Ladies and gentlemen, good day and welcome to Nippon Life Asset Management Q3 FY 2025 earnings conference call, hosted by InCred Equities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Jignesh Shial from InCred Equities. Thank you, and over to you, sir.
Yeah, thanks, Mano, and good evening, everyone. On behalf of InCred Equities, I welcome all to Nippon Life India Asset Management Q3 FY 2025 earnings conference call. We have, along with us, Mr. Sundeep Sikka, Executive Director and CEO, and the Senior Management Team of Nippon Life India Asset Management. We are thankful to the management for allowing us this opportunity. I would now like to hand it over to Mr. Sundeep Sikka, Executive Director and CEO of Nippon Life India Asset Management, for his opening remarks. Over to you, sir.
Thanks, Jignesh. Good evening and welcome to our Q3 FY 2025 earnings conference call. We have with us our Chief Financial Officer, Parag Joglekar, Chief Business Officer, Saugata Chatterjee, Deputy Chief Financial Officer, Amol Bilagi, Chief Digital Officer, Arpanarghya Saha, Head ETF, Arun Sundaresan, Head of Investor Relations, Ashish Jagani, Deputy Head of Investor Relations, Aashwin Dugal, and Shin Matsui, nominee of Nippon Life Japan.
I would first like to share key highlights of our performance in the quarter and post that I will hand it over to Parag to speak in greater detail on the recent industry trends as well as our performance, post which we will move to question and answers. Coming to the key highlights, I would like to start by mentioning that as of Q3 FY 2025, NAM India was the fastest growing AMCs amongst the top AMCs on YTD basis, as well as one-year, two-year, and three-year periods.
This has led to a continued increase in our overall AUM and equity AUM market share. Further, our equity sales market share and SIP market share remain well above the equity AUM market share. We achieved a high single-digit market share in terms of equity net sales, while our SIP market share moved to double digits in this quarter. Further, NAM India has achieved its highest-ever quarterly operating profit at INR 3.76 billion. I would also like to share Nippon Life India Asset Management Limited has set up a branch in GIFT City and has taken a fund management entity license to manage the funds. The first GIFT fund, Nippon India Large Cap Fund - GIFT City, was launched in January 2025. The feeder fund will invest in our existing large-cap mutual fund, which has a long and proven track record.
More fund launches are in pipeline and will likely happen later during the calendar year. Lastly, to conclude my comments, I would like to state that we will endeavor to continue our journey of profitable growth going forward, including scaling up of non-mutual fund businesses. Now, I would like to hand over the call to Parag for further details on the industry and our performance.
Thank you, Sundeep, and good evening to everybody. Let me start with remarks on the markets. Equity markets in Q3 FY 2025 witnessed a drop from prior quarter levels. The Nifty declined by 8.4% quarter on quarter, while the Nifty Midcap and Smallcap indices declined by 5.2% and 3.6%, respectively. RBI held the repo rate steady at 6.5%, while the 10-year G-Sec yield increased marginally by one basis point quarter on quarter to 6.76%. Coming to data on the mutual fund industry, industry quarterly average AUM grew by 3.6% quarter on quarter and 39% year on year in Q3 FY 2025 to INR 68.6 trillion. The share of equity in overall AUM remained relatively flat quarter on quarter, ending at 60.8% for the Q3 FY 2025.
Now, moving to the industry flows, the equity category, excluding index fund and arbitrage fund, witnessed a gross inflow of INR 2.53 trillion and net inflow of INR 1.39 trillion. Gross inflows were lower quarter on quarter; however, net inflows were higher for six successive quarters. Categories with the highest inflows were sectoral thematic funds, Multi-cap, and flexi-cap funds. Moving on to SIP investments via the SIP route, further increased with the SIP contribution for the quarter being INR 771 billion of 49% YOY and 8% Q on Q. Monthly SIP flows in December 2024 stood at INR 265 billion, which was another all-time high. The fixed income category witnessed a net inflow of INR 438 billion, which was lower on quarter on quarter basis. The ETF category had a net inflow of INR 143 billion.
At the end of the quarter, unique investors in the mutual fund industry increased to 52.6 million. That is an increase of 25% YOY. Now, moving to our business performance, we closed the quarter with total asset under management of INR 6.56 trillion. This includes mutual funds, managed accounts, and offshore funds. Our mutual fund quarterly average AUM grew 3.8% quarter on quarter and 51% year on year to reach INR 5.7 trillion. We had the highest increase in quarterly average AUM market share on year-on-year basis among all AMCs. I would now like to share a few key highlights for the quarter. Starting with the market share, our market share increased one basis point quarter on quarter and 63 basis points year on year to 8.31%. This is the seventh successive quarter of the market share increase that we have witnessed. Our equity market share also continues to improve.
It increased by three basis points quarter on quarter and 31 basis points year on year to 6.99%. This is our highest equity market share post-December 2020. The share of equity AUM in our overall AUM was flat quarter on quarter at 51.1% for the quarter three FY 2025. We achieved the highest single-digit market share in net sales in the equity plus hybrid segment in Q3 FY 2025. However, excluding NFO, our market share would be in double digits. We continue to have the largest base of mutual fund industry with 20 million unique investors. We are humbled to have over one in three mutual fund investors invest with us. I would also like to touch upon some of the important aspects of our systematic book.
I'm happy to share that there has been a continued uptick in our systematic flows over the last 14 quarters, which has led to an increase in market share. SIP market share increased by 12 basis points to 10% over September 2024 to December 2024. This also represents an increase of 396 basis points over March 2023, when our SIP market share was 6%. Our monthly systematic book rose by 7% quarter on quarter and 60% year on year to INR 33.6 billion for December 2024. This resulted in an annualized systematic book of INR 404 billion. Moving on briefly to the ETF segment, we continue to be one of the largest ETF players with an AUM of INR 1.5 trillion and a market share of 18.14%, which has increased by 278 basis points year on year. Our share in the industry's ETF volumes is 55%.
We also have a 55% share of ETF volumes on NSE and BSE. Our ETF average daily volumes across key funds remain far higher than the rest of the industry. To further augment our passive offering, we launched two new products in the index fund category in the quarter, namely the Nippon India Nifty Realty Index Fund and Nippon India Nifty Auto Index Fund. Moving on to the digital franchise, digital purchase transactions rose to 4.08 million in Q3 FY 2025, up 141% year on year.
Digital business contributed 73% of the total new purchase transactions in Q3 FY 2025. We are excited to announce a groundbreaking feature on our mutual fund Android app, Voice Integration, aimed at making investment easier, inclusive, and empowering for all. This feature has been thoughtfully designed to enable seamless transactions through voice commands, introducing the power of conversational commerce to redefine how the investor interacts.
With this innovation, every investor, including differently abled individuals, can experience independence and ease in managing their investments. Now, I would like to briefly update on our subsidiaries, namely AIF and Singapore subsidiaries. Starting off with AIF, under Nippon India AIF, we offer Category II and Category III AIFs and have a total commitment of INR 69.8 billion across various schemes. Fundraising is currently underway for our Listed Equity AIF, Performing Credit AIF, and Direct VC Fund. Fund deployment across all the strategies was robust in Q3 FY 2025, with five active investments in Performing Credits and full deployment in our Tech VC FOF. The team has been strengthened across the functions, which positions us well for the future. On the offshore front, we continued to witness good equity inflows in the quarter from various incremental geographies.
Offshore AUM grew 34% year on year to INR 167 billion, with our UCITS Equity Fund reaching an AUM of $530 million. We continue to expand our footprint in the Japanese institutional space in conjunction with Nissay Asset Management Japan. A new offering in the India Midcap and Smallcap space, which has been our forte in the domestic market, has now been made available to international investors, providing additional options for the investor to invest into Indian equities. We continue to work with Nissay Asset Management Japan on this new offering and the market in the Japanese retail space. Now, on our financial performance, for Q3 FY 2025, revenues stood at INR 5.88 billion, up 39% year on year and 3% quarter on quarter. Other income stood at INR 0.15 billion, down 86% year on year and 87% quarter on quarter.
Movement in other income was on account of mark-to-market impact on the investment book and was impacted by adverse capital market movement during the quarter. Operating expenses stood at INR 2.12 billion, up 23% year on year and 3% quarter on quarter. Excluding impact of ESOP, operating expenses grew 17% year on year for Q3 and 19% year on year for nine months FY 2025, driven mainly by investment in talent, non-MF business, and technology infrastructure. Operating profit stood at INR 3.76 billion, up 50% year on year and 3% quarter on quarter. Profit after tax stood at INR 2.95 billion, up 4% year on year and down 18% quarter on quarter. For nine months FY 2025, operating profit grew by 55% YOY. Profit after tax grew by 29% YOY.
We would also like to mention that we have rationalized distribution costs for existing AUM in our large-cap and Multi-cap schemes in the quarter, which have a combined AUM of approximately INR 760 billion, while also moving to a proportionate sharing model on these schemes going forward. We will continue evaluating opportunity for similar rationalizations in other schemes as well. 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 withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Please wait for a moment while the question queue assembles. We have our first question from the line of Swarnabh Mukherjee from BNK Securities. Please go ahead.
Yeah, hi sir. Thank you for the opportunity and congrats on a great set of numbers. Three questions from my side. Firstly, I wanted to understand in this first few days of this quarter, how are you seeing in terms of flows panning out in your organization? Is there any kind of pressure coming because of the market performance? So just wanted to understand how the flows are panning out. Of course, in December, we have seen that the SIP flow numbers are very steady for you guys. It has, in fact, increased quarter on quarter, but wanted to get that color for January. So sir, that would be my first question.
Second is, if you could elaborate a little bit on the rationalization that you have done, the proportional sharing, how it has an impact on the yields for the equity segment, and should we, when exactly in the quarter you have done that, and should we expect some favorable impact on the yields in the coming quarter as well? And thirdly, sir, in terms of the other expenses, so just wanted to understand that given the market movement and maybe near-term, the equity AUM growth might not be like what we have seen in the earlier quarters. How should we read the other expenses number going forward? Should we be planning to curtail on our variable expenses? So these are my three questions. And also, if you could also share the yields of the different asset classes, that would be very helpful.
Sure, Swarna. So thank you for the question. I will take the other expenses question first, and then I will hand it over to Saugata for the flows question. So other expenses, there is slightly increase, mainly due to the investment which we have done in technology and our AIF business. So that has slightly taken off the other expenses. But our endeavor is to keep the overall expenses ex-ESOPs in the range of around 15% to 16%, 17% range only. That is our endeavor going forward and futuristic also. So that is the one. And on the yield question, the equity yield is in the range of around 57 basis points. Debt yield is in the range of around 25 basis points. Liquid remains more or less 10, 12 basis points, flattish. ETF is 15 basis points, and the blended yield is 37 basis points.
Yeah, understood. Thank you, Parag. On the flow side, at least the early trends in the month of January do not indicate any sort of distortion. We are more or less at par with the December numbers, but we'll wait and see how it goes, how the behavior of the SIP and the HNI investors come in as we go ahead from here on because the trends are quite volatile. But initial trends do not indicate any major shift of flows from a December comparison.
I think the only thing I'd like to also add is that I think whenever we have seen in past markets are volatile, it is the HNI flows which had to slow down. The retail and SIPs, I think they continue to add stability, so we do not expect, unless and until it is a very prolonged 12-18 months kind of volatility continues from here, we do not expect the retail SIP flows to slow down.
Swarna, on the rationalization question you asked, so yeah, we have recently done in the end of the almost last FY end of the quarter. So the impact may not be seen in the current quarter. There will be some going forward, but on the overall AUM, it will be very flattish or minuscule. Going forward, it will help us to a certain extent streamline the yield. That is the only thing I can comment.
Sir, the proportional sharing method, would that imply that it will allow you to consistently pass on the reduction in TER on the backbook going forwards?
Yes, sir, understanding is correct.
So does that mean that should the equity yield dilution that we have seen so far would be at a lower level than what we have seen, like maybe it will be remaining in this mid-50s kind of a number, even if the AUM growth is there? Would that be a fair estimation?
I think we'd more like to be able to give the number, but as we said, directionally, that's the objective of the proportional sharing.
Right, sir. Understood. Very helpful. Thank you so much and all the best.
Thank you. We have our next question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, hi. Sir, just on this extending the point on the adjustments that you've done to the commissions, and so why did you choose these two schemes and why not some of the other large schemes like a Smallcap? Probably it has one of the largest AUMs. So why not on that as well? Or do you think that probably going down the road, you would start doing it for the entire space? Is there any initial signs where the distributors have kind of raised some concerns around it, and whether the entire industry is kind of moving towards it?
I think, again, I'll take the second part of the question. I will not be able to comment on behalf of the industry because, as mentioned many times in the past, every company has shareholders with different objectives. I think from our point of view, profitable growth is the key. That is point number one. The question, why scheme A, why not scheme B? I think it's not, I think the way you should see Smallcap has already been done. Large-cap has been done. Multi-cap has now moved between all the three schemes put together. The average AUM is about 45%-50%. So I think directionally, I think you can understand which way we are going.
Got that. So second question was on the SIP closures and the SIP run rate that people have been and media have been alluding to the number of SIP closures going up significantly in the past couple of months. Whether that is a reflective of the kind of growth we saw three years ago when the likes of Zerodha, Groww, Angel One kind of started their mutual fund operation and started scaling up, is that kind of semi-automatic closure that's happening, or what is the kind of trajectory we should be seeing here now?
So, Prayesh, I think the SIP trends. You have already had a preview of the industry trends. The industry has seen a higher percentage of discontinuation in the month of December, around 70%, in the mid-70s%. But what happens, these are again cyclical stuff. We'll have to keep seeing, like Sundeep mentioned, we have seen in the past the SIP customer of the past and in the last two, three years are more resilient. Hopefully, these percentages may not be the norm as we go ahead. In our case, our percentage discontinuation is much lesser than the industry numbers, which again shows that if we have been able to get more retail customers, more fragmented customers, that's our business model. We have better retention in our SIP book.
We'll have to wait and see how it goes, but trends don't show that we'll see our SIP behavior should be much better than the industry behavior. The past trends, whenever there's a volatility, tells us the higher the ticket size of SIP. I mean, they are the ones that get discontinued. The more retail you are, the better it is. They are mostly killed.
Okay. Got that. And the other bit, and the last question, is on the international business. Any thoughts that you can share as to what is your three-year kind of targets or any aspirations in terms of AUM size and revenue potential out of that business that can accrue to the company?
I think, as we have mentioned in past also, I think the focus for the company has been to raise more offshore money. But the last four, five years, it was important for us to consolidate our position on the mutual fund side, and that was where a lot of energies were put. With the mutual fund business doing well now and I think market share increasing, at this point of time, we are working closely with Nippon Life Japan, Nissay Asset Management Japan, and other associate companies of Nippon Life across the globe.
It will be difficult for us to give a number, but I think all I can say is I think at this point of time, we are more positive than ever before because a lot of funds are getting launched, a lot of dialogues are on, and I think you will, as and when we have more numbers to report, we'll keep coming to you. But directionally, we seem to be, you can expect more positive flows coming into and adding to the top line and bottom line.
Great. Thank you so much, that's all. All the best.
Thank you. We have our next question from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi, thank you for taking my question. So most of my questions have been answered. I just have one question on the other income. So we've seen a very sharp drop in other income, but when I look at your exposure to equities, that's much lower. So for example, it's at about INR 500 crores of a total book of INR 3,300 crores. So can you give a little bit of color on the breakup of this mark-to-market movement? How much of it is equity and debt if you have that split?
Madhukar, I will give you the broader picture. Basically, we have our alternative asset business also where we have to put money in the seed capital of the schemes which we have launched, which is mainly in category three, which are all equity schemes. They invest in listed equity. There we have seen a lot of movement because there the majority money goes in equity. In the lending side, whatever seed capital requirement which we have to do, which we have done, which has some impact due to mark-to-market losses on the equity in the market.
Okay, but this is largely only driven by equity?
Yeah, yes. So Madhukar, the equity in AIF is getting impacted in the consolidated.
Yes. Understood, understood. Got it. All the best.
Thank you. We have our next question from the line of Mohit Mangal from Centrum Broking. Please go ahead.
Yeah, am I audible?
Yes, sir.
Yeah, thanks for the opportunity. First thing I wanted to ask in terms of the total number of branches, while we have seen your competition opening a lot more branches, I think we are not very keen on that side in terms of expansion. So just wanted to know your thoughts in terms of the next 10-12 months, are you intending to expand?
Certainly, from our perspective, I don't think you'll see us opening substantial number of branches. There could be, well, if it is, it could be very, it could not be like the competition. I think we believe, I think in increasing the efficiency of the existing branches; we already have one of the largest networks, and we believe leveraging technology to get more efficiency from both physically as well as online and offline part of our business, so I think we do not intend to open multiple branches.
Okay, got it. And in terms of the product pipeline, I mean, you told they have been launched a couple of things in the passive side. Now, say going next two to three quarters, do you have any product pipeline?
So, we'll continue launching some, as mentioned in last few quarterly calls, we will continue launching few schemes in our passive business. Having said that, we have taken an internal view that we will not be launching any active mega NFOs. Broadly, the strategy of the company will be to keep launching funds, have them build up a track record, and gradually let business come. We believe NFOs distract the company and impact the overall flows, which are much more stable. So, we'll continue focusing on ongoing sales, SIPs. The only new launches that you will see will be in our passive, and even if there is a scope for us to launch a scheme in active, we will not like to go for a mega NFO.
All right, got it. Just one clarification that we continue to maintain double-digit market share in the equity and hybrid, right, schemes in the flow segment?
Yes. Yeah, yes.
All right. Thank you and wish you all the best.
Thanks.
Thank you. We have our next question from the line of Manas Agarwal from Sanford C. Bernstein. Please go ahead.
Hi, can you hear me?
Yes.
Yeah. Yeah, I had two questions. One is, can you help us understand what is the management fee or expense ratio for the GIFT feeder fund? What I want to understand is, is pricing better at a consolidated level for the entity if money comes in from this route?
So, I think broadly, because it's going to be feeder into the listed fund, I don't think so. It's going to be for the pricing. It's more to do with the volumes. I think it gives them access to international investors to invest. So, a certain set of investors who could not invest or it was not easy for them to invest, they will have access to come into large-cap fund. But the pricing of the underlying level is the same.
Underlying is the same. Okay, understood. The other thing I wanted to understand is this year, industry flows from mainly households into active equity is trending 2x of previous year. Now, a lot of this is lump sum, I understand. But how should one think about growth in flows from here? Because markets have also cooled down. Wanted some understanding on that, how you are thinking or how the industry would think about it.
I wish I had the answer for that. Cannot predict the future, how things will be. But I think from our point of view, the way we see it is, I think over the last five years, you are seeing a very strong focus on SIPs. We strongly believe lump sums will always get impacted whenever the markets are volatile. To the extent our SIP market share has gone up from 5% to 10% in the last 24 months and is moving up faster, which gives us a cushion, even if the markets were to slow down or the incremental flows were to slow down. So from our point of view, it will be more qualitative growth. We will not be worried too much about lump sum. But for sure, we are a part of the industry.
If markets turn volatile or negative, they definitely impact the sentiment, and there could be a slowdown compared to where the flows have been coming now.
Understood. Thank you, sir.
Thank you. We have our next question from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
Hi, good evening. The first question is, again, coming back to the commission cuts, is it possible to give an indication of what would be the basis point impact on the opening book for these two schemes starting 3Q? Sorry, starting 4Q.
So, Abhijeet, it's very difficult to specifically mention on that, but the idea is to overall, the slowdown in the overall yield should have some reduction. That is the ideal because we keep on getting new flows and the AUM keep on growing. So it is difficult to venture on it. But overall, it will be very small because the overall impact will be not much on the overall equity yields. So I think what it shows is the direction of the company in which direction we are going.
Got it. So the way to look at it would be that because these schemes are gathering a lot of flows, so instead of the usual decline in yields, you would probably target the yields to remain flat over the next few quarters.
The idea is basically to slow down the pace of the fall in yields, basically. That is the whole idea behind it.
Got it, got it. And then again, sorry, sticking to the same point, so now you have kind of cut commissions on large-cap, small, and ,multi-cap, right? These would be the three largest schemes for you. And then your initial remarks, you mentioned that you would sort of look at continuing some of these measures going ahead. So would you look at these same set of schemes? Because I think any commission cuts elsewhere probably would not have a similar impact, right?
I think the team continues evaluating depending on the market conditions, situations, and the environment, so I think it will be difficult to give us an answer, but directionally, we'll keep rationalizing and be conscious of that the fall is elastic.
Got it. And second question was, it's possible to give the number for ESOP costs in 3Q?
Yes, it's already been mentioned also. So the ESOP cost for Q3, sorry, ESOP cost for Q3 was around INR 30 crores, sorry, no, no, no. It's INR 11 crores. Overall, nine months is INR 31 odd crores.
Got it, got it. And also, your guidance on OpEx, you stripped out ESOP, right? So just wanted to ensure if there is anything to look forward to over the next 12 months that could move the overall OpEx line beyond that 17% number you mentioned.
Don't see anything specific, but obviously, as I mentioned earlier, that we will keep on investing in technology and other things, and we will keep on investing in our alternate business and other subsidiaries, so that we will keep on doing, but there is nothing specific we can see.
Got it. Thank you so much.
Thank you. We have our next question from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi, thank you for taking my question again. So just coming back to the distributor commission rationalization, so 50% of the AUM has been done. Now, do you envisage that the other 50% will also be sort of, you'll also be taking measures on that over the next few quarters? Could you give some outlook on that? Yeah, that's the only thing. Thanks.
So Madhukar, too, I mean, at this point in time, we may not have specifics to share, but whether the reduction will continue in the existing schemes or we'll extend it to all other schemes, I think that's, as I mentioned earlier, we'll continue evaluating. But I think the guidance that we are giving is the directional approaches, and I think we'll try to arrest the downfall that was there in the years.
Understood. Thank you, sir.
Thank you. We have our next question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, hi. Thank you for the opportunity again. This one is cash balance. We were at around INR 4,300-odd crores at the end of June. Now we are at around INR 3,300 crores. It's primarily dividends, right? I think.
It's one of two factors. One is, as you rightly mentioned, dividend, and another is that we have invested in our corporate office space. These are two reasons why they are dropping the initial assets.
Okay, and just another clarification there. When you say the AIF seed funds and all, this is sitting in other assets, right?
Sorry?
The breakdown that you've given on the constituents of financial assets, the seed funds of AIF that you would have invested, that would be sitting in other assets category?
Yes, you're right. Yeah.
So that is sitting there in other assets, right?
Yeah, yeah.
Okay. Got it. Thank you.
Thank you. We have our next question from the line of Shreya Shivani from CLSA. Please go ahead.
Yeah, thank you for the opportunity. My question is on the offshore business. So just wanted to understand if you could help us understand this book usually is not volatile, usually picks a pace and continues. I mean, maybe here and there I can see a decline. This time, sequentially, there's been a decline. So just trying to understand what exactly plays out in terms of a book declining at this pace. I get that you've given the mix between managed and advisory, but even there, there is a slight bit of decline. Just want to understand what happens in this business that it can change directions at this pace.
So I think the movement in the asset that you're looking at is mainly due to mark-to-market, majorly. I think it's the flow of the assets.
Okay, okay. So this may not be reflective of lack of, not reflective of redemptions, more to do with mark-to-markets, right?
Yeah.
But there can be higher redemptions also that can come through, if my understanding is correct.
Nobody can predict redemptions, but I think at this point of time, for the reserves that you've declared, you're not seeing any redemptions.
Okay, okay. Got it, got it. Yeah, that's useful. Thank you so much.
Thank you. A reminder to all participants, you may press star one to ask questions. The next question is from the line of Yashodhan Nerurkar from Ionic Wealth. Please go ahead.
Yeah, hi. Thank you so much for giving me the opportunity to ask a question. So the first question that I had was on an ETF business. So we have seen a sharp scale-up from the FY 2018 levels to 2024. As a percentage of your total AUM has gone up to somewhere around 26%-27%. And if I consider, I mean, amongst the passives, the retentions are higher than liquid funds as well. So what plans do you have in terms of scaling this part of the business as well? Because as I see, I mean, in terms of a tremendous potential, you already have significant head start in terms of the volumes, in terms of the market share. So how do you see this business? How lucrative is it for you? And what do you see the growth for this business?
So I think, yeah, and I think you're right. I think we have a head start. I think we were one of the early ones to invest into this business. And we clearly believe both active and passive will continue to grow. There are different set of investors who will continue investing in active and passive. Our objective is to have the client at the center and whatever decision investor wants to do, whether he wants to come to active or passive, we'll try to offer the best both to them. Coming to future, I think we remain very, very optimistic about the passive business. And the pace at which it is growing, I think clearly it's already demonstrated in the numbers. About our future plans, I think we clearly, as mentioned earlier, we may launch suddenly new schemes.
But one good thing about this business is, if you look at globally also, this business normally, I mean, the top two, three players continue commanding higher market share because of liquidity, lower tracking error, and various other parameters. Unlike mutual funds, typically where an investor will invest in five to six different schemes because in ETFs and passives, the underlying is the same, I think they do not over-diversify. So I think we believe we'll continue building on the head start that we have and continue building our product suite. At this point of time, we have 48 passive products. We may launch a couple of more, but this business is all about scale.
I think from a margin basis point, we believe with the kind of AUM that we have and the basis point that we are earning, it is now adding substantially to our bottom line.
All right, perfect. That's helpful. And another question that I had was on the SIP discontinuation that you have faced. You already said that the discontinuation is lower than the industry. But I mean, is there any efforts taken from your end to minimize the discontinuations or the cancellations? Because I'm sure there will be people who will be pausing SIPs for a month or two. So is there any initiatives from your end that you might be reaching out to the investors and trying to somehow make sure the cancellations don't go through?
I think let me answer it in two ways. I think first, I think definitely there is an ongoing effort from the company by reaching out. I think we have basically created in the portfolio by we have roughly about three crore folios. I think we have micro. I think we try to segment investors into different categories based that artificial intelligence and data is used and a different kind of handholding, centralized handholding is done. We kind of create a setup and that is one part. But I'll go a step back a little. I think it's not about what we do after I think we acquire the investor. I think the quality of sourcing the funds, basically, that is a very important thing.
If you are trying to get investors which are more, I mean, like I mentioned earlier, more H&I, I think they typically are a little bit volatile, and when the sourcing, the lower the ticket size getting for smaller citizen towns, we have seen these assets are more stable and they do not discontinue when the markets are volatile, so it's a mix of both the things, both while sourcing also as well as continuous efforts are done by the digital teams.
All right, all right. The last question that I had on total AUM. If I consider just your equity AUM, roughly half of it is contributed to just three to four schemes, the larger ones. You said that you don't want to launch any newer schemes and your focus remains towards scaling the existing ones. Most of the schemes that are there in equity, they're still below, say, 10,000-5,000 crores of AUM. How do you intend to scale those up and what are your plans for those schemes?
So I think you're right. A couple of schemes are below 10,000. I think we do not want to aggressively push any particular scheme against that. We have stayed away. I think we have seen in the industry, the thematic funds have been getting a lot of allocations. I think we do not want to push funds where we do not believe. I think we believe the majority of the investors should be in the vanilla products, large cap, small cap, mid cap, rather than thematic funds. So I think we are in no hurry to scale up the schemes because some of these schemes have been these are niche schemes, they're sectoral funds and all. We'll let the advisors and the investors take the call. But from a perspective what I mentioned, we will not launch schemes. Please read the schemes as NFOs.
We may continue adding schemes, but we do not want to launch mega NFOs, which we believe the assets are not seeking.
Right. So basically, it's going to be an approach where any investor, so you have all the options open. So any investor that he chooses the right option for him, he can go towards it. So that's the kind of thought process that you have towards the investor.
Perfect. Perfect. You're right.
All right. All right. Thank you. Thank you so much, brother.
Thank you. We have our next question from the line of Ankit Bihani from Nomura. Please go ahead.
Yeah, hi. Congrats on a good set of numbers. So my question is on the performance of the two top equity schemes that you have, small and multi-cap, which have seen a slight softness in performance over the six to nine months. So are you seeing any slowdown of inflows into these schemes given that mutual fund distributors, while pushing the scheme, I think recent performance, maybe a six-month or a one-year performance becomes a selling point for them?
Yeah. So Ankit, I'll take this question. See what happens. It is a method, like Sundeep also was mentioning. What is our method of getting equity assets in our company has always been detailed, has always been explaining to the distributors that you should look at three-year, five-year, it's not longer performance. Even if the six-month, nine-month performance has slightly dipped, the three-year, five-year makes sense. So I think it's continuous education, communication, telling them about the processes what we have built in this company. I think that's what probably is helping us to keep retained the flows and moving the direction of the distraction from near-term performance to long-term performance. So what you mean to say is the flows are resilient in these schemes. You have not seen any slowdown.
Yeah. I think broadly, I think your understanding is correct. I think one more thing I'd like to mention, this is not only about our schemes. I think what we've seen is the distributors and the investors have matured a lot. They invested in equities. Six, nine months is nothing. I mean, you'll always have this glitch. You're not investing in fixed income. So I don't think so they react to it the way they used to react about five years back or ten years back. So I think this is not only for us. I think going forward, you'll see schemes which have a long-term track record. Even if there's a blip for six months, one year, I think you will not see the kind of reaction what you used to see in the past.
Because investors are also understanding and appreciating in equity, it has to be a long-term view. And three to five years is what needs to be looked at, not six months or one year.
Okay. Thank you.
Thank you. If there are no further questions, I now hand the conference over to Mr. Jignesh Shial for closing comments. Over to you, sir.
Yeah. Hi. Thank you. Thank you, everyone, on behalf of InCred Equities. I would like to once again thank the management of.
Hello.
Yeah. Thank you for joining the call.
Thank you. On behalf of InCred Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.