Q2 23/24

Oct 23, 2023

Please note that this conference call is being recorded. I now hand the conference over to Mr. Abhijit Bhakare from KFin Technologies. Thank you, and over to you. Hi. Thanks a lot. Good morning, everyone. Welcome to early conference call of KFin Technologies Limited. To discuss with you FY 2024 performance of the company and share industry and business updates, we have the senior management with us, represented by Mr. Sreekanth Nadella, the MD & CEO, Mr. Vivek Mathur, CFO, and Mr. Amit Murarka, Head Investor Relations. I would now like to hand over this call to Sreekanth for his opening comments, after which we will take questions. Sreekanth, over to you. Thank you so much, Abhijit. A very good morning and a warm welcome to everyone who joined this conference. I start the conference with a fair amount of optimism and a lot of confidence as we move into the second half of the year. Clearly, the results of the quarter that has just gone by actually have instilled a similar amount of confidence in you as well. As always, I will spend 20 odd minutes explaining a little bit about our results and give certain insights on how we look into our portfolio in the way forward. I would hand over at this point in time to Mr. Vivek Mathur, who is our CFO. Specifically talking about the organization and its strength and the current scale of its operations. We continue to be the largest investment solution provider to mutual funds standpoint in terms of assets management continuously managed. We continue to manage close to 60% of all the operating AMCs, 25 out of 42 AMCs. We are managing now close to INR 15 trillion of assets under management spreading across these asset managers. The quarter that has just gone by, we again had our overall AUM growing ahead of the overall market. Our win rate in the mutual fund business continued to be impressive even as the overall assets under management coming from the equity component is about 50% of the AUM, occupying a market share of about 60%. SIP monthly inflows above 10%+. As always, SIP monthly flow is a very well-earned assignment in the future in terms of where we expect to see the overall equity AUM over a period of time, even as the retail deconstruction process. From a folio standpoint, we have today managers about 23 crores of folios in the country making us not just the largest in India, but one of the largest in the world. When you take the number of folios, the number of unique investors that we manage would be around 80% of every investor who invests in this country chooses us as their investment manager. The other large business we have in the form of issuer solutions. We have improved our market share substantially to now about 37.5% in the form of the market cap companies that we render our GBS research to in India. We have continued to add more and more listed and unlisted companies that today we manage about 1,290 plus of it. We have added significant IPO book this year and we are well-positioned in terms of the pipeline of mandates that we have won by companies like YES Securities to actually list this means that will be coming through in the second quarter of this year. While mutual funds and issuer solutions continue to be our larger businesses, potentially gaining is the other younger business, which is largely our financial business, accounting administration for customers, for mutual funds, pension funds, for insurance clients, so on and so forth. Our pensions truly have been the ones that are growing much faster. We have grown little over 48% year-on-year in terms of revenue for this younger business, has gained 69% over mutual funds business. It really speaks about a factor of 2 to 3 times the growth of the larger business. Given the size of the addressable market that exists out there with both maintaining the traffic bar, which over a period of time would continue to reduce dependency on one large business, providing the resilience that is required in terms of risk distribution to a single asset class to a single country solution. Not just a country, even from a business client perspective, not just a branch agency. We are uniquely positioned to be the only large institution that can manage both the custodians and the fund accounting administration side, which is the only asset side of fund management. We have equipped ourselves on the ESG to be rated "A" this year. The rating for this year results will be released on the way and we hope to get the results into early part of November. We hope to maintain and improve our ESG rating which we are very, very passionate about in terms of driving the business. Also glad to inform you in terms of expansion of our products and portfolios over the past couple of. We have added several cutting-edge modern tech platforms for the betterment of our end clients, for the investors, for the distributors, India and abroad. One of such platform is called the Guardian, which is country's first and only platform which will integrate AI with our off accounting engagement into an integrated platform to be able to provide a very comprehensive solution. One, for every asset manager to report its base and manage internal compliance. Two, to the regulator or supervisor itself. Quickly going into the quarterly performance. Financially, we have grown our revenue from operations on a consolidated level is around 15% year-on-year. That translates into sign-up of 37%. The overall EBITDA margin standing at close to 25% grew at 28% year-on-year. The overall tax margins were at 93%. It marks an impressive area of dynamic growth, both in terms of offline as well as cost optimization. Whilst much of the margin expansion had also happened in terms of the younger and the larger businesses contribution, it is also the more domestic business contribution, especially in the form of cost optimization that we have been able to render as contributing to our margin profile. Talking about the domestic mutual fund business, overall AUM of 20.5% year-on-year we have grown as against industry average, which is closer to 18, grown alongside AUM. On the equity side, there has been a slight downselling the housing industry and not necessarily in the industry growth and that is a factor which we hope would change rather soon, even as several of KFin's clients have large discount offerings due to happen in the upcoming quarters. For monthly ASC, it grew 10.40%, which is a very encouraging factor. IT footers grown leaps and bounds to now touch close to 70,000 flows per month, not just providing the resiliency gain but also the overall capital market for three at this point in time. We also have 10 asset managers with a percentage of 14 AUM, which is some of the growth of our younger and intermediate duration for growth of KFin Tech over a period of time. Of course, we will see that cyclicality on performance what happen. It is a great pleasure to note at this point, slightly behind growth on the equity side, our overall revenue has grown year-on-year above 17% solution. Mutual solutions, 170 customers have been added in the Q2 to a total count close to 1,293. In this space, we are near about three to four clients, and we believe that as the years grow, it always would add a significant amount of resilience to earnings and FCF. We have been appointed as the bookkeeper for the State Bank of India, which is a matter of pride for us, and we have also managed the top three IPOs in terms of the funds raised this year and out of anti-fraud assessment. Our market share has expanded by 1.6% to 47.6% in this particular segment as compared to our previous quarter. These were managed, currently managed deals through our integrated system. We have, as I said, a pipeline of several more IPO mandates that have been won, and all those as companies are trying to launch the IPO, we honestly would help us to maintain the growth of integrated mutual solutions but also the funding and growth that may be associated with that. On the international investor solutions, we continue to add more clients. Our total clients base at the current time stands at 50. We are happy to inform you that our first client in Singapore, we have gone live in the straight-through processing and we have two more clients, one of whom is under general letter of contracting and another one in the process of implementation. We have also won our maiden contract in Thailand in the form of Bank of Ayudhya Public Company Limited, which is the second largest asset management company. KFin Tech will be providing the fund administration services for this particular client. The pipeline in Thailand has opened up twice as financially in just a matter of few months, even as we have been chosen to be the first such participant to render such solutions in Thailand. We have also won another contract with an operating system client in Manage Distributor Platforming and two more LOIs, letter of intent received in Malaysia for NR solutions. We believe that into the coming quarter, we would close the contract and initiate the transition soon after. On the alternatives front, we have continued to extend our market leadership. Today, we manage 87.2% of the total number of funds launched in India, putting us at number one in AUM managed. Overall AUM for alternatives has been steadily on the rise and has grown 6% year on year. In terms of beyond the alternative business, we also do a significant amount of wealth management platforming and solutions and on the fund administration services for general insurance clients in India. Also are extremely proud to be chosen by the LIC Pension Fund manager for us to be transforming their fund administration as a solution, and I'd say definitely one of the top-performing Fiat trends for this financial system. Outside of technology, from a technology solution standpoint, we continue to maintain our position of being a leader in terms of providing digital solutions at scale. Big data and clouds are two very important areas for us. For a company that sits on near about INR 200 billion of AUM, it is absolutely clear that we need to get our strategy correct. Very happy to inform you that much of our data is already cloud provisioned. We are rewriting our application layer into the cloud as well into a data platform model. We would have launched our completely cloud-enabled and fully satisfied all business and platform, not just in India but globally. On the national front, our subscriber base grew 22%, even as the overall subscriber base at industry level has grown 11.5%. This means that we've been growing two times above the industry help us to improve our market share from 6.9% to 7.7%, which is 80 basis point increase within the year. We continue to drive our growth through significant value-adding acts of acquisition through the physical presence and into the DNCS and other platform. We continue to be very committed to the cause of driving pensions as a theme, even as financialization grows into the front seat, that individuals are protected from their retirement standpoint by very concerted and cohesive financial planning, which covers primary and secondary markets, alternatives, and pensions. The overall industry performance itself had been nothing short of spectacular. As many of us know, there has been a near 20% rise in the AUM and the industry over the past six to seven months. It is extremely welcoming and performing, and of course, we firmly believe, as also is the expectation of the industry, in terms of reaching 100 trillion AUM over the next five years. This growth not just in size but also in confidence in terms of the potential more than doubling of this particular asset class and hence the growth of the asset management company and also sub-segment such as mutual funds in the growth along the way. Same is the case with the alternatives substantial growth near about. I think this last quarter itself the overall capital has been committed and drawn down, which remains low, which is largely in the form of stock, the rise in U.S. yields as well as inflationary pressures. That notwithstanding, the overall alternatives industry has grown very rapidly, nearly six times over the last three years alone from near about INR 800 billion has grown to now close to about INR 8 trillion. I think this has been a phenomenal one and alternatives growth is beginning of the growth there, obviously. What is also important for us, again, we are the only institution in the country who touches every asset class, scheme, and account and the IPO is something that we also track very closely. There has been a significant rise in the preceding six months. The scheme assets have increased near about 85.4% year-on-year. And obviously this kind of retail investor base of itself is a core like to ours and expansion of the individual investor of itself. More money to move away from into investments, more money away from real estate and bullion type illiquid investments into what is more liquid and long-term return generating assets such as mutual funds. Overall, mutual fund investor, our AUM have already come up in terms of the growth up on 20.5% year-on-year in terms of AUM, even as industry is growing at 20.3%, slightly lesser than the AUM. It remains fair amount more money has come into the money market and the asset services. F&IT shares have grown 18.5% year-on-year. And this is a very promising track to not just do we track, but we also do everything we can to improve the in-closing FSFE markets through technology and innovation. With that, I would happily hand it over to Vivek to cover the financial highlights of the company, and then we believe it over to you. Thank you, Srikanth. On the overall financial performance, the revenue from operations on an year-on-year basis for the half year has gone up by 12%, but same period, same quarter last year versus this year, it has gone up by 16%. Sequentially, quarter-on-quarter, the revenue from operations is gone up by 15.1%. Overall, we did about INR 390 crores of revenue in the first half of the current year. Back by the stellar performance across various business lines, which Srikanth explained. The overall EBITDA margins, if you see, EBITDA itself has gone up about 23% year-on-year. And if you look at the same period last year versus this year, same quarter, it has gone up by about 31.8%. Sequentially, EBITDA has grown by 33%. In this quarter, we have got an EBITDA margin of 44.8%, and for the half year and financially, it is 42%. So there is a jump across revenue and EBITDA margin. Both as a result, not only of increased revenue but also in terms of containing cost. So both in terms of employee cost and other expenses, we have been able to maintain trajectory with the investment in IT and automation. It has not gone through the roof, and we have been able to maintain it to increase the EBITDA margin. Therefore, overall PAT, if you see, has gone up about 22.7% year-on-year. Same quarter last year to this year, it has gone up by 28%, and quarter-on-quarter it has gone up at 31.7%. PAT margin has also improved in this quarter to 29.4%. For the half year, it is 26.8% and sequentially also it has gone up. Overall, the performance, I would say is good for the half year ended FY 2024 for the quarter and sequentially. Quarter-on-quarter, we are now having a cash and cash equivalent balance of INR 374 crores, a three-year peak, and the diluted EPS has also gone up to 6.11 versus 5.05 same period last year. That is all something where we continue to remain invested in the future, going to new geographies and launching new products. As far as the segmentation is concerned, domestic mutual funds continues to remain at around 70%-71% of total revenue. Issuer solutions revenue is about 13% of the total revenue from fee services. International and other investor solutions are 10.5% of the overall revenue, and GBS is around about 1% of the revenue. This growth, coupled by explaining the employee benefit expenses, if you see, are just about 1.6% increase year-on-year, resulting in a better EBITDA margin and PAT margin. So that covers the financials. We are happy to take questions now. 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 phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands up to ask a question. Ladies and gentlemen, we will wait for a moment while the questions are answered. We have our first question from the line of Pawan. An investor, please go ahead. Sir, may I know what is your dividend policy, sir? The dividend policy is stated that it comprises of decision of the board considering various aspects, such as investment for future in IT, geographical expansion, investing in developing new markets and new businesses. In the process, whatever surplus funds are there, board will take a call in terms of when to declare dividend. Declaring dividend is easy in terms of paying back, but creating future moats in a growing company is equally important. Board will take a call in times to come in terms of when to declare dividend. Dividend stated policy in the same lines as I mentioned to you, which is approved by the board. Thank you. Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phones now. We have a question from the line of Aejas Lakhani from Unifi Capital. Please go ahead. Yeah. Hi. Congratulations on good set of numbers. Srikanth, could you just spell out that some of the wins that you had in the international geographies, you mentioned that Singapore clients will also go on stream. Malaysia is also in the process. I just want to get the sense that are these all under that one-time charge before they move to the recurring bucket? Hi, Aejas. Yeah. Short answer, yes. These are a combination of transfer agency and fund accounting clients. The Singapore client that had gone live is per mutual fund. Most of you in Singapore. The clients in Malaysia, we are the one we signed and two more LOIs we have received for large funds, large asset managed in Malaysia are effectively on the RTA work today. And there is one in Thailand, as I have already mentioned, accounting administration. All these clients, there will be an initial transition phase followed by go live from a pure revenue standpoint. Transition itself is a charge at one time, and the run component will be on a basis point charge basis. The fund has gone live in Singapore already as I said transition complete and it took us in a record time about seven weeks and they are live as of today. That is wonderful to hear. The next one is, if you could just clarify that investments ahead of the curve, like you spoke about even in your initial remarks. So what is the volume of investments you have made throughout the year? How should we look at it for the rest of the year, and how should we think about this number in the year ahead? Sure. So I would classify the investments into two buckets. I mean, probably just from an easier answer. So one is the pure infrastructure and hardware component of it all. A play that is growing and the data that doubles near every 12 to 15 months of play. It is a significant amount of hardware consumption that is required for us to do it. Corresponding to that, and I mentioned this as well, our movement of data center of excellence in house managed into our Tier IV/standard data center that we moved about two years ago. We continue to expand CapEx in the form of servers and routers and the instances are increasing at a decent pace here. As we move a lot of our data and application layer into the cloud, we intend to bring down the CapEx requirements over a period of time. That is part of this remote vision. Of course, we will have to keep playing if growth in terms of outputs going up even as we move to cloud solution plays. To that extent, we have done a budget this year to the tune of about INR 80 crores, and this year we have used it and it does. We use our component of hardware as well as the amount of products and services on the P&L. Only if there is a substantive product development which has a significant economic value over a long period of time will we start by some form of it. All of it put together roughly at the tune of INR 60 crores was the case here, and we still have a decent amount this year as well. On the share, I mean, probably if I may also just add one important factor from my side in terms of what is the outcome of this. In addition to rendering better solutions and services for existing and the new clients, the pure revenue that we could generate on value-added solutions and services backing on these products and platforms has risen from 5%-7% over the last two years. Got it. That is clear. These generation costs or these higher costs will remain for FY 2025 or will they drop tomorrow 2025, given that you have been spending a lot and bulk of it would be over? Yes. Short answer is yes. We expect a moderation of infra spend in 2025. We are hoping to close out much of the education rewrite to be on cloud by end of fiscal 2024 into FY 2025. By that time, much of the work would have moved at least from on-prem to the cloud. At this point in time, we should not need too much infrastructure in the form of servers, if I may. You can use up maybe some of the comments last year as infra in the lab, how much it covers and it will take 2 years or so. That should actually come down. We would like to believe in the order of anywhere between 25%-30% of the usage. Got it. Just 2 more questions. One is, you spoke about the issuer solution business as well. Just wanted to understand the elasticity of pricing here. We do earn between INR 8 to INR 9 or INR 10 per folio, just as a theoretical number, broadly what we do. Is there a scope that we can increase the pricing elements there, or is it a function of several things which will ensure that we are in that band only? Price increase in the industry clients happens, unlike in case of mutual funds, if I may. That's something that we orchestrate every year, price, in the sense that it is not easy to shake off existing clients and then do a price increase. For a year, up to then, this is all based on when the contract comes up for renewal. As and when the contracts are coming up for renewal, there are machines for price increase. If it is genuinely warranted, for example, a folio fee from a certain client and that cost increases over a period of time, there is a genuineness for us to increase price and then we obviously do the same. What you might not have seen is a single year increase or how you would see if you were to suggest a price increase across all the clients in one go. Given it doesn't work like that in a single year, 7%-8% of our clients look to have a price increase after negotiation. 5%-6% usually turn out to be a price increase scenario. At the overall level, you may not see a tangible increase, but every year there is a price increase because of that. Got it. That is clear. Could you speak a little bit about your acquisitions? They have been doing quite well in terms of your cross-sells, even a little bit of account aggregator. Currently, as you have acquired these smaller entities, you have retained those teams and are letting them do their job. Could you just speak about now that they are fully integrated, what is the elements that you all talk about that is very strategic? How does the cross-sell between the clients happen? A little more on that. Sure. Thank you. That is a good question. Our M&A strategy is conceptualized with a view to drive one of three factors. The first one is to drive demographic reach. One of key objectives of M&A is to drive and add new product and portfolio solutions to our arsenal of things to do. Three, to drive depth in an existing business. If I may say, the third one is, I would not say less important, but then is of lesser importance, if I may, in the sense that sometimes you have to do acquisition consolidation, buying few other companies who are in the same space just to line up your revenue. Also, a lot is on Very interested in just increasing our business by buying businesses. We are looking to increase our business and grow and add a lot of value to our clients by acquisition of certain platforms, expansion and digital footprint. This anchors back to our overarching goal of being a global administrator of financial brands here. In order to do so, we need to have geography. In order to do so, I need to have enough number of certain platforms in our arsenal which are relevant, not just in India, but maybe in whichever geography that we launch and then want to expand into. So in that context, expansion, such as an acquisition such as Hexagram, for example, which we announced some years back, was done only with the singular purpose of achieving those goals, right? We believe it will add the right kind of talent which is required and the right kind of infrastructure which is critical and get a much larger addressable market. We also have been reasonably successful in converting many of these organizations we have acquired from slow or moderate growing companies to fast growing companies and negative EBITDA companies into positive EBITDA companies in just a matter of 12 to 18 months. That has been our strategy, and it has been working well. We also firmly believe in technological progress. So when we acquire a company, very, very dispassionately, we evaluate and understand should we have that complementary capability for ourselves now or we keep it on the vendor supplier. That time of the purchase is very important tactically because it helps us in optimizing our tech, our performing, and the vision in terms of the assets that you would want to keep for a long period of time. We continue to look for more opportunities as we speak, and of course, we have some amount of cash on hand, and there are plenty of times, and we continue to monitor and reevaluate each for possible acquisitions. Hopefully, in time to come, we have something substantial and meaningful to announce. That's very helpful. Thank you for the elaborate answers. Just one follow-up. You mentioned the move to data facilities from tech infrastructure. What is the Bhubaneswar data center you were referring to then? That's correct. Bhubaneswar, of course, it started off a year and a half ago to actually to have a tech campus, which we have now expanded into the operation campus as well. We are in the process of setting up a pretty decent-sized captive unit in GIFT City, because we manage international operations. GIFT City enables us or allows us to manage better in GIFT City. For example, my international business has near about 800 to 900 people who work in GIFT City alone. So we believe that we can have a pretty decent setup there. We have also identified a campus in Vijayawada where we will be expanding our tech headcount there as well. As a strategy, we believe that tier 2 offers not just a compelling entry point, but more importantly, the retention that is required, the stickiness, and the commitment of management are the values that we are able to get in tier 2 cities, which we had been for years in tier 1 cities. We continue to expand our footprint and we have certain goals. We believe over the next 3 years, we would love to move at least 3%-4% of our total headcount there. Okay. That's very helpful. Thank you so much. All the best. Thank you. Thank you. I remind all participants to press star and one to ask a question. The first question from the line of Harshil Gosh from Citi. Please go ahead. Hi. Good morning, sir. Just a few questions. First, with your revenue on International and other investor solutions between international and digital banks or ML and AI segment. There has been a sharp uptake in revenue which demonstrates a non-event in the solution segment. If you find the volume moves, incremental volume additions are broadly more in line with the business as usual. If you could give some color in any profit provision or the realization in the quarter, please. On your fee and digital banks business, which was seen from earlier. Could you just give color on what would have been the move in assuming overall fee mix if they would have remained flat-ish this quarter? Last, your interest income, can you give some guideline for the next quarter? Maybe you can give some color or guidance on it, the percentage for the current fiscal on the interest income side. Yeah, sure, Vivek. Please go ahead. This is Vivek. On the International and other investor solutions, if you see the large part of the business in international is global fund solutions. That is something which comprises of the Southeast Asia business and what we are doing in terms of Singapore and now getting into Thailand. That part of the business is large enough. Other pieces, the alternate investor, the AIF and TWN PMS services that we do. In terms of the numbers, that business itself, both these businesses combined is in almost 90% of the entire International and other investor solutions business. Among them, since it is about half-half in terms of the share of revenue. The business revenue has essentially doubled as compared to almost double, 93% growth over the same period last year versus this year. It has grown from INR 7 crores to about INR 16 crores. This is a big piece which is growing and catching up on the Southeast Asia revenue. As the Southeast Asia revenue itself grows, the other buckets, which are pension business and the Hexagram and Revai piece integrated into it, the other businesses are still smaller. These are the two businesses which are growing. Does that help answer your question? Sure. That's a very good number of metrics given and I appreciate that. What my understanding is there has been this big jump in this alternate revenue. This big jump, is it like new clients got onboarded? Like realization of some old money has been changing flags from street flags and something. I mean, just want to get a sense around that. Actually, can you elaborate? A combination of all of them, as you rightly said, that is no one thing. I think we have won a substantive number of alternates mandates over the last 12 months. As you are aware, the process of launch is quite time-consuming. Just because we won a mandate doesn't necessarily translate to revenue because the fund then has to get operational. They have to have capital commitments and drawdowns need to happen, and our commercial models are priced assuming that time. That explains the boom that we've had in three years where at various points in time, six have gone live. Six have gone live. That's been contributing towards growth these past three seasons. We continue to have at least another 17 more funds who are yet to go live and launch, which effectively means as they start to go live in the next quarter or so, we expect to see the revenue to continue to increase at a similar pace, even as the AUM of the existing funds will grow. It is effectively a combination of funds and mandates that we won in the previous year going live now. Second, we already had and we had gone live earlier, trade AUM going up is a second factor. Three, we have been adding a significant amount of value-added solutions to clients. It is not just the AUM basis points, but also the digital onboarding platform which was first time in the country being introduced by us and it is beginning to scale. It is helping people to onboard residents on residents, individuals on individuals, so have you. That has been contributing to the revenue. Last but not least, earlier on, some of the contracts used to be a fixed fee per scheme per month kind of a model, which we have completely done away with all of that at this point in time. I would say a combination of reasons for better pricing growth that we have had over the last few quarters. Sorry, Srikanth. Could you highlight on what the portion of your instrumental business is basically? Since you mentioned that there has been a big transition, a lot of things. I am not sure if it is going to be a feature how. Everything. There is no fixed fee component here going forward. We have essentially strung that process of fixed fee contracts exposure only to FIT. FIT is on the fringe. It goes into the fund with just asset investors. At this point in time, it has not been a part of and probably sitting those few schemes now at this point is our exposure to business. Got you. On my next two questions, if you- Yeah. Sanjana, on your IT expense. We spend around 20%-22% of our revenue on IT spends. As we continue to innovate new products while the FIT is ready, you still need to invest to grow new and configure for new geographies and new businesses. I do not expect that this overall spend will grow beyond 20% of revenue. Within that, there is a small part which goes to CapEx. It is about 20% of it goes to CapEx. The rest of it is usually charged out to the P&L. We think that as we grow, this percentage will keep coming down as the revenue grows. Does that answer your question? Yes. Lastly, on the domestic channel mixed change towards in favor of F&Qs. I am not sure how to say this. There was no mixed change in favor of F&Qs. Can you just clarify or give some color on that? Yeah. I think the mix that I mentioned earlier on. Our overall AUM grew 20.5% ahead of the industry, right? Our FIT grew behind the industry curve overall a little bit. I think it was largely because of the amount of asset churn that we have seen and a few redemptions of certain SEBI schemes. To that extent, our yield actually could have gone up if the mix was more in favor of specific, what I just said. I think the mix, of course, overall blending in at an RCA level, it will be the combination of layered with commission, that is which has management and scheme distribution commission as well as just asset management. The combination of- As well as, of course, pricing optimization. I think no, is it safe to say that we've been in the journey of our client growth, providing the necessary that is required there in terms of pricing. With that, we'll take it back and let's go to our next speaker. Maybe just even one more question. When there's a new NFO launched by another provider, do you get any one-time revenue out of that or is it mostly a unit economic stock? Sure. I mean, there is a certain amount of NFO for pricing, but it is not very material in the context of the overall business timing. If I were the unit economics of that, obviously, there is a significant amount of cost being put in, but what happens is in a very short period of time, the NFO, let's say, 5, 7 days or 8 days, there is a certain volume of physicals as well as the virtual. So we have to obviously staff up to meet that spike for those few days. We have available these days, especially with the regulatory, previous regulatory in terms of equities admission, there is a certain amount of compensation. Compensating for additional cost would be a certain amount of pricing we charge at an association level, largely the difference out of the customer in terms of commission. As I said, while there is a certain amount, I wouldn't talk about it because it's not very much in the context of the overall financial revenue. Oh, got you. Thank you, Srikanth and Lillian. Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We have our next question from the line of Devesh Agarwal from IIFL Securities. Please go ahead. Hi, everyone. Thank you for the opportunity and congratulations on the good set of numbers. First question is again on the International and other investor solutions, although you did mention that there was a good pulse in the alternate space. What I want to understand better that we are seeing an increase in the revenue after six quarters of revenue being between that 20 to 18 crore bracket. Is there any one-off component or one-off events of whether the platform fees or some attrition of these revenues? What would be the sustainability of this revenue? I am sorry. Can you please rephrase your question and see if I got it right? You are asking if the revenue for non-domestic mutual fund business, is it sustainable? Is that the question? No. I am asking the International and other investor solutions, the INR 22 crore revenue that you have for the quarter. I am assuming that will include some platform fee, which is more like a one-time fee. What I wanted to understand, would we see this revenue line item will have volatility going ahead? There would be quarters where we see a spike because of you selling more of the platform-based, what we say, offerings to the clients. Rather, I would say, I want to understand what is the component of annual fee and one-time fee within this INR 22 crore. Understood. No, good question. I would actually say the component of episodical one-time fee is marginal in the overall investment solutions, sorry, International and other investor solutions book. As Vivek had explained, it comprises of three small yet fast-growing businesses of alternatives, international and asset solutions. There is no lumpy episodical revenue than it is with alternate investment plans. Even in international funds too, there is some transition revenue we get, which is a one-time bill, but there is a recurring run revenue as well. The recurring run revenue component is much higher than that of one-time transitory revenue we get. Outside of this, there is a very small component of asset administration platform which we license out. That component is again very small in the overall scheme of things. Even if it was one of the business, I mean to say that it is a very large part of this bill. There is some maintenance, there is an AMC bill, which is not a one-time sale. There is a recurring revenue which we get and it is between 3% to 5% of the contract value. But every year business to use our. Just to add to what Srikanth mentioned, Devesh, out of this INR 22 crores, less than INR 2 crores is one-time revenue. That is the nature of business. Unless you bring one-time revenue, you will not get recurring AMCs. That is something which we aspire to get every quarter. Next quarter, we may get another win, which may be another INR 2 crores to INR 5 crores. But we want to grow this business not just by one time, but at monthly basis, collecting revenue. Just, Devesh, one more point here. I mean, what Vivek was alluding, as we keep adding these new contracts, part of the revenue comes as part of the implementation cost and all, that is the one-time revenue that is there. It is pure the nature of the business and the way these contracts are structured. For instance, I mean the LIC contract that we won, that is something that has not been reflected in the first half numbers at all. I mean, as we move along and we start implementing the project for LIC, those revenue would start kicking in towards the second half. As we go live, the recurring revenue would start growing from the next year onwards at all. Likewise, the case with the other contracts that would come as we go along into the other quarters. I understand. I think that is clear. Secondly, on your international asset business. For some quarter, we have seen that the issuance have been around that flatline of INR 65,000 crore. Just wanted to know where we are in terms of transition of the new clients, and from when can we see an increase in this AUM base? Yeah, sure. That is a combination of factors. Unlike in the case of Indian markets, which continue to stay above water amongst global turmoil. Unfortunately, it was not the case for many of the Asian markets. Again, things are cyclical, and I would like to believe that in the coming months, quarter, we can start to see a significant turnaround because no market in the world will continue to stay down for too long. These are fast-growing emerging economies with more financialization that is happening. Our AUM itself will grow on a platform of three things. One, existing clients getting more inflows, which is something that we have seen happening in the past few quarters. Two, the market going up and that is the market. Countries are still to be rigid and chief and with the present configurations, wars, hopefully, we can come inside of the ongoing war to see a dramatic turnaround, which will help us. Three, of course, wins and transitions of new clients. We have already gone live with our clients in Singapore. We have added only two funds of a very large asset manager, which is a current client in Philippines. The AUM would start moving into it as we start the transition into 2025. You will very soon start to see the AUM going up in the international space. Understood, Srikanth. On the third bit, in addition to Philippines, are there more clients that you can highlight wherein we are in the transition phase? Probably over a year period we are expecting them to go live. Absolutely. Not one in fact. There are more of our clients who will go live in Sri Lanka, Philippines too. We have a differing point in time. We received two LOIs. We have already called out, and the result of transition we are expected to receive into the next few weeks. The transition phase also will start. We have also improved the turnaround time for transition. Unlike in the past where it used to take about 12 months, these transitions are able to wrap within three to four quarters. It is largely a factor of our own growing maturity in these markets, and the fact that the platform can consume a wide variety of existing business rules and logic in a particular geography. That means adding an incremental client and transitioning will take progressively less time. It is a very important factor to note that the AUM that is being reported here is for TA alone. We do not want to get into double counting. Let me put it this way. I am rendering transition for a particular client. Let us say the AUM is INR 2,000 crores. If I am also rendering some accounting for the same client, we are not adding another INR 2,000 crores, though I will get 0.8 for TA and the 50-20. That is one small thing that you would want to note. The AUM itself has not necessarily been the only thing that is coming out because of enhanced technology tie-ups. Understood. Lastly, sir, on account of this issue, there were some issues in terms of RBI not giving approval for acquisition. Any updates on that and what is our thought process in getting into this space completely, particularly the last question? Viresh, we are still pursuing that with RBI in terms of following it up to increase the majority stake. It is still work in progress. Any lights in terms of what has been the issue? There is no issue which has been reported to us, and it is simply whatever has been stated in terms of our stock exchange filing is the only communication we got from RBI. We are trying to seek in-person meeting with them, and this is likely to happen later this month. We will update you once we have the next update about it. Let me just add some color to that. On aggregation, as I have already explained back in the day when we were doing the investment too, was our interest in driving TSP solutions, not so much of just aggregation data movement itself. From that standpoint, our current investment pattern renders itself phenomenally well for us to build technology solutions, leveraging the economic aggregated data for our clients. Those clients could be asset managers, wealth managers, and investors cutting through cases even vertically. Businesses like Guardian have seen a build on top of asset aggregation using AI technology to be able to provide even the regulators an opportunity to try getting compliance aspects as well satisfied, for example. So we believe that our operations have been very well managed with it, and of course, we continue to pursue the RBI in terms of understanding as to what else we could do to continue to go ahead and move things out strategically as well. Understood, sir. Thank you so much, Ashwan, and all the best to you. Thank you. We have our next question from the line of Lalit Tiku from Kotak Securities. Yeah. Good afternoon, sir. Congratulations on a good set of numbers. I have just two questions. Firstly, on the issuer solution business, we have seen a material increase in our revenues this quarter. Could you give us more light in terms of the unit economics in the IPO business, like how does it help in increasing the revenues? Over there. And also on the newer contract in the LIC Pension Fund, just like what is the quantum of revenues which you can expect in that contract over the coming years? That will be the two questions. Sure. The unit economics of registry of an IPO and LIC components of revenue for registry. There is a portfolio maintenance fee, which basically, includes a set of portfolios, multi-factor and unit. You have then events and corporate actions, which is a series of duration tie backs, right issues, rights and so on and so forth. There is a component of an incremental revenue of IP. Our revenue pool comes substantial amount of revenue comes from the combination of multiple factors, which is the maintenance and improvement of managing events such as AGMs, financial reports without any issue at all. The IPO revenue itself, again, going back to the NS kind of analogy for me in the case of HDFC, it is not very significant. What an IPO does for us, of course, is that it equals one set of clients, one set of on board clients on some IPOs. The portfolio maintenance aspect which is a recurring annual revenue is what is more critical. You may see a very small, maybe 2 to 3 minimum IPOs we do and also bond and the size of participation of that issue. Anywhere between 1.5% to 2% of our revenue of registry could be impacted because of that one factor. From an economic standpoint, it will add a popular revenue coming to the bottom line as well. That is based on the issue of services. My colleague's second question, Prateek will come with that. Yes, it is. The second question was on the LIC Pension Fund contract. That is a landmark win for us. We won against several other competitors. It is a contract which allows us to deploy full capabilities of the end of our platform, which as you would know, was a platform we acquired when we have invested in Sam. It takes care of front, middle, and back-office pension fund activities starting from bridge management all the way back to fixating anything. To that extent, the full glory of all of this is being implemented for our clients. We just signed it the previous week. A joint announcement has been made. This is a 7-year contract and the competitive bid was rendered. The contract will be about INR 25 crores. It gives us opportunity to add several value-added services of an economic function and value to the client. With that, of course, there are several other large CFAs we are working locally and internationally. Sure. So this INR 25 crore plus contract, that is on an annual basis, right? Or is it over the period of 7 years? No, it is in over the year. Okay. And sir this last follow-up question on the issuer solution business. So you mentioned that this quarter there was a revenue buildup was also based on some of the contract actions like the AGMs and all. So does that mean that going ahead in the quarter 3 and quarter 4, the revenues, we could see some seasonality also factoring in this segment, like it could remain flat? Or do you believe that the growth will continue to remain in this issuer solution business? No. We are expecting a growth in Q4 as well. There is no seasonality within the banking recovery. There is still a robust pipeline of IPOs coming to life. There are several large companies where our clients, there are demerging conversations going on. We are also in the process of transitioning some clients, which is registry AGT ramp, the captive registry business, our competitors. All of this and we obviously continue to invest with proper actions, which when just a lot of the comments of the AGMs, which will be three, four, six months distance and then the duration continues to add more revenue. Short answer, I do not expect a flat business up ahead from the registry. Got it. Thank you, sir. Thank you. We have a next question from the line of Abhijit Kakade from Kotak Securities. Please go ahead. Hi. Just one last question is, could you just share the HC number for this quarter and last quarter? The other one is that when we look at the international business, I think the revenue run rate has almost doubled from about a couple of years back. When do we start seeing margin numbers also inch closer to, let us say, double-digit levels as well? Thanks, Abhijit. Margins have already improved for the international business. Probably won't be as resource unlike the mature businesses. There is a continuous process of business development and innovation, most of which we expect. When I'm talking about domestic, I'm talking of new features to an existing platform or onboarding new clients. We add certain amount of one-time costs, which are basically in nature. So when you have a business where we are adding 100 odd clients in half years or two to three clients in a half year or something like that, there is always that one-time cost that will kick and 50-60 days of time when you need to bring more resources at one time. So it looks as if there has been some lag in India. What really contributes towards is the unit economics of the business, where we have started to see a significant improvement in domestic markets. But at an overall account level, you would see some overall business where you are not able to see because there are certain one-time expenses that are required for onboarding new clients and then. We believe that, as I mentioned yesterday as well, the international business renders itself to greater margin, especially as it gains much domestic work and the unit economics move with it. Sorry, Sriganesh. Just one small follow-up. Is it still fair to assume that these pullbacks on the international side, those are larger global players are still sort of seeking out the places that lack the local presence or the contract value itself is not very attractive from their sizing side? Sorry, your question is about international administrators not playing a role in India, is that the question? No. On the international presence, like the KAF contract that you won, the competition from the larger global players still seems it is not as active as one would have expected or if you could maybe correct me if that's not correct. But if that's the case, is it because the contract values are quite smaller from their sizing scheme and if they also lack the presence that you have in these countries as well? Again, I think it's a bit of both. I won't be able to conjecture in terms of why they haven't been able to, but I think the point is these are those geographies the sizes are not very large. For someone to go through the pain of structuring your entire platform to consume rules and regulations of the local regulator and the local business requirements have, and to generate enough volume of business. Actually, that is where the large international administrators. I mean, this is just my outside-in view, honestly. Probably will have a significantly higher cost structure and probably may not find the ROI attractive enough. But for us our engineering teams are flexible and those markets are both geographically and much closer. And given that trend, we could find an ROI. More importantly, our name and goal is different, which is, as I said, as I mentioned, we are close to the administrator. Therefore, we can't be picking and choosing only few geographies because there is enough to learn from every single country, both in terms of solution and solutions which we effectively use for helping growth of clients in some other geographies. Like we took one opportunity in Philippines for a period of time because it brings us what we needed to offer for some of the Indian clients. But in the global side, administrators do not find the time, energy and to work. Possibly they are attracted to the amount of time and effort they will have to spend and invest in the platform for a reasonable period. But they are reasonably convinced once they come to the platform from what I could gather. That's clear. Thank you. Abhijeet, we had another question about employees. So average headcount in the first half was 5,271 versus 5,306 in the first half of last financial year. So we have actually come down by 35 employees in terms of average headcount for the current financial year. Thanks. Thank you. We have the next question from the line of Deep Shah from Prosperoh Feast Financial Services. Deep Shah. Yeah. Can I proceed? Yes. Yeah. You mentioned that the margin from international business is higher than that of domestic business. So what is your margin range from international business? Let me clarify that point. I mentioned that the margin expectation from international is higher, and it will be at the unit economics level. We see it is largely being the deal ticket size is higher than international compared to the domestic space. Second, we do not have any volume-based discounting or deal-based pricing, as we call in the domestic space. Those are two different items. The third item is the ticket sizes are at least 7 to 8 times larger than that of India, which effectively means fewer amount of transactions offices for a like-to-like comparison, which requires trade tools for a finance and treasury tools also. Those three factors certainly contribute to higher unit economics, which are being at a contract level. Overall, Abhijit, at this point in time, it is actually lower than that of domestic mix business. That is largely because we are constantly winning clients and that requires a one-time expense, which is in the P&L. Business development expense and so the new country as an expansion country. Broadly, we expect to drive at least 4% to 5% more as a revenue margin as compared to the 17%. Okay, I got it. My next question is, from what I understand, the mutual fund business has limited growth, limited to the industry growth, and the other segments have more growth potential than the mutual fund business. Does the company target any specific revenue share among the mutual fund and non-mutual fund business like 60/40 or so? The revenue share among mutual fund and non-mutual fund businesses. Must be on lock track with the customer. Have you thought of the revenue mix to change in the future? Yes, revenue mix. It is going to change, and it has been changing. If you look at 2 years back, 5, 6 years, the 15% of new revenue pool that you see today, which is the international arm of it was zero. From a base of zero, we managed to orchestrate a 3%, and that also includes certain tech solutions as well. It still sees a change in the mix, and we believe that over a period of time, the growth of this 15% pool had been faster than that of the rest. It has also been growing quite well at 17% growth every month. Relatively, these businesses have been growing faster than the rest. We see over a period of time, it will gravitate towards nearer to 50%, and our plans to go international hit a huge milestone with two large wins. It is a matter of time. I would like to believe that the continent of revenue from India would soon be less than that of overseas. That is subject to outside events. I got it. That is pretty clear. My last question is, the issuer solutions business. What is the number of listed companies out of the total number, which is roughly around 5,500? What is the number of listed companies? We manage roughly around 550 plus listed companies. Okay. Yeah, got it. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the call to management for closing comments. Over to you, sir. Closing comments, sir. Thank you very much for attending the call and asking us the questions. If there are any further clarifications, we are happy to take your questions either on email or on the call at the email address given on our investor website. Thank you so much for joining today. Thank you. On behalf of Kotak Securities, we conclude this conference. Thank you for joining us. You may now disconnect your lines.