Ladies and gentlemen, good day and welcome to Nippon Life India Asset Management Limited Q1 FY 2025 Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing the star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Swarnabh Mukherjee from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Thank you, Steve. Good evening, ladies and gentlemen. On behalf of Batlivala & Karani Securities, I welcome you all to the Q1 FY 2025 earnings conference call of Nippon Life India Asset Management Limited. Today, we have with us Mr. Sundeep Sikka, Executive Director and CEO, along with the top management team of Nippon Life India Asset Management Limited. I would now like to hand the conference over to Mr. Sikka for his opening remarks. Over to you, sir.
Thanks a lot. Good evening and welcome to our Q1 FY 2025 earnings conference call. We have with us Chief Business Officer Saugata Chatterjee, Interim Chief Financial Officer Amol Bilagi, Chief Digital Officer Arpan Saha, Head ETF Arun Sundaresan, Head AIF Ashish Chugani, Deputy Head AIF Aashwin Dugal, and Matsui-san, nominee of Nippon Life Japan. Our detailed investor presentation and press release have been uploaded on the exchanges as well as on our website. I would like to share some comments on the recent industry trends and our performance prior to addressing the questions. I would like to start by mentioning that Q1 FY 2025, NAM India has achieved a profit after tax of INR 3.32 billion, as well as its highest-ever quarterly operating profit of INR 3.08 billion.
Further, owing to consistent efforts of the business teams, our equity net sales market share and SIP market share remain well above our equity market share. Beginning with the markets, equity markets in Q1 FY 2025 displayed a strong performance overall. The Nifty moved up 7.5% quarter-on-quarter, while Nifty Midcap indices rose by 17% and 19% respectively. RBI held the repo rate steady at 6.5%, while the 10-year G-Sec yields moderated by 5 basis points quarter-on-quarter to 7.01%. Coming to the data on mutual fund industry, the industry quarterly AUM grew by 9% quarter-on-quarter and 37% year-on-year in Q1 FY 2025 to INR 59 trillion. Strong momentum in equity segment sustained as the share of the equity in overall AUM continued to increase, ending at 59.4% for Q1 FY 2025, up from 51.8% in Q1 FY 2024.
Moving to the industry flows, the equity category, excluding index and arbitrage, witnessed a strong inflow of INR 2.54 trillion and a net flow of INR 1.1 trillion. Both gross and net inflows were higher than higher on a quarter-on-quarter basis for the fourth consecutive quarter. Strong inflows were witnessed across sectoral and thematic, multi-cap, and multi-asset allocation funds. Inflows in small and mid-cap funds were higher sequentially. While sector and thematic funds witnessed high inflows on the back of a large number of NFOs, NAM India has opted to stay out of this trend. We believe that the large share of such flows into these funds comes on the back of market tailwinds and may not be in the best interest of the investors and is typically not very sticky.
We would like to continue to focus on scaling up our existing products, which have a long-term track record. That being said, we will continue to launch newer products into passive side , both index and ETFs, as highlighted . Moving on to SIPs, investments via SIP routes further increased, with the SIP contribution for the quarter being INR 625 billion, up 45% year-on-year and 9% quarter-on-quarter. Monthly SIP flows in June 2024 stood at INR 213 billion, which was another all-time high. SIP folios increased by 7% quarter-on-quarter to 89.9 million. The fixed income category that is both net and liquid witnessed a net inflow of INR 123 billion after an outflow in the previous quarter. The ETF category had net inflow of INR 267 billion.
At the end of the quarter, unique investors in the mutual fund industry increased to 46.9 million, that is an increase of 22% year-on-year, while the industry folios increased to 191 million. Now, moving to our business performance, we closed the quarter with total assets under management of INR 6.04 trillion. This includes mutual funds, managed accounts, and offshore funds. Our mutual fund quarterly average AUM grew 12% quarter-on-quarter and 54% year-on-year to reach INR 4.84 trillion. We have seen the highest increase in quarterly AUM market share on a year-on-year basis amongst all AMCs and second-highest increase quarter-on-quarter. Further, on a quarter-on-quarter basis, we have been the fastest-growing AMC amongst the top 10 players. I would now like to share a few highlights for the quarter.
Starting with the market share, our market share increased 24 basis points quarter-on-quarter and 93 basis points year-on-year to 8.20%, with market share increase across all categories. This is the fifth consecutive quarter for market share increase that we have witnessed. Our equity market share also continues to improve. We increased by 12 basis points quarter-on-quarter and 62 basis points year-on-year to 6.88%. This is our highest equity market share post-December 2020. The share of equity AUM in our overall AUM continued to increase and stood at 49.8% for Q1 FY 2025, up from 49.2% for Q4 FY 2024. Performance for most of our equity schemes remained strong, and this, along with the distribution network, digital capabilities, and strong risk management, helped to deliver near double-digit market share in net sales in equity and hybrid segment in Q1 FY 2024.
On the segmental front, our individual AUM, which consists of retail and HNI AUM, saw further market share improvement. Individual AUM grew 16% quarter-on-quarter to INR 2.98 trillion. Market share increased by 21 basis points quarter-on-quarter to 7.95%. Our corporate AUM grew 15% quarter-on-quarter to INR 2.11 trillion. This led to a market share improvement of 37 basis points quarter-on-quarter to 8.86%. Our B30 AUM grew 16% quarter-on-quarter to INR 1 trillion, which keeps us among the fastest-growing large AMCs in B30 locations. Our market share improved 20 basis points quarter-on-quarter to 8.98%. This segment forms 20% of our AUM versus 18% for the industry. We continue to have the largest base of mutual fund. We continue to have the largest base in the mutual fund industry with 17.5 million unique investors. We are humbled to have one in three mutual fund investors invest with us.
I would now like to touch upon important aspects of our systematic book. I'm happy to share there has been a continued uptake in our systematic flows over the last 12 quarters, which has led to an increase in our market share. Of the incremental SIPs in the quarter, we had a market share of 11%. SIP market share increased by 28 basis points over March 2024 to June 2024, ending at 9.36%. Our monthly systematic book rose by 11% to INR 25.8 billion for June 2024 over March 2024. This resulted in an annualized systematic book of INR 310 billion. On a year-on-year basis, monthly systematic book grew 111% over June 2023, when it was INR 12.2 billion, as it is 44% growth for the industry. 59% of our SIP AUM has continued for over five years versus 28% for the industry.
I would now like to update you on the increase in our headcount witnessed during the quarter. As some of you would have noticed from our presentation, we have increased our employee headcount by 45 employees in Q1 FY 2025. We have also deployed 50 more management trainees in July 2024, leading to a total headcount increase of 95 employees. Of the total increase, the majority are on account of increasing the team size in sales and distribution and AIF function. As mentioned in the past, we will continue to invest in our future growth, whether it is talent, technology, or other areas. Moving on briefly to the ETF segment, we continue to be one of the largest ETF players with an AUM of INR 1.3 trillion and a market share of 17.8%, which increased by 108 basis points quarter-over-quarter. Our share in industry ETF folios is 60%.
We have 61% share of ETF volume on BSE and NSE. Our ETF average daily volumes across key funds remain far higher than the rest of the industry. Passive AUM, which includes ETF and index, crossed a milestone of INR 1.5 trillion in this quarter. Now, moving on to our distribution franchise, digital transformation has always been a strong focus for Nippon India Mutual Fund. Our digital roadmap is in line with the consumer expectation crafted around innovation and ease. NIMF's digital transformation journey factors in consumers across segments, starting from the new Gen Z to the experienced investors, bringing in need-based relevance and personalized touch. The digital focus at NIMF has been on a future-ready stance and to provide a lucid online experience to our investors and franchise.
The NIMF digital stack has ensured that the users always experience frictionless solutions in its information-first economy. This has led to NIMF to become a prime choice on the online customers, where every two seconds, we have 30 consumers purchasing NIMF products digitally across our digital ecosystem. Digital purchase transactions rose to 2.82 million in Q1 FY 2025, up 170% year-on-year. In the month of June 2024, Nippon India Mutual Fund digital crossed 1 million new purchase transactions. Digital business contributed to 68% of the digital new purchase transactions for Q1 FY 2025. Our physical distribution base is well diversified, with a wide presence across 263 locations across the country. We have over 14,300 distributors in total and added roughly 2,900 distributors in the quarter. Now, I would like to briefly update you on our subsidiaries, namely AIF and Singapore subsidiaries.
Starting with our AIF business, as mentioned in the past, AIF continues to be an important focus area for NAM India. Under NAM India AIF, we offer Cat 2 and Cat 3 alternative investment funds, having a total commitment of INR 65.1 billion across various schemes. The company has started broadening its focus across asset classes and strategies. Towards this end, we have recently launched a Performing Credit AIF and a long-only small-cap equity AIF. Fundraising is underway, and both have undertaken their initial closing. We have recently undertaken the first closing of a tech VC AIF, Nippon India Digital Innovation Fund, Scheme 2A, a direct venture capital fund targeting investments in early-to-growth stage startups. Also, our tech VC and Fund of Funds launched in 2020 is in an advanced stage of deployment, with nearly 84% of the commitment raised having been deployed across 12 funds.
On the offshore front, we have witnessed good equity inflows in the quarter from various international geographies, and we remain positive for the strength to continue in the future as well. We will remain focused on fundraising from international markets and are looking at business opportunities with subsidiaries, associates, and a large network of Nippon Life. Nippon Life Japan also remains committed in supporting Nam India's offshore operations and growth. We continue to see interest in India from conventional markets like Europe, the Middle East, Japan, and from unconventional markets like Latin, Thailand, and Korea. Now, to our financial performance. For Q1 FY 2025, revenue stood at INR 5.05 billion, up 43% year-on-year and 8% quarter-on-quarter. Other incomes stood at INR 3.31 billion, up 12% year-on-year, sorry, and 42% quarter-on-quarter. Operating profit stood at INR 3.08 billion, up 59% year-on-year and 9% quarter-on-quarter.
Profit after tax stood at INR 3.32 billion, and an increase of 41% year-on-year. Overall, Q1 FY 2025 has been another strong quarter for the MF industry, as well as for NAM India, and we hope this trend will continue going forward. With this, I would like to conclude my remarks and open the floor for questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Yes, thank you, sir, and congratulations on a good set of numbers.
So just two questions. So firstly, so with respect to the consultation paper which SEBI has come up with, so could you share your comments around the same? How are we looking at the new asset class? And so that would be my first question.
Yeah, you want to go with the second question also? Then we can try to combine it together.
Yes, so the second question is, so during the quarter, we have seen some compression on the yield side. So what were the trends for the same? And also, could you give us yield on the asset class, like equity, direct, liquid?
Let me take the first question, and the second one, I'll request my colleague Amol to take it. With respect to the new consultation paper which we have come, we are still evaluating the paper given its outgoing recently.
I think while the opportunity could be big, we must also be cautious of the new kind of risk associated with the new asset class and not get carried away with it. I think all options are currently open, and we are trying to see how we can take advantage of it. But we want to remain cautious. I think we may, I mean, while the minimum ticket size, what has been mentioned, is INR 10 lakh rupees, we may evaluate to launch products which will be higher than INR 10 lakh at entry level because I think we want investors who are really, really understand the risk associated with it to come into such products. But like I said, this is two initial days. I think it just has come two days back. I think maybe in the next quarterly call, we'll be able to give you better clarity.
Yeah, thanks, Sundeep. So on the yield part, I think for the quarter, we have seen a quarter-on-quarter growth in equity AUM of almost 14%. And as a relative to telescopic pricing, there would be pressure on the yield as the yield contracts as the AUM grows. So that is the main reason why we have seen a contraction in the yield. So on the quarter-on-quarter basis, if you look at it, there is a 1 basis point compression in the yield. On the asset class-wise, the yields on equity stands at around 60 basis points. On debt, it's around 25 basis points. On liquid, it's around 10-12 basis points. And on ETF, it's around 18 basis points.
Awesome. And, sir, in your opening remarks, you also highlighted the fact that you would be staying out of the launching, staying out of launching products on the sector and thematic side, whereas in the industry, we are looking that a lot of agencies are looking to launch products on the same, and they are mobilizing funds also. So what are our thought processes in that? What are our thought processes on this thing?
I think from our point of view, we believe. And I think anything, I mean, right now, a lot of these products are being launched with the tailwind of the markets doing well. And I think our past, if you look at past, many of the thematic funds which get launched, they are not able to do so very, very long a period of time.
Our strategy would be to remain restricted to some of our core flagship products and scale them up. I think also, if you want to deep dive into the portfolios of some of the thematic funds which have come, I mean, they are very similar to 70%-80% or similar to most of the diversified funds. So we will stay away from getting into such schemes which, I mean, seem to be very seasonal in nature. I think we'll try to continue focusing on regular large-cap, small-cap, mid-cap, or true-to-label sectoral funds which the investor understands what he's getting into.
Awesome. Thank you, sir.
Thank you. The next question is from the line of Shubham Bhadra from ICICI Prudential AMC. Please go ahead.
Hello. Yeah, hi. Congratulations on a great set of numbers. I had a question regarding your FY 2024 numbers.
So if I look at your consolidated financials, the PMS revenue comes out to around INR 29 crores, whereas in the standalone, it is INR 42 crores. Why is the consolidated revenue lower than the standalone? What is the difference?
So what are you referring to? What is the INR 42 crores basically?
INR 42 crores is in the standalone and INR 29 crores is in the consolidated.
But we don't disclose the numbers. So from where are you getting the numbers?
This is from the annual report. This is regarding FY2024.
FY2024.
Yeah, yeah.
So we'll come back to you on that, Shubham.
Okay. Nothing that you can tell me right now?
Yeah. So we have to check that, what you're referring to, probably. Then we can get back to you.
Okay. Take care. Thank you. Great.
Thank you. The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi, good evening. Thank you for taking my question and congratulations on a great set of numbers. So just a couple of quick questions. One, why has staff cost gone up so sharply? And so we're seeing from INR 89 crore last year in Q4, we've gone to INR 105 crore. And also, even on a year-over-year basis, the jump is very material. So wanting to understand that and what should we sort of be building in for the rest of the year. And second, the AUM is growing really rapidly. And incrementally, are we able to pass on the lower sort of TER in terms of lower distribution costs to our customers? Or are we losing out in terms of incrementally what we are able to keep for us? We are, obviously, but is there any way to stabilize those yields? What's the thought process on that?
Okay. Thanks, Madhukar, for the question. So the reason for the increase in employee costs are manifold. First of all, is the fresh issues granted during the quarter one that have resulted in a P&L hit of around INR 8.3 crore, which has added to that. Another part is the increment that we had for this year, which was higher than the average past increment. So the increment was in the range of 13%. That is why you see that. Also, the provision for the variable pay that we have made in quarter one would be comparatively higher compared to what we did in Q1 of last year. So that is another reason why we will see the higher pay here. And also, this year, there was a comparatively higher spend towards the annual employee engagement activity.
So these are some of the reasons why cumulatively, the cost has gone up for the quarter. If you look at the year, excluding employee cost, probably you can see an increment of around 12%-13% over the full year. I suddenly mentioned that we have already added 100 employees during the quarter, and we will keep on investing wherever we feel necessary. We'll keep on adding resources.
You said excluding employee costs, the other costs will go up 12%-13%. I didn't get that.
So excluding ESOP costs, the overall ESOP costs will go up 13%.
Got it. Got it. Okay. Understood. Understood. Thanks. And on the other question on the yield side.
Yeah, yeah. So Madhukar, strategy is right.
So in the past, you would have heard from us that we had reduced the brokerage in one of our largest funds, and that continues to be one of the practices which we are doing. On a quarter-on-quarter basis for all new business, what we gather, as per the TER movement, we proportionately reduce the brokerages. That's been our practice, and we will continue to do that as we go ahead. It does not impact our business that much because the granularity of our business is very different. We have a very, very strong retail franchise, and we believe in building assets through SIP. That's probably the reason why we continue to maintain our net sales growth on a quarter-on-quarter basis.
Understood. Just one follow-up question on the employee cost. What should be billed as ESOP cost for the year?
So the ESOP cost would be roughly around INR 45 crore for the full year.
And next couple of years?
So it will taper down. So as I mentioned, the first, normally, whenever ESOP is granted, the first year, it's almost 50% of the cost accounted in the first year, and then it tapers down to 25%-26% the next year, and then it reduces further in the third and fourth year.
Understood. Got it. Thank you. And all the best.
Thank you, Madhukar.
Thank you. The next question is from the line of Ranjit Bhadra, an individual investor. Please go ahead.
Good evening. This is more of a suggestion or request than a question. The reports that are published and reported to the exchange, will the amounts be mentioned in lakhs and crores instead of millions and billions? Most of the people in India are more familiar with the former than the latter. Thank you.
Sure. And if you look into it, and if that's evident, we can definitely surely look into that.
Thank you.
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead. Hello, Ms. Shreya. Your line has been unmuted. Please go ahead with your question. Hello, Ms. Shreya. Your line has been unmuted. Please go ahead with your question. We will move on to the next question. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.
Yeah. Hi. Good evening, everyone. Congrats on a good set of numbers. Firstly, if we think about the strategy with respect to branch expansion or deepening your presence, further presence into the country, what are your thoughts there?
What are your strategies there? You added some 2,900 distributors in the quarter, and branch addition has been much spoken about. So what is the strategy there? That would be my first question. Related to that, second question as to how should we think about your other expenses growing in this year? While you guided for the employee cost, but from the other expenses standpoint, how do we see this increasing? Coming back to the employee cost a bit, with addition of employees at the sales and distribution level, do you think that this will continue, or are we reaching an optimal stage where you've invested enough for the next one or two years, or is it that you still will continue to add?
So actually, both the questions are linked to each other. I'll try to clump it together.
I think presently, we are present in 263 locations, and 70% of our branches are in B30 locations. So we'll continue evaluating some of our branches. We will be looking at changing, making them bigger. I think as the penetration and the scale of businesses is increasing in the cities and towns, will we go really deep and add a lot of more branches? Answer is no. I think even if they would be, there could be 10, 15 branches in a year, but there will not be much because we are also seeing a lot of these B30 locations, new business, as it was mentioned in the presentation, a lot of these businesses coming to digital. So to the hub-and-spoke model, but I think to your question, will we add a lot of more branches?
Having one of the largest branch franchise, I don't think so that we'll add too many more branches. It could be maybe five, 10 branches in a year. That's the kind of trend I think we'll see at this point of time we see. As far as adding employees is concerned, I think yes, we have added about employees, 94 employees in all total. 45 were added in Q1, and 50 have been added after that. Some are in sales and distribution. And also, a very high percentage of them are basically the new talent and the new skill set we are acquiring for our alternative investment businesses. So will this trend continue? I think I'm seeing how the penetration is increasing in the country and how we as small citizens are contributing. About 10% addition can happen, I think, for the next three to four years also.
So those 100 more people can be added. I mean, most broadly, many of them will be at entry level. Few could be new skill set that we'll acquire for our alternative business.
And regarding the other cost.
Other than ESOP employee cost, I think we believe it will be in the range of about we can expect about 12%-13% increase every year.
12%-13% increase. And that large portion of that would be in what? Because generally, I think there should be a good scale benefits. So a large portion of this increase would come in from what elements? Digital advertisement? What would kind of take away a large portion of this increase?
Majority of these will be technically investments for future. You're right. It could be digital advertising, building the brand.
I think because as we go up, because there's a lot of operating leverage at the fund today, I think as we have gone from INR 300,000 crore to INR 500,000 crore, touching almost INR 500,000 crore, the basic costs don't go up. So I mean, some of these are inflation-related costs, but the majority of the costs are going to be investments for future.
Okay. Okay. Got that. Thank you so much.
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Yeah. Hi. Can you hear me now? Hello?
Yes, please. Yeah.
Yeah. Okay. Okay. Thanks. So I had a question. Congratulations on the set of numbers. I had a question on the flows.
Is there any color that you guys give out on which is your segment where majority of the flows come into, not in terms of the tenure or anything that comes out in the PPT, but in terms of the product segment? And any color on how those has there been any change or any move in that segment where the flows were coming? Has that shifted to any other direction? Any of those? Any color on that would be useful.
Yeah. So Saugata here, I'll take this call. So the SIP, if you see the SIP flows which are coming to the industry and to us, for us, the good part is we have derisked our SIP flows across the various funds which we have today. Earlier, probably two years back, it was probably small cap was anchoring the entire SIP flows.
Today, the dispersion of the SIP flows have moved towards small cap, large cap, mid cap, big cap. We are also seeing a lot of flows now coming into the sectoral fund. That's the way the SIP book is now building for us. It is quite derisked at this point in time. The other part is the retail franchise which we have built along with the digital strength which we have, we are getting a lot of inflows coming in from the B30 market. The reason why our B30 market share is much more and our share of assets in B30 is much higher than the industry average. That is the way the flow is coming. Even our average ticket size is increasing.
So today, because investors want to stay longer with us, they are ready to commit a higher average ticket size, which is also an area of improvement which we have seen in the last 6-12 months.
And just that you mentioned B30, so should we expect whatever market share we have in B30 market, similar would be the trend with SIP flows, or how should we look at that in there?
Yeah. So we have a higher because B30 market share is now increasing. The SIP book always is the higher, and then the market share moves in tandem to the SIP market share. So if SIP market share, as an example, if it is a 10%, our B30 market share may be 8%, then it starts catching up as the SIP book starts building.
Okay. Okay. Okay. This is very useful. Thank you so much. Thank you.
The next question is from the line of Swarnabh Mukherjee from BK Securities. Please go ahead.
Thank you so much for the opportunity, sir. Just following up on the previous participant's question in terms of the distribution in B30. So sir, if I see your distributed assets mix, I can see that over the last few quarters, your MFD share in the stock has kind of slipped by maybe 100 basis points, which has been taken up by the bank side. So I just wanted to understand where would that B30 growth be reflecting in this distributed asset mix? Are we reaching out to customers through the banking channel? What is happening?
And secondly, as a ramification on our needs, because as banks see some increase in share in the mix and it being a higher cost channel, is it also putting up slight pressure on the headline numbers that we are seeing, which we have been discussing that there's been a slight squeeze in that? So that is one. And secondly, in terms of the flows, I think the schemes that you have mentioned, I think the larger schemes continue to still when the flow is derisked, but the larger schemes continue to see higher share of flows. So any mitigation strategies which can result in the smaller schemes also maybe getting even more and more share, which can kind of help us maintain some stability in the industry? These will be my two questions. Thank you.
Yeah. So I'll just take this answer.
On the B30 side, like Sundeep also mentioned during the initial comments, there's a plethora of NFOs which have come in the industry. Typically what happens, the B30 market tends to participate more in the NFOs, and hence your B30 market share in IFA might have slipped a bit. But what we do, we are also derisking our business in the sense if we have to broadbase, we have to go to other channels. For us, banks is not only the private sector banks. We have a very strong PSU bank franchise which we run in the company, which also does give us protection on yield. That's the way we are trying to build our volumes in these markets. On top of that, the digital penetration in B30 is also very strong for us.
So if you combine all the three aspects, we tend to get our fair share of wallet, and we are continuously accessing channels which will keep giving us inroads to new investors. So that is the strategy which we work with, and that's the first part of the question. Second part is when it comes to derisking from a scheme perspective, like I mentioned, small cap obviously has reduced. We have moved the flows into mid cap, multi cap, large cap, sectoral funds. The entire narrative which is happening in the industry around sectoral funds, we are capturing it through SIP because it's good to build the book through SIPs rather than having lump sum because there are cyclical trends in these sort of schemes.
So you'll find sequentially as we move ahead, we'll start having more trends in these products, and hopefully the mix will keep improving as we go ahead from here on. Currently, as we speak, almost one-fourth of the flows are coming from our large cap and multi cap funds. So that's again a derisking strategy which has helped for us. And as I mentioned, this is an ongoing thing.
Understood, sir. Very helpful. Is it possible to, sir, give some indication of how, at maybe what level the flow shares are coming vis-à-vis that on the stock equity?
So can you say? Flows to stock equity. Yeah. So you're talking about the SIP flows to our stock equity?
Sir, the yields in case of flows vis-à-vis what we are receiving on the stock in case of equity-oriented assets.
So we don't include that number, Swarnabh.
So what I'm capable to say is that the yield on a new business would be lower than the stock.
Okay, sir. Okay. Thank you so much and all the best, sir. Thank you.
Thank you. The next question is from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
Hey, hi. Good evening, everyone. So the first is a data question. I wanted to know what would be the closing equity book? I think the average is about INR 2.4 trillion. Okay. INR 2.6 trillion.
INR 2.6 trillion.
Okay. And then sort of coming back to Chatterjee Sir on the question on yields. So in one of the earlier questions around the current level of commission payouts, you sort of gave me a sense that it doesn't seem to be a matter of too much concern.
We've seen almost, I think, 10 basis points sort of a correction on the equity yields on a YoY basis. But I guess the pass-through for the distributor hasn't been to a similar extent. So what is your thought process around this when you're planning for the rest of the year or maybe one to two years? When would you kind of think about passing slightly higher share to the distributor as well?
So for us, as I mentioned, the telescopic TER movement which we see in every fund, we try to replicate that in the brokerage structure to quite an extent. And the reason why quarter-on-quarter, the brokerage structures do tend to follow the glide path.
Now, obviously, the previous question we had come in, we have a ratio which has old assets as well as new assets. So we get protection from the old assets too. And as we progress, and we start so this is an equation where if you are bringing down the new business brokerage and the old assets continue to probably remain with us, the blended yield for us will gradually go down. It will not go down in proportion to the TER movement. Yeah.
And just to add to it, having said that, we have various levers that we will keep working on to ensure that the decline in yield is not very steep.
Okay. And then just a clarification, the commission payouts on SIP versus lump sum, is there a differential in how we've structured the overall commission structure?
No, it is similar. Same. It is both for lump sum and SIP, we have the same structure.
Got it. And sorry, one last thing, just again a qualitative sense. Given that we are staying out of the NFO market and we are sort of preparing to bring more money through the SIP route versus lump sum, how does it work with the distributor, right? Because for him, generally, it seems like there is lots of opportunity when it comes to pushing your products versus others. So do we read this as just the performance sort of doing the heavy lifting, or is there some other way we are sort of keeping ourselves relevant in the market?
So I think it's not a SIP versus lump sum. I think there are enough number of distributors who also believe in the same strategy like ours. I think it's important to be.
It's far better for the investor to get into averaging through SIPs rather than lump sum. So I will not say that I will not paint all distributors with the same brush that they want to only lump sum. Rather, a trend we have seen is very different. I think a lot of distributors and AMCs thinking in the interest of the investors preferred the SIP route. So I don't think so. We have to make an extra effort for it. It's a question of like-minded. It's a thought process that I think works good for the investor. If it works good for the investor, it's good for the distributor and good for the AMC.
Okay. Thank you so much. All the best.
Thank you. Thank you.
Thank you. The next question is from the line of Jignesh Shial from InCred Research. Please go ahead.
Yeah. Hi. Am I audible?
Yeah. Please go ahead. Yeah. Okay. Just wanted to check. It's more of a curiosity I'm asking. You're seeing that your overall market share ex ETF and equity is also 6.88, which is roughly 12 basis points higher, right? And even your market share in your ETFs has also seen a significant improvement sequentially. So with ETF also, if we see it up like what other large AMC gives us, we implement, right?
Jignesh, can you repeat your question?
Yeah. So your equity market share excluding ETFs is 6.88, correct? Which is 12 basis points kind of a rise sequentially.
Yeah. Correct.
Yeah? So if you put with ETF also, we will be seeing a significant improvement only, right? I just wanted to reconfirm because I see sequentially your ETF market share also has gone up.
Correct. You're right. You're right.
Right? So even including ETFs, our market share would have been going up only, right? That is my correct understanding.
Yes. Yes. You're correct. Yes. Okay.
And secondly, we are seeing different.
S eparately, but your understanding is correct. If you were to see both ETF and equity, the market share has gone up from the 10 basis point and more than 100 basis point in equity.
Yeah. That is what I was actually assuming. I just wanted to reconfirm it. And number two, we have been looking. I've been tracking for a while, quite a long period of time. We have seen a significant improvement on the corporate segment side. Retail and HNI had been many have been decent, but corporate is also right now is doing good for us. And our direct flows are also direct channel is also seen a significant improvement.
So anything specific you want to mention for this particular segment? Because once the debt market opens, which we are seeing now, the flows are improving. The corporate plays an important role. Anything worth highlighting that would be here or something that you want to comment upon? That is the only thing I wanted to understand.
So I think broadly, if you were to see, there has been an improvement in all segments: retail, HNI, corporate, and all asset classes. I think I will not attribute to anything specific that we have done in the last quarter, but a lot of things we have done in the last five or six years. A lot of these things come with the lag effect. So I think definitely things are falling in place. We see structurally, I think, across all segments and asset classes.
I think we feel, I think, for the investments that we have done and the way the company is positioned, we will benefit with higher inflows and higher market share in times to come.
Right. Just roughly one more thing. With the almost 90% profits we have been distributing as dividends, roughly around 90%, our ROE has been significantly improved. We are at around 30% now. But do we have that number will continue to move with our dividend and still policy remaining payout still remaining at the similar level? Can we assume that the ROEs can even cross 40%+ over a period of next one or two years? Is that a fair assumption? Just assumption I'm asking for.
No, I think I will not be able to give a futuristic thing.
I think I'm sure you can put it in the spreadsheet and see how it could look like. But I think from our perspective, I think the board of the company has a very clear view to keep sharing the profits of the company with all shareholders, including minority shareholders, and we'll continue with that trend. But ROE, this business has high operating leverage. As the yields increase, the expenses do not go up the same way. But we'll not be able to give a number to it. But for this quarter, the ROE was 32%.
Correct. Perfect. Perfect. That sounds good. Thank you so much, sir, and all the best.
Thank you. Thank you.
Thank you. The next question is from the line of Bhavin Pande from Athena Investments. Please go ahead.
Congratulations on a wonderful set of numbers.
I just wanted to draw your attention to slide 44 regarding operating leverage. Of course, assets sort of inelastically are a factor of how markets do and profits in terms of the manifestation of that. But looking at variables which are controllables, do we think that if things sort of go in tandem, we could see some sort of accretion happening on per branch and per employee basis?
So hi. I only have time for the question. So if you look at our expenses, almost 53% of our expenses come from the employee cost, okay, of which almost 25% would be a variable component of it. Okay? So whenever there are tough times, probably that is what is directly into the profit of the company, right? So even when there's internal profitability, that component will automatically come down.
On the other expenses part, the majority of the expenses would be fixed in nature, except for some part of marketing and everything that are variable and that can be depending on the market situation, that can be tapered down a little bit. But excluding that, I think most of the expenses are fixed and they will continue.
But the discretionary expenses, depending on the market condition, one can take a call on them. But having said that, as you've always said, we see this business from a long-term point of view. We would not like to cut down short-term cost and investments, which can give us long-term benefits.
Okay. Secondly, on the expanding on the employee expenses front, of course, variable payouts and headcount addition, they are sort of cyclical in nature and would keep happening for business cycles.
But we have seen this trend of spending on employee engagement. So do you think this will also continue or it's more of a cyclical thing that's prevailing right now?
So I think I will not say this is cyclical, but I think maybe I think this is post-COVID and all has happened for the first time. I think but broadly, it will continue whether the expense amount will be the same or not, that is still a question mark. But employee engagement remains a very important part of the strategy of the company because ultimately you have 1,000-plus employees. I mean, small cities and towns, you have to engage with them, get them together. So all those things play an important role, but employee engagement will continue. Amount will be difficult to settle at this point.
Of course, of course. It's difficult to quantify that.
Just lastly, on adjustment of commission on account of the TER formula with the distribution partners, of course, their TER on an absolute basis would also go down. Sorry, their share of TER would go down. So do you think that industry-wide spread of this activity would happen or have it already started happening, but other AMCs are sort of adjusting payouts with the distributors?
I think I will not be able to comment on behalf of the industry in this call. I think it will depend basically on which AMC wants to work on market, top line or bottom line. I think for us, again, as I mentioned in the earlier question, our focus will remain on profitable growth, and I think that will be the only top line.
That's it. That's it. Mr. Sikka, congratulations to you and your team for another wonderful quarter and good luck.
Thank you very much. Thank you.
Thank you. This will be the last question for today's conference call. It's from the line of Prateek, an individual investor. Please go ahead.
Hi. Congratulations for the great set of results, and I hope it continues going forward. My question is on AIF that I just want to see if I'm seeing on the website on AIFs. We are taking stakes in these companies who are doing AIFs or we are doing mix of both?
Can you repeat the question, please?
My major question is on AIF. I just want to ask that I was seeing on the website that we have some funds which we are taking stakes in. So these are the companies which we are taking stakes in who are doing AIF, or it's a mix of both?
That we have our own AIFs and we are doing some via some other companies as well.
So I think I just try to clarify. I think this is in reference to our tech Fund of Funds, our venture fund, which was launched in 2020. That fund, actually, we consider it as a Fund of Funds. It was about INR 183 million was invested from investors in Japan, and that has invested in 12 different funds. So our idea is not to take stakes. I think we are an LP in all these, either based on the constitution of the fund and with the IMs what has been decided. So we are not buying stakes. We think we are investors in them.
Okay. Okay. Thank you. Yeah. Just wanted to add on the earlier question.
So there was a question from Shubham of ICICI Prudential AMC on why the PMS advisory fee in the standalone is higher than your consolidated. So just wanted to clarify on that. So if you look at on the standalone basis, that includes the advisory fees that we receive from our Singapore subsidiary. So when we do the consolidation, that gets eliminated, and that's why the figures in the consolidated numbers are below the numbers in the standalone balance sheets. And also, there was a question on the closing AUMs. So just wanted to provide the numbers. So on the equity, the closing AUM is around INR 2,598 billion. On the debt side, it's INR 733 billion. On liquidity, it's INR 336 billion. And on the ETFs, it is INR 1 billion.