Ladies and gentlemen, good morning, and welcome to the KFIN Technologies Limited Q1 FY 'twenty six Earnings Conference Call hosted by IIFL Capital Services Limited. As a reminder, all participants will remain in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I will now hand the conference over to Mr. Devesh Agarwal from IIFL Capital Services Limited for Oppenheimer. Thank you, and over to you.
Thank you, Ryan. Good morning, everyone, and welcome to the Q1 FY twenty six earnings call of KPM Technologies Limited. Today from the company, we have with us Mr. Srikanth Nadella, the MD and CEO Mr. Vivek Mathur, CFO and Mr. Amit Murarka, Head of Global Business Finance, M and A and Investor Relations. I would now hand over the call to Shikanth for his opening remarks, which will be followed up by a Q and A session. Thank you and over to you, Shikanth.
Thank you so very much, Dinesh. Very good morning and a warm welcome to run an update. It gives me great pleasure for me to come back to you again with yet another stellar quarter for us. I will start with the qualitative commentary, and we'll discuss the financials at the very end. We continue to be the country's largest registrar by a mile.
We the only qualified RTA who who travels across both sides of the registry business. One of it is the investor solutions and services, which is mutual funds, alternate airs, pensions, private retirement schemes, what have you. And on the issuer side, where we are the share transfer agent, you know, for a vast majority of the corporates, it gives me great take, you know, to call out some few important standout milestones we've accomplished this quarter. I'll start with mutual fund business. To start with, we continue to outgrow and outperform the industry in terms of given growth.
Albeit by a small margin this quarter. We grew marginally ahead of the overall industry on the AUM and by the number of asset management company wins that we have secured this quarter. We have won three new mutual fund mandates out of four that have gone for a discussion and negotiation on this quarter. So that's a 74% win rate, and, you know, it's it it gives us an a great deal of, you know, a price in terms of several marquee professionally run asset management companies continue to use KSAN to be their preferred partner. Our SIP inflows by market share continues to be ahead of our total market share.
As I always maintained, I believe that in the medium to long term, it is the market share of the SIP, which is the surest indicator of the overall AUM. Given our overall AUM is roughly 32.5 and SIT market share is about 39. I do hope should this trend continue, we should continue to see a full trajectory in terms of the overall market share gain that Cape and Tech, you know, would see. We have had one of the new A and P Capital Mine that has just gone live. Their first and a point that it is happening as we speak.
And it is a matter of honor for us that market PMS who has just entered into mutual funds and have adopted our latest template, which is x a a s, which is to stand for everything as a service, which means that we not only just manage the core IT operations, but we also take care of everything else. We provide, you know, service and solutions around, you know, marketing or content, full, you know, stack digital, including infrastructure, and also everything to do with the partner solutions as well. That's on the mutual funds. I'll give a little bit of deep dive along the way on the second larger business and one of the other core business we have, Issuer Solutions. Again, we've had much spectacular quarter and indeed right in the way of the overall expansion of the primary market in terms of IPOs and the number of entities that have gone public over the past twelve months.
But we've been outperforming the industry by quite distance there. We improved our market share from about 48% about eighteen months back now to close to 51% in terms of the listed companies by market cap. The total roster of the corporate clients has swelled up now closer to 9,000 clients. We are hopeful by end of the year, will cross 10,000 mark and the the largest use run by line. There are several IPO mandates that we have won, which are expected to hit the street into the coming quarter to '2, which would, you know, obviously, you know, help us in terms of the run revenue as well as its vertical IT revenue that we will get for the issue solutions into the q two, q three, q four.
As we all know, it is the q two, '3, and '4 which are more impactful quarter for issues. Solutions given several corporate actions continue to trigger. This being the q one for most of the financial services, I'd like to believe that the number of financial growth of around 50 naught percent is is is normal, and the trend tends to pick up into the subsequent quarters. What's even more happening is our continual focus on market share expansion, new client wins. In the international space, we have one several new clients and the new in this particular quarter.
This gives us nearly 13 additional new clients which are yet to go live, and some of them are large. One of them is, you know, Maybank and, you know, we have one several trustee to rent, you know, a contract which gives us access to not a singular client, but to several of them who that particular trustee, you know, has under their, you know, client shift. We have about five in Malaysia, two in Singapore, one in Philippines, and several in Gibsity, you know, which are under transition and yet to go live. Yet another business which we are, you know, extremely optimistic into the coming years as I believe that this is a pure play tech play and one that probably will have higher margin. I'll beat business which was, you loss know, making, which has just turned the corner now and has which is an asset pension system.
We've been outgrowing the industry by a factor of two, and happy to inform you that in a very, short period of time, we crossed the double digit market share of 10% in the overall plans in the country despite the fact that we do not operate in the government sector, which means that government, let's non government together on the total share of the plan that exists in the country. We just alone on the private mandate have cost, you know, 10% plus as compared to the overall market. AIF, you know, has been growing at a sharing pace. We continue to extend our market share from 34 to 37% at this point in time. We are now the most preferred alternative player in the country, given the only one with the proprietary platforms integrated both transparency fund admin, full stack digital play, and full stack analytics platform as well.
We continue to expand our solutions in this space, not just in India, in this city, well as on to the rest of the world. Given we are a large public infrastructure utility player, security is always on the paramount, you know, interest and in the signature in terms of both the board and the management in terms of making sure that we are on top of it. We continue to expand our investments and, you know, both as well as the dollars to continue to drive our bit size score, security score to now profit 810 amongst the best in the industry. And we'll continue to, you know, get that probably to be the best, you know, in in times to come. The volume transaction has been steadily on the rise, and we process little over two and a half million on an average.
On peak days, it's such as 10,000,000 transactions, and we expect these numbers to compound at about 20 to 25% into the coming few years. This quarter also saw, important milestone in terms of several new products and platforms that we have delivered to. I will also call out outside of the core businesses, you know, happy to inform to you that we have launched our KRA business. And within a matter of few weeks, we signed up with, you know, five marquee clients and it's a very osticious start for us and which I like to believe will all go well in terms of the growth of this industry. I would like to also call out that our carrier solution is the only one which is, you know, onto the tokenization world, which is probably the first to introduce and the very many applications that we expect to see in time to come, you know, will be seen by the world and will definitely further the the onboarding journey to be far more frictionless and, you know, far more cost effective with finance.
I will also like to call out the I'll give you a little bit of update on the acquisition of FN Fund Services, which I have called out in the previous quarter. Very, very pleased with the overall progress we could made in just a matter of two months. We have secured all the necessary regulatory approvals in India. And even as Essent Fund Services is securing its approval from some of the jurisdictions as one would recollect their present in 18 different countries. And hence, there are a few more jurisdictions under military approvals that are ought to be thought and is in the works.
And I'm quite hopeful that in the coming weeks or so or months, you know, we will get through that and then we will, you know, get on with the integration. It also gives me a pleasure to continue to deliver the point in terms of growth prospects of global fund admin solutions. The organization that we have acquired has shown a tremendous growth even in this quarter and the previous one, they grew at about 35%. And, you know, we believe that we have visibility into our path to growth, you know, in that number as Pearson combined with Essent will have greater potential to grow into the coming quarters once we get through the regulatory approvals. We have also completed once we have launched the wealth platform about two quarters back, which I called out, and we won about five mandates.
Again, using great pleasure to let you all know that we have now formally gone live on two large contracts on wealth, which gives us an in list, not a sense to the Indian wealth industry, but also into the global fund industry wealth industry. Sorry. And that, again, has a great potential given the platform with several of these multi currency, multi geo, multi asset, multilingual impact. And to when it is not as a regulatory driven business as a pure play asset management, You know, we expect a far, you know, fungible and, you know, a path which we can easily traverse into many different countries, you know, rather quick time. With that, we have already started taking these solutions to many of the geographies that they are part of without necessarily having to wait for, you know, any of the integration which has no bearing on this particular activity that we're trying to do.
I'll quickly come back to the mutual funds. The three lenders that we have won, I'll call out. One is Abacus Asset Manager, one is March less, both marquee professional entities, and very happy to also inform about the win of Pantomac. Our continued intent to grow the digital development, you know, for our clientele across whether it is case in service, the agencies, or otherwise, you know, continues to bring traction. That is a testimonial of not just our domain skills, but also our, you know, technological spirit in terms of creating big data solutions that are being leveraged across the industry, including by the regulator and the industry body finance.
We are also, obviously, blessed to have several of the fastest growing AMPs to be with us. Six out of the top 10, you know, AMPs that are growing in our country, fastest growing are with Case and Tech. Clearly, this is, you know, incredible performance, you know, of our clients, which, you know, we're only passive recipient. But our solutions and services, I'd like to believe, contribute in a significant manner even for them to grow as well. In terms of the 880 corporate that we have added during q one, that is, you know, absolutely spectacular.
We have never added that large client in a single quarter. Of course, this country is both unlisted and the listed, And that obviously has contributed to our overall market share to go up to 51. We are, you know, happy hopeful, you know, terms of several large IPOs including, you know, IPO asset manager, mutual client, on and so forth, several levels to hit the street into the coming, you know, months and quarters, which obviously belong to wealth for the auto ratio solutions revenue, you know, so to speak. We have covered the international. In terms of the wealth, I also want to call out that we have launched our first international wealth win in Philippines.
If you recollect, I know we have announced a win of Sun Life asset management client, both the agency and the trustee in Philippines about two quarters back On the back of a solid delivery execution and purely based on the experience the client has seen and based on the credentials that they can and that they saw in terms of our Empower Wealth platform, we have one of made in international, you know, wealth deal in Philippines as we look to expand this into their family office and the wealth office into many parts of the world, you know, starting with Philippines, Malaysia, Singapore, and so on and so forth. In the case of Gibcity, we have a pretty large market share of nearly about 60%, and you add the essence market share of roughly about 12 to 15, you know, we get to nearly about three fourths of all the gift city funds that are operational. And we believe that we'll continue to, you know, grow at a similar clip to end on the differentiated solutions that we're able to offer on top of our platform. The AUM for international, alternative, and pensions, all of them, AUM and revenue has been growing north of 30%.
It is no different this quarter as well. We've grown nearly about 30% plus in this particular segment. We also have called out our intent to step away from a noncore business called global business solutions, which was market management. As we all know, they all stood out as as a a line of business, which was not core to Ketan. As we concentrate on driving our agenda and vision to be a global administrator, we did not want any distraction.
So we have initiated, you know, moving out of our market management solutions nearly about three quarters back. And we have another probably, you know, one or two quarters left in terms of the remain that was locked in the previous year no longer will be available now. And by which time, we will completely exited, keeping our focus entirely on the asset and wealth management solutions, not to get that business into other businesses. So if not for the particular purpose, we orchestrate the deep growth in the global business solutions. We have crossed, you know, 30% plus growth in our younger, faster growing businesses.
The overall industry performance is something that everyone's fully aware. I think, you know, India is mutual fund industries, you know, on the verge of crossing a trillion dollars. I expect that to happen most likely in the next twelve to fourteen months. And, you know, that growth still fails in shadow in terms of the overall potential that we have. With a series of initiatives that are being taken by the regulator, by the industry body, and sole asset management companies, including the RTS in terms of, you know, providing the necessary solutions for some platforms to drive financialization to every nook and corner, provide solutions for quick onboarding, quick transacting, quick credit resolution, so on and so forth.
I believe that this driven out in terms of growth of 20% platform, the AUM can continue to happen for the foreseeable future even as nearly a 10,000,000 odd of fresh investors come to the industry every single year, and that number could easily be deferred from the fact that is a similar number that gets added into the Poland fund, you know, wage for year after year and the number of new just coming into the formal employment sector. Most of whom extremely intensive of investing into the mutual fund as a preferred asset class. And a mark to market gain is anyone's call, but making into a moderate gain this year, even we had a spectacular rise, I'd like to believe that we continue to see a potential to grow up north of 15%, you know, in terms of the revenues in these businesses, yeah, into this year as well. I will also spend a few minutes in terms of, you know, some of the other initiatives, you know, that are incidental ancillary to the mutual funds. One of that is the mutual fund for MF Central.
MF Central continues to expand its growth. More than the growth, I wanna call out the impact that this platform has for, you know, many ecosystem partners. Investors, of course, are probably the most benefited to be able to secure such a solution where the entire industry comes together under a singular platform to provide the ease of doing business is absolutely unparalleled anywhere in the world. With that as a solution, many fintech companies in India have based their business, you know, on the back of the APIs that we're able to, you know, access. Many of those have been helping other mutual fund investors to stay put, you know, in the industry.
For example, taking the loan against mutual funds out against simply redemption, so on and so forth. It helped the entire industry and the fintech ecosystem, and very happy to inform, you know, we have onboarded nearly 230 clients as of June, and that number, you know, continues to expand, you know, nearly 10% every single quarter. So on the mutual fund side, innovation continues to be, you know, are absolutely right mobile market. We have also launched Iris as a a platform, which is case and text just defining to the financial intermediation as a in for this class, which is the first of its kind, a multi asset, multi tenant, fully integrated CRM solution for the entire financial intermediary class. So it is not just for the mutual fund distributors.
It is for the loan syndication. It is for insurance. It is for selling pensions. It is for selling Casa bank accounts, credit cards, what have you, with a singular focus and view to enable and help individuals who choose to be financial, you know, intermediate professionals make their livelihood in a far more effective manner. A single asset class or a single financial instrument, you know, sales does not render itself to a a very large meaningful, you know, career of our manual financial intermediary.
So this platform basically solves for that in terms of any financial, you know, intermediary can come on with this platform and for the same investor can upsell process several different assets, which itself is one thing for the citizen if you, you know, you know, keep your eyes as a that of a citizen where a single person can, you know, take care of many of your financial services needs and not just having to, you know, look at multiple of them. The release too of that particular platform is lined up related this evening. I'm extremely, you know, hopeful and glad that it would be warmly embraced by the inter financial intermediary community. So products and platforms and innovation will be a a large focus for K Fintech. It is irrespective of, you know, its revenue potential.
We believe that, you know, the things that we have to do to give back to to the entire, you know, partner class, which is helping the industry to grow quite substantively. In terms of the RTA wins that we've had, I've already called out the names. We are extremely excited in terms of the growth potential. These are marquee AIF PMS player in the country, all of them. And given their trajectory, you know, we expect rapid growth of their AUM in times to come as well.
Just quickly call out few things on the international side. As we all know, it is a a composite solution of both RTA and fund administration. Overall client contracts this quarter, happy to announce that we have crossed the count of 100. Today, you know, we roughly stand about 111. And the overall clients, quarter on quarter, even as they've been growing, very, you know, pleased to see the AUM growth, which was not the case in the past few years.
Even the number of clients have increased. There were no mark to market gains, you know, unlike in the case of India. We have seen that happening, and that is obviously one of the most important reason why it has been a 30% plus growth in revenue in this, notwithstanding the fact that close to about 11 contracts are yet to generate revenue in the context that they are under transition and hence in times to come the revenue purpose. In addition to the AUM group of the existing, you know, clients will contribute to, you know, faster clip of growth in the overall international business. Now we started winning more clients in Singapore.
As I said, we already have two, and then now we have two more clients in Singapore that will be going live with. The fraction in that geography, which is arguably one of the largest in Asia, will further be proposed as our integration with, you know, Essent hopefully will conclude into the coming weeks and months. Outside of that, I think, you know, some of the LOIs that we have won, especially for a full service, you know, funding mandate for the treasury desk of Malaysia is is a very important milestone for us as we continue to expand our footprint in Malaysia. I think today we manage nearly 55% plus market of the market by, you know, the number of clients. In a matter of five years, I think that's that's a, you know, pretty good accomplishment.
Of course, I continue to believe that it is the top three to top five AMCs, you know, which will make a material shift. And we are right now, you know, talking to the larger the AMCs. And, hopefully, you know, we'll have some good news to share in the coming months. Lastly, I would like to just spend a minute on the national banking system, which I have already called out in terms of our growth. We have grown about 32% plus year on year on the subscriber base with the largest, you know, service provider in this being nearly at 90%.
And, you know, obviously, a virtual monopoly till about a few years back, you know, we take a good heart and having broken even every plan engine from here on, I would really add to to the margin. And I'd like to believe that in the next three to four quarters, you know, we should start seeing, you know, decent EBITDA contribution even though it's scale is small, but we are expecting, you know, faster growth in the pensions. There's been a change of guard in the overall, you know, PFRD as an organization, And we are seeing a very, very strong and a great intent to drive India to be a a far greater pensionable society. A lot of interest and lot of interest was asked so far as well in terms of, you know, what is that we can do to contribute, you know, in that regard. So we have active discussions, you know, with several regulators, you know, in order to drive the overall market itself in that context.
The auto management system of Empower, Deepgram, you know, is is is a revelation in terms of the number of clients we have been able to win. And it is it it all is well in the context that, you know, so far there haven't been too many Indian alternatives, you know, to large, know, large platforms like Bloomberg, for example. We have title c green shoots in terms of our ability to displace a large, you know, global auto management systems. And as we scale it up and as we take it to global, you know, clients, we'd like to believe that this is a medium to long term plan, but I'd like to believe that, you know, there will come a time when we will be reasonably well positioned to take several of the global large platforms head on even as we consolidate our position here in India. So with that, I will hand over the financial highlights to be provided by Mr. Mathur, and we'll take the questions
Thanks, Ketan. On the financials, the revenue has gone up year on year by 15.4%. Within that, the domestic mutual fund grew by 17.2%. Within this 17.2%, the fee based revenue has gone up by 15.7% and the VAS revenue has gone up by 51% year on year.
The yield has come to 3.43 bps as compared to 3.6 bps last year's same quarter. And that's a combination of telescopic pricing impact and some volume based discounts to some fast growing gains fees that we have given. So we have been giving a guidance that yield will come down year on year by 3.5% to 4% with a combination of telescopic pricing and some selective discounts that we will give. But there is no yield shocks that we expect from case and tech. So we maintain that.
In terms of issuer solutions, the growth has been 25.5% year on year. And as Srikanth mentioned, we have been adding IPO mandates and unrestricted clients, almost 800 clients have delayed in the last quarter itself. If you look at international and other investor solutions, the growth other than GBS, which Srikanth clarified that, that's a noncore business that we don't want to continue to grow, the growth is 39% year on year. And within that, international has gone up by about 36% year on year, AIS has gone up by 31%, NPS has gone up by about 33%. And overall, we continue to remain buoyant about this segment in terms of growth trajectory.
And in terms of overall expenses, the growth has been about 16.916.6%, and that is mainly because of payroll costs going up. And this is something where to support new clients, we have added some headcount. And as you know, in the Q1, the increment hits, while the impact of growth in business revenue will come in subsequent quarters. And we have been investing in technology and crowd charges have marginally gone up. Other than that, if you look at the EBITDA margins, there is a healthy growth of 14.2%.
We maintain a EBITDA margin of 41.5%, which is in the range of guidance that we gave of 40% to 45%. Typically, the first quarter is tepid because the increase in payroll costs and in the Issuer Solutions business, the corporate actions take place in Q2, Q3 rather than in Q1. And therefore, usually the Q1 is different, but it picks up from Q2 onwards. If you look at PAT had us one up at 13.5% year on year and maintained a healthy margin of 28.2%. We have good amount of cash and cash equivalents, which is INR750 crores at the June, one to pay out dividend and another is to make the acquisition of Paysend.
We are well equipped to continue to have surplus cash beyond the working capital after paying off the dividend and the acquisition. Diluted EPS has gone up by 13% year on year. And we believe that we'll continue to grow confidently, as Sridhar mentioned, both on the top line and bottom line, and we maintain our guidance. Thank you. We are happy to take questions now.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. The first question comes from the line of Swanav Mukherjee from BNK Securities.
First question on the mutual fund business. So as you highlighted on the yield, just wanted to understand how much so broadly from the end of last quarter, the yields are down around 5% which is more or less I mean, I think you normally guide around three to 4% for a year.
And in a quarter, we are seeing that. So just wanted to understand that how much of this is because of telescopic pricing? How much because of the volume discount that you gave to pass going clients? And this volume discount that you have given, assuming that the mutual fund industry continues to see steady flows and growth remains, then will this likely be recurring at periodic intervals and would imply that we should expect maybe slightly more than 4% kind of a drop in yields compared to what we have guided earlier? So that will be my first question.
Also, if I can say sequentially, the value added services revenue growth also looks weaker quarter on quarter. I wanted to understand that because I thought that that would be relatively worse, you know, a stickier kind of a business. Going on year on year, think it looks fairly strong, but for quarter on quarter, it is a bit weak. So know your thoughts. Wanted to know your thoughts on that.
Thirdly, on the other report, the system from from the light on there has been good control this time. So is this because we have cut down on discretionary expenses? And why should we see the numbers going forward? That will be my question. Thanks.
Sure. Thanks. Thanks for the questions. So on the the first question, I'll take it, on terms of the basis points and the income ratio. We were at about 3.6, now down to about 3.43.
You're right. I think it's like, much about close to 5% as against a typical years of, you know, three to 4%. I just wanna call out that number is more an average. You know, the contract renewal is entirely and solely dependent on, you know, the the the time, you know, for signing of the contract itself. It is a a coincidence that this year we've had, you know, more number of, you know, clients, you know, whose contracts came up for renewal.
And, for example, if you look into the next year and the year after, we just have one eight. Right? And if you were to normalize it over a three year period, it I'd like to believe that it will still come back to the three to 4% kind of a number. You may have a a particular year where number may look a little longer and also bigger. And that particular, whatever the discount, etcetera, you know, whether it is because of the overall AUM growth or otherwise, they have all been baked into the q one.
We have no further renewals for the rest of the year, so to speak. In terms of the share of what was because of the expansion. So when we say volume, what you're really talking about is the AUM growth, not the volume of transactions. For example, in the previous year, many of us know that the mutual fund industry has grown up north of 2%, and our revenue house has grown up north of 30%. So it is a a reasonable expectation and ask of our clients to partake in some of the gains that we have in terms of the growth that they are seeing.
And that's what happens, you know, when you see thirty, thirty five, 40%, that's kind of the growth. There will be a slight moderation of the basis points and that get, I guess, more than adequately compensated by the continual AUM growth into the subsequent quarters. So that's that's as far as the basis point is concerned. In terms of the value added solutions, see, this is a pure tech revenue and the tech revenue across business lines, not just mutual funds, but into the issue solutions, into the alternatives, into the wealth, so on and so forth. Typically, a large number of tech contracts get delivered in the last quarter, one also because many of clients have their budgets locked down to the end of the first March and they expect the contracts to be delivered as well.
And that's a very typical phenomenon in industry. And typically and hence, we end up seeing a largest growth on the value added solutions in the q four, q three, and q four, and probably a flattish or a slight dip into the q one of this year. But as you rightly point out, if you see the year on year growth, the value added solutions stacks up at a interest of 50% plus. And I've called out back in the day, you know, just on the time we went public that in addition to, you know, be dependent on the vagaries of the market and and our clients' growth, we want to orchestrate several lines of business which is controllable at our end. And value added solutions is one such thing.
So for me, up to 3% growth year on year is a very good indication in terms of where we head into the coming year. In conjunction with the fact that we have several new products and solutions that are going live and have gone live in the recent past, you know, I'd expect many of them to convert into, you know, hard pipeline and then into deals and, you know, delivering to the coming, you know, quarter, so to speak. On the cost, yes, you know, we continue to, you know, have a very, you know, close grip on to the cost expansion. The the menu expansion in the core businesses to an extent, you know, come with a higher, you know, cost expansion unless there is a continual transformation that is happening. To give you an example, a simple 100 SIP probably will earn a 3 paise, but we would have spent easily more than the 3 paise in just creating the data record for that SIP for the next, you know, seventy years, which is the norm in the industry.
So until and unless we continue to invest significant funds and, you know, and of course in terms of ingeniously reducing the tech cost, which is largely the big tech players into, you know, AWS and Microsoft and so on and so forth, you know, the scale business will have an issue. And and hence, you know, we have a a very large scale of data scientists who continue to look at it, and hence, the nondiscretionary spend has come down. But the nondiscretionary spend vis a vis new products, new platforms, new solutions continue to expand. We believe that the future lies in, you know, innovation. Whoever could innovate faster, you know, take a go to market, you know, solutions for our clients and for our partners and prime ministers and the regulators will have, you know, a far superior edge in terms of new client wins and the growth that we will need.
Right, sir. Helpful. Just one follow-up on the yield part. So we are right now in this quarter at 2.43. Assuming that there is no other renewals and, you know, normal telescopic pricing will continue to play out.
Should we expect maybe another, say, two to 3% drop for the rest of the year? So if I were to think about q, where should we end up with is what I wanted to understand.
I don't expect any further drop on the basis points into the rest of the year. I think, you know, on the telescopic pricing, you know, we all know how it works. Right?
So there's a once the area crosses a particular threshold, let's say we have a an agreement that pays at 50 to 75,000 crores. Right? Only the incremental AUM that comes after the 75,000 crores may come with a smaller, you know, basis points. And much of that, as I said, has already been baked into q one. So I do not anticipate any further yield compression.
I also want to follow-up another thing that has contributed to a dip, probably about 20% of the dip was because of a larger expansion of of passage. If you saw our overall AUM has grown, but the equity AUM in terms of market, it was slightly below that of the market. That's actually because of a slower performance of the top three mutual fund houses in our country. And, however, you know, for us, there has been a substantial expansion of, you know, non equity asset classes, whether it is debt, whether it is, you know, patents. And this particular trend is more the strategy of the fund house in terms of what they see as a time to stay invested in the market versus not to stay the market.
If you saw the math, I guess it clearly points to the fact that our clients have chosen to be more cautious and, you know, seek to pass it. But that can easily change. Right? And depending upon the market sentiment and, you know, their own, you know, fund strategy, investment strategy. And as that happens, that will positively contribute to the yield.
And so I guess what I'm saying is I don't anticipate a reduction, but if there is a reversal in the investment strategy of our clients, there can actually be a slight positive surprise.
Understood, sir. Very clear. Thank you so much and all the best.
Thank you.
The next question comes from the line of Kartik Chelapa from Indus Capital Advisors Limited. Please go ahead.
Yeah. Thank you very much for the opportunity, team. Am I audible?
Yes.
Okay. Audio is a bit low. Could you please use your handset and ask your question?
Sure. Hope this is better. So my first question is assuming the normal yield declines at about 3% to 4% and we are and we are assuming an overall AUM growth in the region of, let's say, 12% to 15%, would it be fair to assume that we should be able to hold our domestic mutual fund margins at these levels? Or what else do we need to happen for margins to kind of sustain in this current range?
Thank you, Kanti. Great question. One that I can assure you is always on the top of our mind. I think the the good and bad part of, I guess, the way the industry is structured is a basis point, you know, or a mark to market gains. It cuts both ways.
You know, you will have month, quarter, years when mark to market gains will add to both to your top line and to the bottom line. Right? And likewise, it cuts both ways, you know, when there is a mark to market dip and or there is a basis point reduction, it goes both from the top line and the bottom line. So that obviously is not the same if you were to extrapolate that in many other industries. For example, if you were to win a contract in manufacturing or if you lose, there is a corresponding increase or decrease in the cost.
And hence, it does not you know, the 100% loss of revenue does not permeate into 100% loss of margin, but in our industry it does. So the control in our hands are two. One, obviously, is to have a much more meaningful discussions and deliberations with our clients. And that is something that always happens when you're able to add significant value and not just to basic work. And that is something that I'm proud that as an organization have been doing it.
And that is clearly visible in terms of, you know, I guess, where our basis of their ideal life user base others. The second is in terms of the cost. We continue to, as I said, work on the basically have a target of near zero on nondiscretionary spend. We'll never get that far. I fully recognize it.
But we have to look at mutual funds given it is the largest, you know, book of business, probably the most complex and also the most voluminous and most tech intensive, you know, of all the other businesses. We continue to work with our partners to continue to normalize and optimize the cost. And that, I like to believe, is probably the surest way to hang on to the margins even if there were to be a marginal erosion of, you know, yield. And if you're seeing from our organization standpoint, I think every single quarter, we have been able to maintain that margin in this particular line of business. And I'll also call out our transformative initiative of FinEx, which is a complete replatforming of our core solution, you know, which was, you know, in existence for the last thirty five to forty years.
Whilst we have made incremental stand out, you know, changes into the overall platform to support the needs of the industry. The platform for the future is getting built, and I'm hopeful that into the next three to four quarters. On an incremental basis, it's not a zero sum game that everything will happen on one day. We have already deployed several in a modular fashion. We'll continue to deploy several more into the coming quarters.
As that happens, we should see a faster clip of cost optimization to happen, which will help us to hold on to the margin and probably even try the margin expansion at that point in time.
Got it. Okay. Thank you very much for the detailed explanation. My second and last question is on the issuer solutions. So we are seeing a very strong momentum on the corporate clients, which is which is welcoming.
If I were to look at our investor portfolios, that growth has moderated this quarter. Whereas in the last few quarters, we have been seeing that investor portfolios and corporate clients were growing more or less at the same rate. So anything to be read into this moderating growth rate, and what needs to happen for the folios to start accelerating?
Thank you, Baltic. See, I think, yes, there is a a sequential a marginal decline. I think Jason said today managers here about 15 to 16 core plus four years on the Azure solutions. What you saw is roughly about 12 to 13 on the growth in the full year accounting to the q one of this year, sequentially compared to q four. This again is a natural phenomenon nearly every year itself.
What truly happens in the market is, you know, in q three and q four, especially, there is a far more influx of retail investors. A part of it is, you know, corporate action driven in terms of, you know, securing the dividends and bonuses and what have you. And part of it is, you know, to capitalize on the very large number of IPOs that have happened. People have made quick money, and I have also exited the market in real quick time. We have also seen, if you recollect, the month of April wasn't particularly a good month in terms of the capital markets.
I think the sentiment started to turn mid May onwards. And at this point in time, it looks reasonable, though the mark to market gain, I mean, terms of why on why on the index level is pretty much flat. And so what that's what truly happens. There's basically a, you know, a marginal flight of investors who have capitalized on the IQ and the dividends, and that's something that happens every single year into the q one. As we move into q two, q three, q four, I would call out to take a look at the trend of issuer solutions revenue in terms of how it expands into two, three, and four as compared to one.
This is Norman. I wouldn't read too much into that. And the date on the days of 16 crores, you know, about 12 to 13 lakh for years. I'm sure it's it's a very small, you know, you know, marginal number which basically has not impacted much on the revenue. As you see, the revenue on initial solutions has shown nearly about 24 year on year.
Excellent. That's all from my side. Wish the team all the very best for the remaining quarters. Thank you.
Thank you, ma'am.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press and one. We take the next question from the line of Dupra Ting from Abbott Capital. Please go ahead.
Hi. Thanks for the opportunity. Now I was the first question is on the Issuer Solution business. So if I look at, you know, the market share in mainboard IPOs, that was around 18% versus it being around 70% in the previous years. So just wanted to understand, has the competitive dynamics in this segment changed?
Or, you know, what are you seeing different which has resulted in case you're not being able to win the larger mandate? That was my first question. I have two more.
Yes, please.
Okay.
So I'll I'll repeat that. So the second question yeah. Yeah. You do want me to go through all the three questions or No.
Let me let me answer that.
Let me answer that, and we can go to the second question. That's good. So so here's the deal. So I think by count of IPOs, we've done over 40% in the industry. Yeah.
And by value, it was 18%. It is, you know, a simple math in terms of, I guess, HDB financials having gone public, which was the largest IPO in the previous quarter, which was by our competitor. And that skewed the overall, you know, share by value. And this is not a reflection of the win, but this is a reflection of when the particular, you know, company has gone public. Right?
I mean, we have, for example, close to 175 odd IPO mandates, which are one for the last bunch of years, and they are yet to go live. So it is possible that in the next quarter, more mandates that KFIN has won have gone public rather than our competitors at which time you may see a market here jumping up to sixty, seventy, 80 also. If I were to call out your attention in the previous year when we've done by Raj, you know, all in finance or the e b four l I c, our share of IPO by value actually stood at almost 85% in that particular quarter. So this is a timing, you know, a discussion as against, you know, the wins of that particular quarter. For example, if you have signed up a new IPO mandate in the previous quarter, it is, you know, easily, you know, three to four quarters away for that company to go public.
Right? So what you're now seeing in the previous quarter is actually the wins that, you know, you have to have had over a long period of time, but which company decided to go public. So, again, I wouldn't read too much into the value. Now dynamic has changed. As you could see, our market share has spread by market cap, you know, from 47 or 48 to close to 51%.
We have now made up significant dent into even the fee IPOs. We have, I think, the previous quarter being the largest in the fee IPOs, the business sector that, you know, we have largely a non billing to. Now we have moved into the social stock exchange as well. So into the coming quarters, for example, many of our new clients such as, like, and and and Fine Labs and, you know, should any of them can go public, you would see that 18% easily easily move up north of 60%.
Got it.
That's very helpful, Sipan. Now on the CRA business, you outlined that you have one five key clients. Would you highlight, you know, which are these clients? And how are you looking at embedding your CRA services with your MFRTA service? Would it be are you making it available to all your MFRTA clients and surely the same files can, you know, become similar to the number of MFRTA clients?
So wanted to understand, you know, what is the development pipeline here? And currently, is the TRA revenue being built into the MSRP revenue itself, or is it being shown separately in international order?
Great question. No. So based on revenue at this point in time, so none of it's been clogged into any business.
Right? We just went probably we just signed a contract. This is a separate entity altogether. It's a case and services, and the revenue will be clogged into that different entity because the PR business is not expected to remain in the same mutual fund business. In fact, KFIN as an RPA is one of the five clients of KFIN Kiara.
Right? The other four are our clients as AMCs. And the short answer to your question in terms of our, you know, go to market strategy is obviously to have every one of different clients to be the Kari clients, which I'm confident will happen into the coming, you know, few months. Second, of course, is to for everyone because this is this can easily be a multi tenant model. This not a zero sum game unlike in the case of mutual fund RPA.
And this can have multiple carriers onboarded, and in fact, that is, you know, at least a highly recommended, you know, strategy, at least from my standpoint because it is always a business risk to have a single, you know, point failure. Right? I mean, if you were if you recollect about two years back, one of the KRA had a problem and, you know, which basically had impacted the mutual fund industry. So it's always a good, you know, solution to have multiple, you know, service providers, whether it is KRAs, whether it is payment gateways, payment aggregators, any of these entities I call, you know, so that there is a failover. It's just like, you know, I guess, you know, a part generator as a failback mechanism that you have.
So we expect to have nearly every mutual fund client to be our client in the TRA in time to come even as within the within the fully fifteen days of launching, you know, we manage to secure five mandates. And it is not just the mutual funds. We have to aggressively work with the brokers and the RIA. Much of the new, you know, investor onboarding actually happens, you know, from the broker platforms. Right?
The distributor platforms, such as the growth and pay your money and, you many of the large industries. So working with them is going to be very, very important one because technologically, I'd like to believe our solution is, you know, far ahead and something that I'm confident we'll find a favor with many of the large tech players who bring in far more far greater number of new investors into the industry as against traditional, you know, RT and AMC, I guess, you know, the equation, so to speak. So it is a solution that is not just for AMC, but also for the entire, you know, partner ecosystem to bring in the investors. And the revenue will be clocked in a separate entity. And as of now, there is no revenue, which you will start into the next one onwards.
Got it. Got it. You know, that's helpful. Now need to accent, you know, thanks for the update that has been provided on, you know, on the quarterly performance there. It seems like the revenue has grown by around 36%.
But when I look at the EBITDA in January versus the April, there hasn't been any movement. Is it a rounding error or, you know, because against the 36% revenue growth, I don't see any movement in the EBITDA. So just wanted to understand what has happened there?
Amit, Vivek, would want to take that?
Yes, sure.
See, they have still been investing. So while revenue will grow, they have been investing in terms of hiring senior people in the markets in which they are expanding like recent hire was in U. S. And therefore, you won't see the immediate impact of increase in revenue and EBITDA margins. And as they start winning large contracts across these markets, you will see their EBITDA improvement over a period of time.
And the good thing for you to know is that the future payouts to the founders is linked to the achievement of EBITDA. And there are both positives and negatives. So if they don't achieve the target EBITDA, they won't get the multiples. So rest assured, the focus is in terms of growing EBITDA and growing a profitable business with Essent.
Got it. Thank you very much.
I will also say, one thing I will at here. So this is the testimonial of any fast growing entity, I think, as the entity is present in 18 countries, new geographies getting open, I think a lot of the revenue expansion is getting funneled back for faster growth. We have a path into profitability in terms of, you know, the overall numbers as we move into the year three, year four, year five as the deal is structured, which is basically more on a lot model. You know, you would see the, you know, EBITDA expansion happening.
At this moment in time, it is to drive both technologically, new country expansion, you know, creation of the new sales channels, pipelines, and the technology. So so to that extent, this is, you know, by design and as a plan.
Got it. And, Shetham, then, you know, how you know, what kind of EBITDA exit EBITDA margin can this business achieve? Because some of the listed here do have EBITDA margins closer to 40%.
Right? Your MF RPA business and, you know, the issuer RPA business is the operator more than 405055% margin. So where can this business fit, you know, once it achieves that scale?
So so this business is what does that do? Right?
I mean, so the large the global peers that you're referring to, you know, if you kind of split between bank based fund admin and the non bank based fund admin, we will fall into the category of the non bank based fund admin, which has sort of large, you know, global fund admins like, you know, your ZIP code and SSN fees and ethics group and, you know, the IQ which is sort of a lot of those. Now they are into both public mandates and into private mandates, and I'm differentiating public mandates more as mutual funds and pensions and what have you. Private mandates more as alternate investment funds, hedge funds, digital funds, trading currency funds, on and so forth. The private side of it is far more profitable, you know, book of business for many of these fund administrators beyond India, first and foremost. So because the public money funds are working a very different model, they do not have the RTA construct there.
They work in the case of omnibus model, which is very, very different. Second, the reason why we have partnered with Essent and they have also partnered with us is that we are highly differentiated within our cost structures. We do not have the legacy challenges, which many of these entities, you know, possibly have, which is basically a technological proliferation that happens through large scale acquisitions into multiple geographies and legacy systems. Whereas, you know, we work on the cutting edge on the technology, you know, innovation and proven engineering. Our cost base is substantially low.
Those organizations are now trying to set up captives in India to optimize their cost. We, on the other hand, are India lomiciled right from day one, probably. So we believe that our margin profile for the entity in conversation, you know, will be similar to that of case and then maybe even higher as we partner with them to take, for example, Empower to the rest of the world that is being choosing third party software. We try far more productivity through many of our, you know, homebring solutions. We are able to take, for example, the LP portals, the GB portals, drive, you know, data and analytics solutions to the rest of the world.
These are far more margin accretive. Alright? So so simply put, I I wouldn't compare Essence with the global fund admins because those are, you know, a lot more go into those particular entities, you know, and not just the RCA. In fact, those entities also have custody as a business within that possibly even by basic depository solutions within that. So we didn't have a like to like comparison of a pure play and admin only solutions for private mandates, which I'd like to believe will be far more efficient than many other global fund admins of today.
Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to one question per participant. We take the next question from the line of Vibhav Sharma from Luvama Wealth Management Limited. Please go ahead.
Hi.
So I just wanted to know that on the international business side, should there is it's a few few drop of 11%. So is there some, like, one off or something? And, like, ex global business, what is the group that you guys looks like? Also, on the Athens side, have you added any new clients? And when are we expecting the consolidation to take place?
And if there are any developments happening in the BlackRock Aladdin space? Thank you.
I'll take the last two questions, and I'll request Vivek to answer the first one. In terms of Essence, you know, new client acquisition, there have been plentiful of new client acquisitions. They have started Saudi Arabia with one of the largest clients, and there is an expansion of nearly 60 plus funds in the previous quarter across multiple geographies.
They have also signed a a marquee contract with one of the largest banks in Singapore to be able to provide onboarding solutions, which is a a large contract in the context of the overall revenue profile of the organization. The current run rate of revenue tracks to a 20,000,000 plus revenue on an annualized basis. And, you know, should the current growth rate persist, you know, we should expect the number to be, you know, much higher than that. So, yes, so it is a combination of new client wins and certainly on expansion, you know, of the of the that has helped us. In terms of the integration, as I said, you know, it is hard to, you know, go out a data and a time.
Given this is an acquisition which involves multiple jurisdictions, So KCN ought to have gotten its approvals from our regulators, is the VP of RD and RBI. And I'm very glad to inform you that we have secured all those approvals. SS has more than three approvals to secure given their presence in multiple jurisdictions. They have also really secured for nearly three votes of those. So we have another three countries, I think, that are clear to a quality approval.
They're in the process of a diligent thing yet and certain questions being asked. And I'd like to believe it's just a matter of time, you know, that. So once we come to an integration, you know, will happen. That said, that has not impeded our intent to work together. We've been working on a series of initiatives together on go to market, on technological integrations, so on and so forth.
So that, you know, the receipt of the approval, you know, marks a more a milestone as against, you know, a critical success factor to start that particular activity, if I may. In terms of the BlackRock, Aladdin, you know, as I you know, the previous quarter as well, it is a two to three quarters, you know, engagement in terms of integration of the solutions. We've had several promising meetings with working at tech to tech layer. We are in the process of integrating Aladdin with our back end system, which is Empower. Again, I will call out that Aladdin is a a friend of his auto management system and a risk management system, you know, at his heart.
It needs to be integrated with our core middle office and back office, middle office being a settlement solutions, and the p and l and and then to the back office will get into the stage of any computation, what have you. The integration of these two platforms is the basic first step for us to take it to the market as a viable alternative to many of the global fund administrators. So I would expect only to, you know, mid '3 that we will we would have reached out to the clients and, you know, the traction. We would have completed our go to market sales strategy, the commercials, the contracting structures, and possibly even having identified certain, you know, sales personnel in various important geographies. And it is strongly the potential that as essence integration gets completed, the eighteen, nineteen countries that they are part of, you know, where Aladdin has a significant, you know, market share, We would have already been, you know, blessed, you know, with the fact that several sales personnel already exist in the form of, you know, essence having their personal day on the plan.
So so in that context, I think, you know, once we complete our technology, we have also working in the form of the commercials of contracting go to market and the sales and the feet on the street, which may come from S and J and from some trade.
I'll pick up the question on sequential decline of 11% quarter on quarter on the international end. Hello? Can you hear me?
Yes, I can hear you.
On 11% decline on international revenue and distribution, the reduction is mainly because of GBS and some part of it is because of NPS.
NPS, as you know, is seasonal. And typically, Q4 is a tax season and people contribute because of the tax season in the last quarter. So about 15 lakhs is because of that, but a little more than INR 3 crores impact is because of GBS, where we are consciously declining the number of FTEs. And the whole focus is to move away from BPO kind of a business and start focusing on international global fund administration.
So that's the reason that you see a decline. But if you consider last year versus this year, except for GDS, all businesses have grown by more than 30%.
We take the next question from the line of Deepanjan Ghosh from Citi.
Just two questions from my side. First, you know, from the previous participant question, if I look at the international and the domestic wealth or AIF businesses, excluding GBS and excluding pension, you know, the growth rate which was tracked by quality me calling. Hello?
Yes. Please go ahead.
Sir, in in addition to speaking from a previous participant question in in terms of the international and other investor solutions excluding DBS and pension also, the growth rates which are tracking, like, the 45, 50% in the first, second, third quarter of last year on a YY basis now has come down to, like, 25, 30% in the last two quarters. So in terms of incremental client onboarding or in terms of the pipeline, you know, given the fact that, you know, mark to market is also probably a little better than historical averages, how should one think of this business incrementally? And second, on Aspen's part, you know, if I just look at third quarter metrics compared to the first half or the last two, three quarters of the previous year also, it seems that the incremental number of clients added, incremental AUM growth quarter on quarter, all these matrices have kind of confirmed paper down quite a lot. So if you just look at the number of schemes that's up, like, 5%, AUM is up 5% compared to its historical averages, which is far, far higher. So just wanted to get some sense of just new salespeople that they have onboarded, should that kind of drive some amount of revival in the business momentum?
Yes. So I'll take up the question on your question on other than DBS, the businesses are growing, used to grow at 40%, 50%. That was more in AIS. But if you look at core international business that has grown year on year at 36% AIF, PWM, PMS has grown at 31%. NPS has grown at almost 33% year on year.
So it's mainly the GBS impact. Overall, we still believe 30%, 35% growth in international and other businesses, except GBS, will continue to behave like that. And with Essent coming in, you will see the growth rate going up because their win rate and the growth in the funds under administration and the revenues for them is upwards of 35% to 40%. So you may see that the trajectory will continue to improve beyond 30% in future quarters.
I'll just add to this, Deepanjan.
I mean historically, you see the business, I mean Q1, as we have always been saying that it's a quarter which is the leanest among all the four quarters and all. So across all the line of business, the activity starts picking up as we move into the subsequent quarters and all. So I mean given where we are in the market conditions and all, I mean we believe that we are in a we have a very strong footing across all the three lines of the younger businesses, which we are talking about from the deal perspective. And I think I mean whatever the guidance that we have given in terms of the thirty-thirty basis, that is something that we are fairly confident that we kind of be ahead of those guidance.
Thank you.
We take the next question from the line of Lalit Dev from Equator Securities. Please go ahead.
Yes. Hi, sir. Good morning.
So just one question. So when we have highlighted that lease in the domestic analyst business is likely to remain stable for the remaining part of the year. So just wanted to understand the margins also in this business. So in this particular quarter, it has dropped to around 55%, unlike the previous quarters of around 59% to 60%. So would we react to that similar levels of around 59%, 60% in the coming quarters? Or is this level of around 55%?
Thank you. I think it's reasonably linear math given that the pricing has been closed for the rest of the year, so the AUM expansion that will happen into the next three quarters resulting in the revenue expansion month on month, quarter over quarter, obviously, they'll expand the margin profile. So so I do not anticipate, you know, that trajectory to differ. And again, I'll just follow-up.
It is the exact same phenomenon we see every single year. At q one, we see our two specific items, you know, pick up inflation on April 1 because the AUM remains largely similar. But if it's April, there is a cost inflation that goes up. And the AUM, you know, any discounts that are given in the beginning of the year, the AUM continues to grow at a click faster than that of the discount that have been recorded. Thereby, the margin expansion into that business will expand as well in the subsequent quarters.
Thank you. We take the next question from the line of Pranuj from JPMorgan. Please go ahead.
Yeah. Thank you for the opportunity.
Shita, in the opening comments, you were mentioning about top five AMCs being onboard on the fund administration platform. So I just wanna get a sense of what could be the ticket sizes of these contracts. Thank you.
See, on the fund admin, basically, we have multiple clients getting onboard. Right? So even this is an international platform, it is you know, we won contracts in Malaysia, in Thailand, in Singapore, and several, of course, in India. And within India, again, not just mutual funds, but also in insurance. Right?
For example, in insurance have been onboarded for Viva insurance. In the case of mutual funds, it is KN and Cosmia. Internationally, you know, several large trustees including Amandaya, trustee managers, one support have been onboarded on that. The revenue, you know, would be in two factors. I think, you know, some of these are platform, you know, solutions and some of these are ongoing services.
So or go the revenue will be split. Some will be more for a particular year followed by certain amount of AMC. And some of these are pure play services just like the RTA contract, which means that month on month, you know, for the service that we generate them against certain So the exact number, I would request, you know, Amit, to discuss with you offline in terms of, you know, having computer and what is onetime historical versus what is the run rate on that.
Thank you.
Ladies and gentlemen, we take that as the last question and conclude the question and answer session. On behalf of IIFL Capital Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.