some of the PMS funds. Any number that you are targeting to increase your AUMs in this non-mutual fund business over the next 2-3 years?
A little premature to, I mean, give out those numbers. All I would say is that, yeah, that's 1 business, where we have been investing. We have ambitious plan. We launched this Category II fund of funds. We will be looking at other products there as well. On the PMS side, as I mentioned, I mean, we have launched the second product. On the non-mutual fund side, both PMS and AIF are going to be the areas where we are going to focus.
Right. Lastly, sir, what would be the quantum for the ESOP expense for the full year this year? By how much should we expect a decline in the next year?
This year's total cost would be about INR 40 crore for the year for FY 2023.
Right. Next year, the likely decline?
That's a function of, you know, decline or if the NRC decides to allow more options, that's a different discussion item. We can't comment on it at this stage.
On the currently issued ESOPs.
I mean, we don't give future numbers. It's mathematics, we can take it offline, but it's clearly the reducing balances, you know, that's how the Indian accounting works. Sure. Okay. Thanks. Thank you. That will be all.
Thank you. The next question is from the line of Lalit Dev from Equirus Securities. Please go ahead.
Good evening, sir. Thank you for the opportunity. Just wanted to understand on the HNI segment, which forms a significant part of our individual area. Given the volatile markets, how are the inflows shaping up over there? Like, what is the outlook? What could be the outlook over there?
Yeah. Lalit, I think just give us 1 sec. I think you were not very clear. I haven't been able to get you. Just give us 1 minute.
Yes.
75%.
Yeah.
In fact, if I remember correctly, 75% of flows in the last few months are purely from SIP, which means that lump sum flows have come down. Maybe, yeah, some of the investors who were putting the lump sum flows are not putting now. Market is definitely volatile. I think we have to give it to the individual investors, retail investors in India who have shown tremendous resilience against the backdrop of the heightened volatility that we have seen over the last 7, 8 months. Yeah, I mean, the lump sum flows have clearly slowed down. Earlier, we gave you the number of, you know, quarter-on-quarter as well as year-on-year. Flows have slowed down a bit because of the volatility.
Sure. Sure, sir. Like, on the SIP side-
Sanjeev, your voice is sounding a bit muffled. Are you on speaker phone right now?
Yeah. Hello?
Yeah.
Yeah, yeah. Is this audible, sir?
Yeah, this is better.
Yeah. Sure, sir. Like, as you mentioned that on the SIP front, so on the new registrations, like, about 1/3 is coming through the FinTech channel. Could you talk about the persistency level and the like, how much of it retires? How much of that is being retained at retention ratio of those numbers from the FinTech channel especially?
No. My assumption is that maybe persistency is lower on that channel relative to most of the other channels. We don't give those that granular detail. At our end, as I mentioned earlier and I reiterate that our share has been going up across all channels.
Sure. Okay. Thank you.
Thank you. If we take the next question, a reminder to the participants, anyone who wishes to ask a question may press star and at this time. The next question is a follow-up from the line of Kunal Thanvi from Banyan Tree Advisors. Please go ahead.
Yeah, thanks for the opportunity again. So I have this follow-up on the debt passive or the index fund that we were talking in response to the earlier participant. Wanted to understand, you know, what kind of yields, you know, are there in that ETFs and passives? Like, is it closer to the equity passives or is it closer to, you know, the active debt ones? Like, what's the sense there? Like, if there's a, you know, structural movement from, say, some part of the active debt to passive, what is that we're looking at in terms of the yield compression on the debt side?
I mean, we are yet to launch products, but when we are looking at the industry, I think they are somewhere between 10%-20%. Over a period of time, there would be product innovation on that side. You are right. I mean, that will be lower than what the current blended yield on the overall open-ended debt schemes.
Sure. Got it. Thank you. Now it's clear.
Thank you. The next question is from the line of Alok Kumar from UTI AMC. Please go ahead.
Hi, sir. I just wanted to understand what has been the impact of the rising yields on our debt portfolio and how do we look, you know, about the future of the yield markets and our debt AUM?
You know, as I mentioned earlier that, there have been outflows from the debt funds over the last several months as yields have been inching up. This is in line with the trend in past as well. Over a period of time, once yields stabilize and given the elevated yields, we are hopeful that this would attract lot of individual investors to the debt funds. I mentioned earlier that while we have seen significant increase in individual participation in equities, particularly in the SIP side, but then in industry we hardly talk about SIP in debt funds. I mean, all of us have grown in our childhood thinking about recurring deposits in banks.
Something similar I think our industry needs to do as well, you know, promoting SIP in the fixed income funds for investors who are hardcore debt or hardcore fixed income investors. I think yields at these levels with product innovation and some of the other efforts by the industry, both on the investor education as well as marketing, can lead to a lot more penetration of debt funds among the individual investors. There's a lot of opportunity. I'm just repeating, I think I mentioned earlier and in case I didn't, that if you look at the overall debt AUM in India in last 5 years, the industry has grown so much and the overall growth in the industry has been significant.
On the debt side, as a percentage of bank deposits. Or if you put any other metrics, I think we haven't really grown much on that side, as industry. I think there is a lot of opportunity. A large part of the savings remain in fixed income instruments in India, apart from of course real estate and gold, where the significant proportion of household savings are. I think yields at elevated levels, some of the product innovation which is happening in the industry and, maybe some bit of other efforts from the industry can lead to a lot more penetration on the debt side. I remain quite optimistic.
When yields go up, when people see MTM losses or the MTM or maybe the overall lower returns on their debt funds, we have seen historically some bit of outflows from the existing funds. As they stabilize, as yields stabilize at higher levels, they start attracting money.
Any plans or any product where we can lock the investors' fund at a higher yields, given that the, you know, returns on the FD deposits have not yet increased as much as the, you know, the lending rates have increased. Any method, any way where we are looking at, you know, launching some product wherein we can lock in the funds at a higher interest rates for our investors?
No, absolutely. That, that's what we talked about earlier. Those are like Target Maturity Funds. I think those funds where the underlying investments would be in GSEC or SDL or highly rated corporate bonds with a specific maturity. They are similar to fixed maturity plan earlier, but fixed maturity plans used to be closed-ended. These are kind of open-ended index funds.
Sure, sir. Thank you so much. A very happy Diwali to you all.
Happy Diwali.
Thank you. Ladies and gentlemen, as there are no further questions, I would now like to end the conference. Over to Mr. Navneet Munot for closing comments. Over to you, sir.
Thank you so much, and wish you all a very happy, safe Diwali and a prosperous, and blissful New Year ahead. Last 2 years, I think, the Diwali time wasn't as, I would say, jubilant given the overall pandemic situation. Now that thanks to the, vaccination and, thanks to everything coming back to normalcy, I think there is a lot more joyful Diwali that everybody and, every family is looking forward to. Thanks again.
Thank you, sir. Ladies and gentlemen, on behalf of HDFC Asset Management Company Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.