Q1 2027 Computer Age Management Services Ltd Earnings Call

Speaker #1: Ladies and gentlemen, good day and welcome to Computer Age Management Services Limited Q1 FY27 Earnings Conference Call, hosted by MUSG InTime. 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.

Operator: Ladies and gentlemen, good day and welcome to Computer Age Management Services Limited Q1 FY27 Earnings Conference Call hosted by MUFG Intime. As a reminder, all participant lines will be in the listen-only mode, there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nikunj Seth from MUFG Intime. Thank you, over to you, sir.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero on a touch-tone phone. Please note that this conference is being recorded.

Speaker #1: I now hand the conference over to Mr. Nikhun Seth from MUSG. Thank you, and over to you, sir.

Speaker #2: Thank you, Sumit. Good morning, everyone. Welcome to the Q1 FY27 earnings conference call of Computer Age Management Services Limited. From the management, we have with us Mr. Anuj Kumar, MD and CEO; Mr. Ram Charan, CFO; and Mr. Anish Savlani, Head of Investor Relations.

Nikunj Seth: Thank you, Sumit. Good morning, everyone. Welcome to Q1 FY27 Earnings Conference Call of Computer Age Management Services Limited. From the management, we have with us Mr. Anuj Kumar, MD and CEO; Mr. Ramcharan, CFO; and Mr. Anish Sawlani, Head Investor Relations. Before we proceed to the opening remarks, I would like to give a small disclaimer that this conference may contain certain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on date. These statements are not guarantees of future performance and involve risks and uncertainties. A detailed disclaimer has been published in the investor presentation. I would like to hand over the conference to Mr. Anuj Kumar for his opening remarks. Thank you, over to you, sir.

Speaker #2: Before we proceed to the opening remarks, I would like to give a small disclaimer that this conference may contain certain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of today.

Speaker #2: These statements are not guarantees of future performance and involve risks and uncertainties. A detailed disclaimer has been published in the investor presentation. Now, I would like to hand over the conference to Mr. Anuj Kumar for his opening remarks.

Speaker #2: Thank you, and over to you, sir.

Speaker #3: Nikhush, thank you very much. Good morning to everyone. I appreciate everyone joining the earnings call for the first quarter, FY27. I presume all of you have read the press release and have downloaded a copy of the presentation.

Anuj Kumar: Nikesh, thank you very much. Good morning to everyone. Appreciate everyone joining the earnings call for Q1 FY27. I presume all of you would have read the press release, and you would have downloaded a copy of the presentation. I'll just quickly jump into the details. Given the backdrop of the times we are in, I think it was a solid quarter from us. You've seen that EBITDA grew over 18% year on year to get to INR 183 crore. This is our highest ever number. Despite the challenging market conditions, I think it did two things. One, despite the fact that AUM did not grow as much as it traditionally would have grown, we were able to post an 18% increase in EBITDA, 17% in PAT.

Speaker #3: So, I'll just quickly jump into the details. Given the backdrop of the times we are in, I think it was a solid quarter for us.

Speaker #3: You've seen that EBITDA grew over 18% year-on-year to reach ₹183 crore, which is the highest ever number. Despite the challenging market conditions, I think it did two things.

Speaker #3: One, despite the fact that AUM did not grow as much as it traditionally would have grown, we were able to post an 18% increase in EBITDA and 17% in PAT.

Speaker #3: Also, the fact that this perhaps now almost puts in the background all the pricing adjustments of the last year, because you know that we had dropped from similar levels to about 42% operating EBITDA and climbed back in the next four to five quarters back to 46%.

Anuj Kumar: Also, the fact that this perhaps now almost puts in the background all the pricing adjustments of the last year, because you know that we had a drop from similar levels to about 42% operating EBITDA and climb back in the next four to five quarters back to 46%. To that extent, 46.4% operating EBITDA looks like a very nice number. EBITDA margin expansion, 270 basis points. This, all of you know, from 43.7% a year back to 46.4%. We are now heading towards our highest was a shade above 47%. We are heading in that direction. Again, I would say pretty sound just given the times that the last two years, AUM expansion has not been as much as you would expect.

Speaker #3: So, to that extent, 46.4% operating EBITDA looks like a very nice number. EBITDA margin expansion—270 basis points—you all know, from 43.7% a year back to 46.4%.

Speaker #3: We are now heading towards our highest, which was shared above 47. So, we are heading in that direction. And again, I would say it’s pretty sound, just given the times that in the last two years, AUM expansion has not been as much as you would expect.

Speaker #3: And the fact that the pricing adjustment, the one-time pricing adjustment, is, well, a bit of the backdrop, but not very recent—it's about one year old.

Anuj Kumar: The fact that the pricing adjustment, the one-time pricing adjustment is, well, a bit in the backdrop, but not very recent, but one year old. Operating revenue grew 11.5% to INR 395 crore. Within this, the two components are the MF revenue. The absolute MF revenue grew under 10%. Asset-based revenue grew about a little over 11%. If you see the non-MF businesses, they grew collectively over 28%. I would say that I am personally pretty happy with the progress of non-MF because you know that we've not done significantly margin dilutive stuff anywhere in the portfolio. We've taken bets. Those bets have paid off. I think a lot of the bets have paid off. CAMSPay has paid off significantly. Alternatives, despite all the competition and new players who entered in the last many years and continue to enter. We grew in the mid-20s.

Speaker #3: Operating revenue grew 11.5% to ₹395 crore. Within this, the two components are the MF revenue. The MF revenue—actually, absolute MF revenue—grew under 10%.

Speaker #3: Asset-based revenue grew a little over 11%. But if you see the non-MF businesses, they grew collectively over 28%. And I would say that I am personally pretty happy with the progress of non-MF.

Speaker #3: Because you know that we've not done significantly margin-dilutive stuff anywhere in the portfolio. We've taken bets. Those bets have paid off. I think a lot of the bets have paid off.

Speaker #3: Pay has paid off significantly. Alternatively, despite all the competition and new players who entered in the last many years and continue to enter, we grew in the mid-20s.

Speaker #3: KRA, which is the third large non-MF contributor, obviously did not grow given the backdrop of, you know, the price adjustment that the industry has taken.

Anuj Kumar: KRA, which is the third-largest non-MF contributor, obviously did not grow given the backdrop of the price adjustments that the industry has taken. I think from Q2 onwards things will start looking good in that territory also. The blended basis, 11.2% MF revenue growth, 28% plus non-MF growth. We expect, therefore, that non-MF growth will stay blended upwards of 20%. We've had half of Q2 done, and we have some view of what will happen in Q2. We believe that for the year, overall blended non-MF revenue will certainly be 20%. If you're lucky, it could come at 22%, 23%. MF revenue, we would like it to grow at least 12%. Blended, we are expecting about a 13% overall revenue growth, about a 16% EBITDA growth. It seems to be on that track.

Speaker #3: But I think from the second quarter onwards, things will start looking good in that territory also. So, on a blended basis, 11.2% MF revenue grew, and 28% plus non-MF growth.

Speaker #3: We expect, therefore, that non-MF growth will stay blended upwards of 20%. We are now in the kind of—we've had half of the second quarter done.

Speaker #3: And we have some view of what will happen in the second quarter. So, we believe that for the year, overall blended non-MF revenue will certainly be 20%. If you're lucky, it could come at 22–23%.

Speaker #3: MF revenue—we would like it to grow at least 12%. Blended, we are expecting about a 13% overall revenue growth and about a 16% EBITDA growth.

Speaker #3: So it seems to be on that track. And from a broad basis, if you see the growth levers, what are the growth levers? Like I said, payments—we started, the cards business seems to be picking up very well.

Anuj Kumar: From a broad basis, if you see the growth levers, what are the growth levers? Like I said, payments, we started the cards business, seems to be picking up very well. In AIF, the base has grown quite well. New logo acquisition has been sound. CAMS WealthServ has done well, continues to add heft, which you may have read in the presentation. Also, the fact now that as far as Gift City is concerned, you would have read that we have in-principle approval to start a KRA operation. We are also in the process of applying for a payment service provider license, and we haven't applied yet because there's a process related to the application. Once we have a wholesome offering of base RTA, fund accounting, KRA, for which we have in principle. This KRA just does not apply to capital market entities in Gift City.

Speaker #3: NAIF, the base has grown quite well. New logo acquisition has been sound. CAMS WealthServe has done well and continues to add heft, which you may have read in the presentation.

Speaker #3: Also, the fact now that as far as GIFT City is concerned, you would have read that we have in-principle approval to start a KRA operation.

Speaker #3: We are also in the process of applying for a payment service provider license. We haven't applied yet, because there's a process related to the application.

Speaker #3: But once we have a wholesome offering of base RTA fund accounting, KRA for which we have in principle—and this KRA just does not apply to capital market entities in GIFT; it has a far broader application.

Anuj Kumar: It's a far broader application. For payments, you know that over a period of time, these outbound funds have begun attracting money, I would say. It's just a beginning, about two quarters old. Over a period of time, as I think there's a lot of press on portfolio rebalancing and trying overseas markets. A lot of people are writing about these things. That trend should deepen the SIP kind of concept and overseas investments through Gift City should deepen. All of that can drive the payments business also. Those growth drivers are in place, and I think they're doing well. From a new logo perspective, you know that we had taken 6AMZ live last year. We've taken one live this year, which is AlphaGrep.

Speaker #3: And then for payments, you know that over a period of time, these outbound funds have begun attracting money. I would say it's just a beginning, about two quarters old.

Speaker #3: But over a period of time, as I think, there's a lot of press on portfolio rebalancing and trying overseas markets. A lot of people are writing about these things.

Speaker #3: That trend should deepen. The SIP concept and overseas investments through GIFT City should deepen. All of that can drive the payments business also.

Speaker #3: So, those growth drivers are in place, and I think they're doing well. From a new logo perspective, you know that we've taken six AMCs live last year.

Speaker #3: We've taken one live this year, which is AlphaGrab. We have three large installations, which should be live from now up to the end of the year—Carnelian, ASK, and NEO.

Anuj Kumar: We have three large installations which should be live from now up to the end of the year, which is Carnelian, ASK, and NIO, and one or two of the smaller ones also, but those are the salient ones. All of that should play out in the coming months. Move to the next. From a MF perspective, therefore, you would have seen that AUM grew just under 15% year-on-year to be about INR 56 lakh crore. Of course, the month of July has been a lot better. April, May, June were muted months. In July, we've been much better. We've kind of grazed close to INR 60 lakh but haven't got there yet. We should get there. Market share stayed at about 67.2%. I think, again, from a foundational perspective, if you look at other growth metrics. What happened to equity AUM? Grew ahead of market.

Speaker #3: And one of the smaller ones also, but those are the salient ones. So, all of that should play out in the coming months. Move to the next.

Speaker #3: From an MF perspective, therefore, you would have seen that AUM grew just under 15% year on year, to about ₹56 lakh crore. Of course, the month of July has been a lot better.

Speaker #3: April, May, and June were muted months. In July, we've been much better. We've kind of grazed close to 60 lakh, but haven't got there yet.

Speaker #3: But we should get there. Market share stayed at about 67.2%. I think, again, from a foundational perspective, if you look at other growth metrics—so what happened to equity AUM—it grew ahead of the market.

Speaker #3: Industry had 16 and some change. We had 17.6%. Equity net sales grew ahead of industry growth. Live SIP accounts grew ahead of industry. So if I just took those three, which are gross equity AUM growth, equity net sales growth, and live SIP account growth, I think that sums up the equity picture, because you know 60–65 percent of the MF asset revenue comes from there.

Anuj Kumar: Industry at 16% and some change. We are at 17.6%. Equity net sales grew ahead of industry growth. Live SIP counts grew ahead of industry. If I just took those three, which is gross equity AUM growth, equity net sales growth, and live SIP account growth, I think that sums up the equity picture because 60% and 65% of the MF asset revenue comes from there. Those are great foundational metrics which have been playing out for the last maybe about a couple of years. Happy to kind of share with you that all of that continues to do well.

Speaker #3: So, again, those are great foundational metrics, which have been playing out for the last, maybe, about a couple of years. But happy to share with you that all of that continues to do well.

Speaker #3: And even in tough times, where the markets had bottomed out, peaked back again, and then went all the way down again in April, May, June, the SIP collections continued to hold, which is, you know, a great peek into the resilience and nerve and strength of the Indian investor, the retail investor.

Anuj Kumar: Even in tough times where the markets had bottomed out, peaked back again, then went all the way back again in April, May, June, the SIP collections continued to hold, which is a great peek into the resilience and nerve and strength of the Indian investor, the retail investor. This number holds in Q1 at just short of INR 60,000 crore. Again, from a domestic collections growth perspective for SIP has outpaced the industry. Similarly, for the unique investor base. I could not have compiled a better set of, what I would say are, foundational MF metrics. It is all in front of you, that all of this has started to do well. On the growth front, I must also point out, apart from Gift, which is Gift retail, very formative, very early, I will not start using adjectives to describe the growth.

Speaker #3: So, this number holds in Q1 at just short of ₹60,000 crore. And again, from an industry collections growth perspective, SIP has outperformed the industry.

Speaker #3: Similarly, for the unique investor base. So, I could not have compiled a better set of what I would say are foundational MF metrics. It's all in front of you.

Speaker #3: That all of this has started to do well. On the growth front, I must also point out, apart from GIFT—which is GIFT retail—very formative, very early, so I will not start using adjectives to describe the growth.

Speaker #3: All I would say is, we have started. With the first 10,000 investors, we are nudging ₹750 crores of AUM. But like I said, given the din in the markets, you know, one, one and a half years back, it was about being in metal ETFs and ETFs.

Anuj Kumar: All I would say is we have started with the first 10,000 investors. We are nudging INR 750 crore of AUM. Like I said, given the din in the markets, one and a half years back, it was about being in metal ETFs and ETFs. Today it is about using Gift City intelligently to do some overseas investing. I think that part has started. I am also very happy with the SIF segment where if we were talking to you in the beginning of August last year, we did not have a single launch. Did not have a single launch. The first launch happened in early October, so it is just a 10-month-old story. 11 unique SIFs have launched, three or four more will launch. This segment has done well. Just look at the numbers. About INR 1,000 crore.

Speaker #3: Today, it's about using GIFT City intelligently to do some overseas investing. I think that part has started. I'm also very happy with the SIF segment where, you know, if you were talking to me in the beginning of August last year, we did not have a single launch.

Speaker #3: Did not have a single launch. The first launch happened in early October, so it's just a 10-month-old story. Eleven unique SIFs have launched; three or four more will launch.

Speaker #3: And this segment has done well. Just look at the numbers—about ₹1,000 crore. I mean, there is not much difference between net and gross sales in the first year.

Anuj Kumar: There is not much difference between net and gross sales in the first year, if I just took it as a net sale metric, about INR 1,000 crore of net sale metric every month. It is accumulated to about just in excess of INR 12,000 crore now. Almost 50,000 investors. When you look at the base of investors in India, this is a slightly more wholesome product because you are allowed leverage, you can short the market, et cetera. You know all of that stuff. I think both Gift and SIF should open up as new asset classes which will grow into meaningful franchises for us. Someday I should be talking about them with the same energy and verve as I talk about alternatives, that may come after some years. I would say, just a great start to this story.

Speaker #3: But if I just took it as a net sale metric—about ₹1,000 crore of net sales every month—so it's accumulated to just in excess of ₹12,000 crore now.

Speaker #3: Almost 50,000 investors. And when you look at the base of investors in India—this is a slightly more wholesome product because, you know, you allow leverage, you can short the market, et cetera.

Speaker #3: You know all of that stuff. I think both GIFT and SIF should open up as new asset classes, which will grow into meaningful franchises for us.

Speaker #3: Someday, I should be talking about them with the same energy and verve as I talk about alternatives. But that may come after some years.

Speaker #3: But I would say it's just a great start to this story. I spoke about AlphaGrab and the three other AMCs, which are about to launch.

Anuj Kumar: I spoke about AlphaGrep and the three other AMCs which are about to launch in the coming part of the year. I should also name Old Bridge. Sorry. ASK, Carnelian, Old Bridge, and NIO, which are expected to definitely go live before December. I think from a new AMC buying some insurance from the new logo perspective, you have some of the best names, the best names which will start work with us in addition to the six that went live last year. Move to the next. Beyond MF I think I spoke about this, don't want to repeat. 28%+ year-on-year revenue growth. Non-MF revenue just getting to about 15%. I am hoping this will certainly be 16% by the end of the year, we will watch this closely. CAMSPay, of course, did the best. Grew just short of 70% year-on-year, largely riding on cards.

Speaker #3: In the coming part of the year, I should also name Oak Lane—sorry. So ASK, Carnelian, Oak Lane, and NEO, which I expect will definitely go live before December.

Speaker #3: So I think from a new AMC, buying some insurance from the new logo perspective, you have some of the best names—the best names.

Speaker #3: Which will start work with us in addition to the six that went live last year. Move to the next. Beyond MF, I think I spoke about this, so I don't want to repeat—28% plus year-on-year revenue growth.

Speaker #3: Non-MF revenue is just getting to about 15%. I'm hoping this will certainly be 16% by the end of the year, but we'll watch this closely.

Speaker #3: Pay, of course, did the best—grew just short of 70% year on year, largely riding on cards. And cards is a business that we want to grow, but don't want to scale too much.

Anuj Kumar: Cards is a business that we want to grow but don't want to scale too much. We'll be intelligent about scaling because it's a high bank charges kind of business where your margin will remain limited. The retail recurring match kind of business is a better business to do. We started cards about a year back. Alternatives, I said, grew mid-20s. AUM overall crossed INR 3.2 lakh crore. We won 50 new mandates, several new logos. That part did well. KRA was a bit of an iffy story in Q1. Had to be like that. I don't know whether your expectation was any different. We knew that there was a rate revision starting 1 April about 29% and 30% rates down. The market was also slightly subdued. It was a slightly revenue down quarter.

Speaker #3: And we will be intelligent about scaling because, you know, it's a high bank charges kind of business where your margin will remain limited. The retail recurring, that kind of business, is a better business to do.

Speaker #3: But we've started cards about a year back. Alternatives, I said, grew mid-20s. AUM overall gross ₹3.2 lakh crore. We won 50 new mandates. Several new logos.

Speaker #3: So that part did well. KRA was a bit of an iffy story in the first quarter. Had to be like that. So I don't know whether your expectation will be any different.

Speaker #3: But we knew that there was a rate revision starting 1st April, about, you know, 29, 30 percent rates down. The market was also slightly subdued.

Speaker #3: So it was a slightly revenue down quarter. We expect that from the second quarter, things will look well better. We'll certainly look better in KRA.

Anuj Kumar: We expect that from Q2 things will look better. Will certainly look better in KRA. As KRA starts firing back, you will have CAMSPay, Alternatives, and KRA, all three firing on the non-MF side. MF, SIP, and GIFT City retail firing on the MF side. That should be a good combination if all of this happens in Q2. Rep, BIMA Central, expanded user base. I still don't think it is meaningful revenue yet. We are waiting for that day.

Speaker #3: So as KRA starts firing back, you will have pay alternatives in KRA—all three firing on the non-MF side. MF, SIF, and, you know, Gift City retail firing on the MF side.

Speaker #3: So, that should be a good combination if all of this happens in the second quarter. Rep, BIMA Central expanded user base. I still don't think it is meaningful revenue yet.

Speaker #3: But we are waiting for that day, I think, when retail acceptance continues to scale quite well. And I do want to talk to you about consent flow, where I think we've stated a little in the past, but not too much, that we started building this capability in-house.

Anuj Kumar: I think retail acceptance continues to scale quite well. I do want to talk to you about consent flow, where I think we've stated a little in the past, but not too much, that we started building this capability in-house, just given the fact that retail consumer consent across our businesses, whether it is MF, KRA, CRA, and pension or insurance repository, is kind of a controls consenting capability that we had to have in-house. At some time between CAMS and Think360 AI, we built this out. Happy to let you know that we will have our first signed contract shortly. We've started working about seven or eight clients, some inside the capital markets, some in distant markets. This is not just a capital markets or financial services story. I will not make it a big deal right now. I will not make it a big deal. We have early wins.

Speaker #3: Just given the fact that retail consumer consent across our businesses—whether it is mutual funds, KRA, CRA in pension, or insurance repository—is kind of a controlled consenting capability that we had to have in-house.

Speaker #3: At some time between camps and, I think, we built this out. Happy to let you know that we will have our first signed contracts shortly.

Speaker #3: We've started work with about seven or eight clients—some inside the capital markets, some in distant markets. You know, this is not just a capital markets or financial services story.

Speaker #3: I will not make it a big deal right now. I will not make it a big deal. We have early wins. We are very happy.

Anuj Kumar: We are very happy. I think hopefully when we come back to you, I will have something meaningful to report and share with you in a quarter from now. Just wanted to mention that you may see some PR, some stuff on our website, et cetera. Don't be surprised. You've been seeing this for the last 2, 3 months. You will just see that in a more acute manner. Don't ask me for revenue numbers because it's too early for us to start projecting numbers. It's just a good start to a new thing. On the new platform from a re-architecture AI perspective, again, I think you read stuff that we put out. You're aware of the PR we have done. On the transaction acceptance, which is basically that big hairy gorilla that we had to take live because that is about transaction acceptance.

Speaker #3: I think, hopefully, when we come back to you, I will have something meaningful to report and share with you a quarter from now.

Speaker #3: But just wanted to mention that you may see some press, some PR, some stuff on a website, et cetera. Don't be surprised. And you’ve been seeing this for the last two or three months.

Speaker #3: You will just see that in a more acute manner. Don't ask me for revenue numbers, because it's too early for us to start projecting numbers.

Speaker #3: It's just a good start to a new thing. On the new platform, from a, you know, re-architecture and AI perspective—again, I think you read the stuff that we put out.

Speaker #3: So you're aware of the PR we have done. But on the transaction acceptance—which is basically that big, hairy gorilla—we had to take it live because that is about transaction acceptance.

Speaker #3: It's all the sum total of the external work that we do with the markets. A lot of the other work on the platform happens internally.

Anuj Kumar: It's all the sum total of the external work that we do with the markets. A lot of the other work in the platform happens internally, but this is the work we do with acceptance of transactions, coming in of monies, coming in of KYCs, and then a lot of other stuff with the exchanges, depositories, sellers, banks, all of that. That's now beginning to go live step by step in August, September. We believe we would have sunset the entire transaction acceptance part of the platform by the end of the financial year. Other things in terms of data warehouse, CAMS Lens, a revamped KRA offering, stuff on eKYC and deep fakes, all of that is now live. I'd also mentioned in some of our meetings that physical transaction acceptance is now going through.

Speaker #3: But this is the work we do with the acceptance of transactions, inflow of funds, receipt of KYCs, and then a lot of other activities with the exchanges, depositories, sellers, banks, and all of that.

Speaker #3: That's now beginning to go live step by step, in August and September. We believe we would have sunset the entire transaction acceptance part of the platform by the end of the financial year.

Speaker #3: And then other things in terms of data warehouse, CAMS LANDS, revamp KRA offering, stuff on eKYC and deep fakes—all of that is now live.

Speaker #3: I'd also mentioned in some of our meetings that, you know, physical transaction acceptance is now going through. We have the capability. I can convert the entire thing to AI-led transaction acceptance, 100% today, if we want it.

Anuj Kumar: We have the capability, I can convert the entire thing to AI-led transaction acceptance 100% today if we wanted. We are not doing it today because there's a risk in just blindly doing it. Out of our 8 transaction types, 4 are live. When I come back to you and talk to you in November, all will be live. Within those, it's our choice on how fast we want to go. We've converted about 10% of our gross payload into AI-based acceptance. We just read the forms, go to our database, do cross-referencing, and then just accept the form. I still have a manual checker, but this 10% will scale to 100% acceptance at the maker level in the next 12 months. We will deal with the checker at some point in time.

Speaker #3: We are not doing it today because there's a risk in kind of just blindly doing it. So, out of our eight transaction types, four are live.

Speaker #3: When I come back to you and talk to you in November, all will be live. And within those, it's our choice how fast we want to go.

Speaker #3: So we've converted about 10% of our gross payload into AI-based acceptance. We just read the forms, go to our database, do cross-referencing, and then just accept the form.

Speaker #3: I still have a manual checker, but this 10 percent will scale to 100 percent acceptance at the maker level in the next 12 months.

Speaker #3: We will deal with the checker at some point in time. But again, very happy with this bit of AI-led automation that's happened in the base.

Anuj Kumar: Again, very happy with this bit of AI-led automation that's happened on the base. I think one of the things we'd said to you is that we will show definitive, although we don't quote revenue by headcount or transactions by headcount as standard metrics, and we're not inventing them yet. Average headcount at the enterprise level, it's a simple thing for you to measure and not keep looking for the number. We'll give you that number, and that number is expected to have a 4% to 5% down impact in the financial year, which has already started from 1st April onwards. We are about 2% to 3% down already. We'll demonstrate that, and I think over the next three or four years, as this platform settles down, you will just keep seeing meaningful impacts in that area. What else? Just go to the next.

Speaker #3: So, I think one of the things we'd said to you is that we will show definitive—although we don't quote revenue by headcount or transactions by headcount, it's standard metrics.

Speaker #3: And we're not inventing them yet. But average headcount at the enterprise level is a simple thing for you to measure, so you don't have to keep looking for the number.

Speaker #3: We'll give you that number, and that number is expected to have a 4–5% downward impact in the financial year, which has already started from 1st April onwards.

Speaker #3: We're about two to three percent down already, so we'll demonstrate that. And I think over the next three or four years, as this platform settles down, you will just keep seeing meaningful impacts in that area.

Speaker #3: What else? Just go to the next. Okay. So what I'll do is I'll hand over to Ram Sesharaman to take you briefly through the financials.

Anuj Kumar: Okay, what I'll do is, I'll hand over to Ram Sesharaman to take you briefly through the financials, and then we can come back and talk about whatever questions you have. Ram?

Speaker #3: And then we can come back and talk about whatever questions you have. Ram? Thanks, Anuj. Anuj has already gone through the highlights in terms of numbers.

Ram Charan Sesharaman: Thanks, Anuj. Anuj has already gone through the highlights in terms of numbers, I won't repeat the numbers. I'll just add a few points which might kind of broaden the understanding on these numbers. You all saw a revenue growth of 11.5%. It was actually split into asset-based revenue and non-asset-based revenue. The non-asset-based revenue, we have said, is not dependent on the asset growth as such, and that's why we're showing it separately. There are four or five components to it. The decline in that quarter on quarter was predominantly because of OP reduction and some sort of transaction reduction. This is something that will not keep pace with the AUM growth. However, from an asset-based revenue perspective, we are back to where we generally guide, which is there is no yield decline as such in the current quarter.

Speaker #3: So I won't repeat the numbers. I'll just add a few points, which might broaden the understanding of these numbers. You all saw a revenue growth of 11.5%.

Speaker #3: It was actually split into asset-based revenue and non-asset-based revenue. The non-asset-based revenue, we have said, is not dependent on asset growth as such.

Speaker #3: And that's why we're showing it separately. There are four or five components to it. So, the decline in that quarter-on-quarter was predominantly because of OP reduction and some sort of transaction reduction.

Speaker #3: So, this is something that, you know, will not keep pace with the AEM growth. However, from an asset-based revenue perspective, we are back to where we generally guide, which is, there is no yield decline as such in the current quarter.

Speaker #3: Obviously, mix played some impact on this. But even otherwise, there has been no decline in yields quarter-on-quarter. The biggest question that we had over the course of last year was, will your yields be stable?

Ram Charan Sesharaman: Obviously, mix played some impact on this, even otherwise, there has been no decline in yields quarter on quarter. The biggest question that we had over the course of last year was, will your yields be stable? I think for the last two, three quarters, we have been demonstrating that the yields are within acceptable range, and this year there have actually been no depletion in yields quarter on quarter. From an overall cost perspective, we mentioned in the last earnings call, again, we are reiterating that the numbers here, generally the appraisal impact, which is a salary increase for the employees, we have deferred by a quarter. What should have been effective from 1 April will be effective from 1 July. You will see an additional cost impact coming in the current quarter, which is not in the earlier quarter.

Speaker #3: I think for the last two, three quarters, we have been demonstrating that the yields are within an acceptable range. And this year, there has actually been no depletion in yields quarter-on-quarter.

Speaker #3: From an overall cost perspective—you know, we mentioned this in the last earnings call, but again, we are reiterating that the numbers here generally include the appraisal impact, which is your salary increase for the employees; we have deferred that by a quarter.

Speaker #3: So what should have been effective from April 1st will be effective from July 1st. So you will see an additional cost impact coming in the current quarter, which was not in the earlier quarter.

Speaker #3: It could, depending on how revenue ramps up, be anywhere close to 2% of overall revenue. But having said that, I think from an overall cost perspective, at the beginning of the year, when people asked for an estimate, we said that if we keep the overall cost increase on a year-on-year basis to less than 10%, that would be good.

Ram Charan Sesharaman: Depending on how revenue ramps, anywhere close to a percentage of overall revenue. Having said that, I think from overall cost perspective, at the beginning of the year, I think when people asked for an estimate, we said that if we keep the overall cost increase on a year-on-year basis to less than 10%, that'll be our target. Happy to say for the last quarter, on a year-on-year basis, the cost increase has been less than 7%, excluding depreciation, and the increase has been almost negligible on a quarter-on-quarter basis. This is expected to sustain, as Anuj was mentioning about going live with various re-arch modules. We expect that this productivity will be sustained. In fact, on a headcount basis we've had a net reduction in headcount on a quarter-on-quarter basis of more than 200. On a year-on-year basis, about 85.

Speaker #3: That will be our target. I'm happy to say that for the last quarter, on a year-on-year basis, the cost increase has been less than 7%, excluding depreciation.

Speaker #3: And the increase has been almost negligible on a quarter-on-quarter basis. So this is expected to sustain, as Anuj was mentioning about, you know, going live for various re-ARK modules.

Speaker #3: We expect that this productivity will be sustained. In fact, on a headcount basis, we've had a net reduction in headcount on a quarter-on-quarter basis of more than 200.

Speaker #3: On a year-on-year basis, about 85. So the productivity improvements are continuing and will continue going forward. This will help keep control over the costs that we are incurring.

Ram Charan Sesharaman: The productivity improvements are continuing and will continue going forward. This will keep a kind of control over the costs that we are incurring. From a non-MF, I think we saw the numbers. CAMSPay has been extremely strong in growth, with a 67% growth. AIF has been very strong in terms of 25% growth, and KRA, because of the price impact that we are seeing, has not shown much of a growth. In fact, has gone down year-on-year. If you normalize that for going forward increase in revenue, I think we are well on track for this 20% plus growth in our mutual fund. In terms of cash and cash equivalent, you would have seen that we ended the quarter with a very comfortable INR 980 crore almost cash balance, and the board has declared INR 2.5 interim dividend for the Q1. All pointers are looking good.

Speaker #3: From a non-MF, I think we saw the numbers. Pay has been extremely strong in growth; it is 67% growth. AF has also been very strong, with 25% growth.

Speaker #3: And KRA, because of the price impact that we are seeing, has not shown much growth. In fact, it has gone down year-on-year.

Speaker #3: But if you normalize that going forward for increase in revenue, I think we are well on track for this—20 percent plus growth in non-mutual fund.

Speaker #3: In terms of cash and cash equivalents, you would have seen that we entered the quarter with a very comfortable ₹980 crores, almost cash balance.

Speaker #3: And the board has declared a 2.5 rupees interim dividend for the Q1. So all pointers are looking good. We are seeing asset growth come back to a large extent in the last in the current quarter.

Ram Charan Sesharaman: We are seeing asset growth come back to a large extent in the current quarter. Fee is being stable, non-mutual fund growth on track, and cost control measures in place. That is a summary of the financials. I will now hand it back to the moderator, Sumit, for questions.

Speaker #3: Yields are stable, non-mutual fund growth is on track, and cost control measures are in place. So, that is a summary of the financials. I'll now hand it back to the moderator, Sumit, for questions.

Speaker #1: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may pass down, and one on the touch-tone telephone.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Devesh Agarwal from IIFL Capital. Please go ahead. As he was disconnected, the next question is from the line of Swarnav Mukherjee from 361 Capital. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press "Down" and "2." Participants are requested to use handsets while asking a question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Devesh Agarwal from IIFL Capital.

Speaker #1: Please go ahead. As he was disconnected, the next question is from the line of Suvarna Mukherjee from 361 Capital. Please go ahead.

Speaker #2: Hi, sir. Thank you for the opportunity. I have three questions. First, on the growth front, sir, you mentioned that the broad expectation is around 13 percent kind of blended growth.

Swarnav Mukherjee: Hi, sir. Thank you for the opportunity. I have 3 questions. First is, on the growth front, sir, you mentioned that broad expectation is around 13% kind of a blended growth from the top-line point of view. Just wanted to understand that in this, what would be your expectation for AUM growth and yield compression? Because I just wanted more color on the fact that given that we have several large clients where internally also the schemes are quite large in size. What is the downside possibility?

Speaker #2: From the top line, point of view, just wanted to understand that in this, how what would be your expectation for AUM growth? And yield compression, because I mean, I just wanted more color on the fact that given that we have several large clients where internally also the schemes are quite large in size.

Speaker #2: So, what is the downside possibility?

Speaker #4: I think we lost setup.

Ram Charan Sesharaman: I think we lost Swarnav.

Speaker #1: Just a second, sir. Suvarnam is disconnected. Okay. So the next question is from the line of Devesh Agarwal from IIFL Capital. Please go ahead.

Operator: Just a second, sir. Swarnav is disconnected. Okay, the next question is from the line of Devesh Agarwal from IIFL Capital. Please go ahead.

Speaker #5: Good morning, sir, and congratulations on a good set of numbers. My first question is just for clarity: This year, how many AMCs are up for renewal?

Devesh Agarwal: Good morning, sir, and congratulations on good set of numbers. Sir, my first question would be just to get a clarity. This year, how many AMCs are up for renewal?

Ram Charan Sesharaman: Sure. As we said last time, Devesh, there are a few mid-sized AMCs up for renewal. A couple have been concluded and two more are in discussion. That's the score for the current year.

Speaker #2: So this, as we said last time, Devesh, there are a few mid-sized AMCs up for renewal. A couple have been concluded, and two more are in discussion.

Speaker #2: So that's the score for the current year.

Speaker #5: And whatever the impact would have been for the ones which have concluded are already in one queue pricing?

Devesh Agarwal: Whatever the impact would have been for the ones which have concluded are already in Q1 pricing?

Speaker #2: Yeah, they are already in one queue pricing. As we said earlier, the impact because of this is expected to be very muted.

Ram Charan Sesharaman: Yeah, they're already in Q1 pricing. As we said earlier, the impact, because of this, is expected to be very muted.

Speaker #5: Right, sir. So secondly, if we see the KRA business, as you rightly pointed out, there was a pricing reset that went live from the 1st of April.

Devesh Agarwal: Secondly, if you see the KRA business, as you rightly pointed out, there was a pricing reset that went live from 1 April that led to the impact. If you see the same for CDSL, their impact was significantly lower. The reason that they highlighted was that there were the fetch volumes were higher, as well as there were some incremental revenues which were allowed by SEBI. Did we not have these benefits as an industry, for us?

Speaker #5: That led to the impact. But if you see the same for CDSL, their impact was significantly lower. And the reason that they highlighted was that the fetch volumes were higher.

Speaker #5: As well as, there were some incremental revenues which were allowed by SEBI. So, did we not have this benefit as an industry for us?

Speaker #4: So, Devesh, yeah, interesting point—interesting point. You know that the pricing structure has changed, and some of—don't want to take you into too much technical detail.

Ram Charan Sesharaman: Devesh, yeah, interesting point. You know that the pricing structure has changed and don't want to take you into too much technical detail, some of the fetch which used to be free has now got priced. We're getting into that. The opportunity is the same. As for them, it is the same for us. From a blend perspective, our revenue is still about 70% and 75% MF and about 25% and 30% non-MF, which is DP and broking. My estimate is that for them, this mix will be very different. It'll probably be just the reverse, the segment from which they derive core revenue. We've seen the results, We are getting into it, We can have a conversation later. The pricing components, obviously, it is not that this IOP phase 1 fetch applies only to them and not to us.

Speaker #4: But some of the fetch, which used to be free, has now become priced. So we're getting into that. The opportunity is the same. As for them, it is the same for us.

Speaker #4: From a blend perspective, our revenue is still about 70–75% MF and about 25–30% non-MF, which is DP and broking. My estimate is that for them, this mix will be very different.

Speaker #4: It will probably be just the reverse. The segment from which the derived core revenues... So we've seen the results, and we are getting into it.

Speaker #4: And we can have a conversation later. But the pricing components, obviously, it is not that, you know, this IOP Phase One fetch applies only to them and not to us.

Speaker #4: It applies to both. Some of the mix would have been different. Markets have been muted; account opening is not at the same level that it used to be, let's say, one, one and a half years back.

Ram Charan Sesharaman: It applies to both. Some of the mix would have been different. Markets have been muted. Account opening is not of the same level that it used to be, let's say one and a half years back. You have to get into the depth of this on what the contrast is. We will explain it to you. At first sight, the segments from which they derive fetch revenue and from which we derive fetch revenue, those segments are slightly different.

Speaker #4: So you have to get into the depth of this, and what the contrast is. We will explain it to you. But at first sight, the segments from which they derive revenue and from which we derive revenue—the segments are slightly different.

Speaker #5: Understood, sir. And so, on an overall basis, for the non-MF business, what is the margin that we are delivering in Q1? And what is the expected margin for FY27?

Devesh Agarwal: Understood, sir. Sir, on an overall basis, non-MF business, what is the margin that we are delivering in Q1 and the expected margin for FY27?

Speaker #4: So if you recollect

Ram Charan Sesharaman: If you recollect last quarter, we kind of came to around 17% plus margin. The Q1, we have seen the KRA revenue drop a little, right? KRA is a high contribution or contributor to the overall non-MF margin. We are at 13% now, but I think this is probably one quarter impact as the KRA revenue recovers and the losses in the other parts of the repository and Account Aggregator reduce. We are confident of getting it, if not to 20%, at least close to 20% by the end of the year. I would say that it will not be 20%, but you should expect probably 17% kind of a margin.

Speaker #2: Last quarter, we kind of came to around 17% plus margin. But in the first quarter, we have seen the KRA revenue drop a little, right?

Speaker #2: And KRA is a high contributor to the overall non-MF margin. So, we are at 13% now. But I think this is probably a one-quarter impact as the KRA revenue recovers.

Speaker #2: And the losses in the other parts of, you know, the repository and account aggregator reduce. We are confident of getting it, if not to 20 percent, at least close to 20 percent by the end of the year.

Speaker #2: I would kind of say that it will not be, it will not be kind of 20 percent. But, you know, you should expect probably 17 percent kind of a margin.

Speaker #5: Right, sir. And so you did mention that SIS is now gaining traction. Could you just help us refresh what exactly is the economics in SIS for us?

Devesh Agarwal: Right, sir. Sir, you did mention that SIF is now gaining traction. Could you just help us refresh what exactly is the economics in SIF for us? How does we charge?

Speaker #5: How does we charge?

Speaker #2: The economics in SIS are that,

Anuj Kumar: The economics in SIF are that you take a scheme, you slot it in an asset type. If it is equity-led, which most of it is, then it's an equity scheme for us, and the same rates apply. The same rates apply that the AMC does. To that extent, you can think of it as just MF AUM scaling. We have some cost because it is supposed to be set up as a separate segregated schema. You would see on the website also that we don't show it, and mutual funds don't show it as part of your MF portfolio. It's shown as a separate portfolio. It's some cost. Think of it this way, that at about INR 10,000 crore, INR 12,000 crore, we've already taken the cost of setting SIF as a separate schema for all the 11 SIFs. That cost is now in the base.

Speaker #4: You take a scheme, you slot it in an asset type. If it is equity-led—which most of it is—then it's an equity scheme for us.

Speaker #4: And the same rates apply. The same rates apply that the AMC does. So, to that extent, you can think of it as just MF AUM scaling.

Speaker #4: We have some costs because it is supposed to be set up as a separate, segregated schema. You would see on the websites also that, you know, we don't show it.

Speaker #4: And mutual funds don't show it as part of your MF portfolio. It's shown as a separate portfolio. So it's some cost to think of it this way: at about ₹10,000–12,000 crore, we've already taken the cost of setting SIF as a separate scheme for all the 11 SIFs.

Speaker #4: That cost is now in the base. Any scale-up will help us defray that cost. The pricing will be identical to MF pricing.

Anuj Kumar: Any scale-up will help us defray that cost. The pricing will be identical to MF pricing.

Speaker #5: Understood. Perfect, sir. Thank you so much, and all the very best.

Devesh Agarwal: Understood. Perfect, sir. Thank you so much, and all the very best.

Speaker #4: Thanks, Devesh.

Anuj Kumar: Thanks, Avish.

Speaker #1: Thank you. The next question is from the line of Udaybhai from Investech. Please go ahead.

Operator: Thank you. The next question is from the line of Uday Pai from Investec. Please go ahead.

Speaker #5: Yeah, thank you for the opportunity. I just wanted to get a sense of the employee headcount. You mentioned that we have seen a 2–3% reduction on a QOQ basis.

Uday Pai: Yeah, thank you for the opportunity. Just wanted to get the sense on employee headcount. You mentioned that we have seen 2% to 3% reduction on a QoQ basis, and for the full year, you are expecting 4% to 5% reduction. Does this benefit our margin very significantly in Q4? Because the full impact of that will come in Q4. Already, you have done very well on Q1. Generally, it's a low-margin quarter. How do we think about employee cost on a quarter-on-quarter basis? For the next year as well, is there any further benefits that you expect on the headcount?

Speaker #5: And for the full year, you are expecting a 4% to 5% reduction. So, does this benefit our margin very significantly in Q4? Because the full impact of that will come in Q4.

Speaker #5: You've already done very well on Q1. Generally, it's a low-margin quarter. So, how should we think about employee costs on a quarter-on-quarter basis?

Speaker #5: And for the next year as well, is there any further benefit that you expect on the headcount?

Speaker #4: So I'll just give you a bit of perspective, and then I'll get to the point. Base automation has continued to make sure that we run the enterprise at a constant headcount.

Anuj Kumar: I'll just give you a bit of perspective, and then I'll get to the point. Base automation has continued to make sure that we run the enterprise at constant headcount. Okay? In the last 10 years, our enterprise headcount is more or less constant. In this year, we've stated, if you take FY27, that we will drop enterprise headcount by about 5%. That's just taking away backfilling of frontline positions, all those tasks which are getting automated. They were getting automated in the past, too. Given the re-architecture program, the speed of automation will be faster. Therefore, as progressively we are able to drive this productivity, you will see some diminution in employee cost, some in infra cost, because it's basically a seat and headcount takeout.

Speaker #4: Okay? So, in the last 10 years, our enterprise headcount has been more or less constant. In this year, we've stated that if we take FY27, we will drop enterprise headcount by about 5%.

Speaker #4: That's just, you know, taking away the backfilling of frontline positions. All those tasks that are getting automated were getting automated in the past too.

Speaker #4: But given the re-architecture program, the speed of automation will still be fast. So, as we progressively are able to drive this productivity, you will see some diminution in employee cost, some in infra cost.

Speaker #4: Because it's basically a seat and headcount takeout. Do keep in mind that a lot of this also means that we are hiring expensive AI resources and expensive automation resources.

Anuj Kumar: Do keep in mind that a lot of this also means that we are hiring expensive AI resources and expensive automation resources, or certainly backfilling those because you can't do without backfilling. Don't do your math assuming that 500 people and 500 seats will completely go away. Yes, they will go away, but there'll be some offsetting influence of adding new talent. The net, you will not see a 5% cost drop in those two heads. You may see, let's say, a 3% to 3.5% cost drop. That's perhaps what you should expect.

Speaker #4: Or certainly backfilling those, because you can't do without backfilling. So don't do your math assuming that 500 people and 500 seats will completely go away.

Speaker #4: Yes, they will go away. But there will be some offsetting influence from adding new talent. So, net, you will not see a 5% cost drop in those two heads.

Speaker #4: You may see, let's say, a 3% to 3.5% cost drop. That's perhaps what you should expect.

Uday Pai: Sure, sir. Very useful. Thank you.

Speaker #5: Sure, sir. Very useful. Thank you.

Speaker #1: Thank you. The next question is from the line of Sanket Gowda from Avendus Spark. Please go ahead.

Operator: Thank you. The next question is from the line of Sanket Godha from Avendus Alt. Please go ahead.

Speaker #5: Thank you. Thank you for the opportunity, sir. My question is again on employee costs, because it seems to be the key driver of your EBITDA margin expansion trajectory going ahead.

Sanketh Godha: Yeah. Thank you for the opportunity. Sir, maybe the question is on employee cost because it seems to be the key driver of your EBITDA margin expansion trajectory going ahead. If I look at the data last year, full year that you had, and if I exclude the one-off labor code impact, then you were almost at INR 470 crore of employee cost last year. Given headcount number will keep on coming down as you go and more automation or AI mode of doing the work, is it fair to say that even if you assume annual escalation and probably fill with the little more talented or skilled employees, this number should grow at a very low single-digit rate for next few years in that sense, and that will be the key driver of the EBITDA margin?

Speaker #5: So if I look at the data, last year, full year, you had an—if I exclude the one-off labor code impact—then you were almost at ₹470 crores of employee cost last year.

Speaker #5: Given that the headcount number will keep coming down as you go, and with more automation or AI modes of doing the work, is it fair to say that even if you assume annual escalation and probably fill with a little more talented or highly skilled employees, this number should grow at a low, very low single-digit rate for the next few years in that sense?

Speaker #5: And that will be the key driver of the EBITDA margin?

Speaker #2: So, Sanket, I think in the last call also we said the same thing. We'll be kind of endeavoring to keep the employee cost growth to around 5%.

Ram Charan Sesharaman: Sanket, I think last call also, we said the same thing. We'll be kind of endeavor to keep the employee cost growth to around 5%, including the appraisal number. Bear in mind that while there is a productivity increase and automation that happens, the other part of the business, which is your risk, compliance, software development, et cetera, they will still require some investment on our people, right? It will not be just a one-sided reduction in one side and other side, no filling up happening. I think it'll be a balanced kind of an approach, but our target is to keep it around 5% employee cost increase on a year-on-year basis.

Speaker #2: Including the appraisal number. Bear in mind that while there is a productivity increase and automation that happens, the other part of the business—which is your risk, compliance, software development, et cetera—will still require some investment in people, right?

Speaker #2: So it will not be just a one-sided reduction, and on the other side, no filling up happening. So I think it will be a balanced kind of an approach.

Speaker #2: But our target is to keep it around a five percent employee cost increase on a year-on-year basis.

Sanketh Godha: Understood, sir. Sir, the reason why I'm asking this is that you have employee cost lever and you have the lever from other businesses showing a better margin trajectory, which you already told, sir, that it will go from 17% to 20% probably in the current year, and maybe it will further expand in the next year. If I look it in combo, last year you were at 45%. Maybe you already told it, but fair to say that assuming no yield meaningful pressure, the normalized margins will be at least 150 to 200 basis points compared to currently what we are reporting?

Speaker #5: Understood, sir. The reason why I'm asking this is that you have the employee cost lever, and you have the lever from other businesses showing a better margin trajectory, which you already mentioned, sir, that it will go from 17 to 20, probably in the current year.

Speaker #5: And maybe it will further expand in the next year. So, if I look at income, last year you were at 45. Is it fair to say that—maybe you already told us—but is it fair to say that, assuming no yield or meaningful pressure, the normalized margins will be at least 150 to 200 basis points higher compared to what we are currently reporting?

Speaker #4: So Sanket, directionally, maybe yes. Directionally, maybe yes. Do remember that, as Ram pointed out, since we deferred increments by a quarter, you did not see the base impact in the first quarter.

Anuj Kumar: Sanket, directionally, maybe yes. Do remember that, as Ram pointed out, since we deferred increments by a quarter, you did not see the base impact in the Q1. You will see the base impact in the Q2. If I talk of the year, it makes no difference in which quarter I make the increments. It'll show up in the year's trajectory. That's point number one. Secondly, also think of all investments in technology to be not just people. You are reading the same articles I'm reading, that manufacturers of hardware and data center services are getting expensive because of hyperscalers getting a lot of demand from the AI-led segments. There is some cost expansion there.

Speaker #4: You'll see the base impact in the second quarter. But if I talk about the year, it makes no difference in which quarter I make the increments.

Speaker #4: It will show up in the year's trajectory. That's point number one. Secondly, also think of all investments in technology to be not just people.

Speaker #4: You are seeing, you’re reading the same articles I’m reading—that manufacturers of hardware and data center services are getting expensive because of hyperscalers getting a lot of demand from the AI-led segments.

Speaker #4: So, there is some cost expansion there. The puts and takes, therefore, are that when I take all of this together, we have stated in the past that you can expect about a 1% margin expansion from our side.

Anuj Kumar: The puts and takes therefore are that when I take all of this together, we have stated in the past that you can expect about a 1% margin expansion from our side. Can we get to 1.5%? I would say yes. Let's just watch it closely. We hope we get there, directionally, you are right. We would still say that 1% we are very confident of, we may get to 1.5%.

Speaker #4: Can we get to 1.5%? I would say yes. I mean, let's just watch it closely. We hope we get there. But directionally, you are right.

Speaker #4: We would still say that 1% we are very confident of. We may get to 1.5%.

Speaker #5: Understood, sir. And maybe on the employee count number, if you can call out that number for the current quarter compared to last year.

Sanketh Godha: Understood, sir. Maybe again, on the employee count number, if you can call out that number in the current quarter compared to the last year. Second is on Think360, we increased the stake. What is our current ownership and how do we see the ownership to play out in Think360 eventually?

Speaker #5: And second is on Think360, we increased the stake. So, what is our current ownership, and how do we see the ownership play out in Think360 eventually?

Speaker #4: So, on Think 360, you know, the transaction had happened in 2023. Both the founders and us had the option to expand the shareholding at the end of the third and at the end of the fourth year.

Anuj Kumar: On Think360, the transaction had happened in 2023. Both the founders and us had the option to expand shareholding at the end of the third and the end of the fourth year. The founders obviously will move at some time, like all founders. What you're seeing as expansion in ownership is the first tranche of our call or their put getting executed. You will see the second tranche of this get executed about a year from now. I'm not sure about which month, it'll certainly happen in about 12 months' time. That's one thing that you will see happen. We may still choose, because it's an award-winning company with a lot of IP-related work in segments where CAMS has not been present. We may continue running the company separately and may never sunset the name. That's a decision we still have to take.

Speaker #4: So, the founders obviously will move at some time, like all founders. And what you're seeing is expansion in ownership—it's the first tranche of our call, or their put, getting executed.

Speaker #4: You will see the second tranche of this get executed about a year from now. I won't—I mean, I'm not sure about which month, but it'll certainly happen in about 12 months' time.

Speaker #4: So that's one thing that you will see happen. We may still choose, because it's an award-winning company with a lot of, you know, IP-related work in segments where CAMS has not been present.

Speaker #4: We may continue running the company separately and may never sunset the name. That's a decision we still have to take, so we may not, because they work in the NBFC and fintech segment.

Anuj Kumar: We may not, because they work in the NBFC and Fintech segment. We would not like to merge it with CAMS at any point in time and may just want to run it separately. That's on the ownership. On the first part, which is employee count.

Speaker #4: We may not like to merge it with CAMS at any point in time. I just want to run it separately. But that's on the ownership.

Speaker #4: On the first part, which is the employee count.

Speaker #5: So, you should look at our headcount currently as just shy of 8,300 for the company. On a year-on-year basis, we are down by around 85 in headcount.

Ram Charan Sesharaman: You should look at our head count currently to be just shy of 8,300 for the company. On a year-on-year basis, we are down around 85 in head count and on a quarter-on-quarter basis, we are on a 225 down on head count.

Speaker #5: And on a quarter-on-quarter basis, we are 225 down on headcount. Understood, sir. Perfect. That's it from my side. Thank you.

Sanketh Godha: Understood, sir. Perfect. That's it from my side. Thank you.

Speaker #1: Thank you. The next question is from the line of Madhukar from JP Morgan. Please go ahead.

Operator: Thank you. The next question is from the line of Madhukar from J.P. Morgan. Please go ahead.

Speaker #5: Hi, sir. Congratulations on the good numbers. So first, on this employee cost expense, you gave a guidance of 5% growth. That is for what time period?

[Analyst] (J.P. Morgan): Hi, sir. Congratulations on good numbers. First, on this employee cost expense, you gave a guidance of 5% growth. That is for what time period? Is it a medium-term guidance? That's the first thing. Second, on the KRA revenues, one of the other companies in this business pointed out of an additional way that you can charge your customers. I was not clear whether you are also charging that additional fee or is it that sort of different players are adopting a different revenue model over here right now, and which is a little unclear how this is changing. I'm a little confused about that. If you could clarify on both these things. Thanks.

Speaker #5: Is it like a medium-term guidance? So that's the first thing. Second, on the KRA revenues, you know, one of the other companies in this business pointed out of an additional way that you can charge your customers it was not clear whether you are also charging that additional fee or is it that sort of different players are adopting a different revenue model over here right now and which is a little unclear.

Speaker #5: So, how is this changing? I'm a little confused about that. If you could clarify both of these things, thanks.

Speaker #4: No, sure. So let me answer the second question first. When the price contraction in KRA was proposed, it was largely proposed so that expansion in demat accounts and mutual fund folios does not get constrained because of any single cost line, and it was the attempt of the industry to bring it to more rational limits.

Anuj Kumar: Sure. Let me answer the second question first. When the price contraction in KRA was proposed, that was largely proposed so that expansion in Demat accounts and mutual fund folios does not get constrained because of any single cost line, and it was the attempt of the industry to bring it to more rational limits. You know that for things like Choti SIP, et cetera, the price was already rationalized. This part had happened. At that time, there is one component of KRA, where any participant, any market intermediary can come to us and check whether, let's say it's my case, Anuj Kumar is present in one of the KRAs or not. He's still not downloading the information. He's just asking that question.

Speaker #4: You know that for things like Choti SIP, etc., the price was already rationalized. So this part had happened at that time. There is one component of KRA where any participant, any market intermediary, can come to us and check whether, let's say, in the case of Anuj Kumar, he is present in one of the KRAs or not.

Speaker #4: He's still not downloading the information; he's just asking that question. So, these kinds of things used to be free at one time, in the new dispensation.

Anuj Kumar: These kind of things used to be free at one time, and the new dispensation, it was believed that since the KRA industry is taking a large haircut, you should be allowed to charge for these kind of things also. Just to make it clear, there are no asymmetries in the charging methodology for KRAs. There are no asymmetries. Everybody charges uniformly and for the same utility. Largely the prices will be same. It is not disallowed not to do any private deals with large consumers, so there will be 5 or 10 or 15 large deals in the industry. Other than that, it is more or less uniform pricing. Whatever the other guys told you applies to us also.

Speaker #4: It was believed that since the KRA industry is taking a large haircut, you should be allowed to charge for these kinds of things also.

Speaker #4: So just to make it clear, there are no asymmetries in the charging methodology for KRAs. There are no asymmetries. Everybody charges uniformly, and for the same utility, and largely the prices will be the same.

Speaker #4: I mean, it is not disallowed to do any private deals with large consumers. So there will be five, ten, or fifteen large deals in the industry.

Speaker #4: But other than that, it is more or less uniform pricing. So, whatever the other guy has told you applies to us also. Like we said at the beginning of this call, we also want to go back and check, because we don't believe it's such a large impacting item at all.

Anuj Kumar: Like we said at the beginning of this call that we also want to go back and check because we don't believe it's such a large impacting item at all. It's not a large impact item. This was the first quarter of invoicing. Just to give you a short answer, all of us are allowed to charge in a same way. On the first part of your question, Madhukar, you'd asked whether 5% expansion is for a definite period. I'll let Ram take it.

Speaker #4: It's not a large impact item. This was the first quarter of invoicing. But just to give you a short answer, all of us are allowed to charge in the same way.

Speaker #4: On the first part of your question, Madhukar, you’d asked whether 5% expansion is for a definite period. Let Ram take it.

Speaker #5: So this is basically a simple matter, right? For last year, the cost was around 500 crores. What we said is, for the year, the timeframe is a year.

Ram Charan Sesharaman: This is basically simple math. I see for the last year, the cost was around INR 500 crores. What we said is for the year, the timeframe is a year. End of the year, we will try to keep it an increase to be within INR 25 and INR 30 crores. This is a steep order given that our increment impact could itself be more than that, but that is where the productivity increases and the rationalization comes. To answer your question, it is end of the year-on-year, your cost increase should be around 5% for employees.

Speaker #5: So, end of the year, we will try to keep it, and an increase is a steep order given that, you know, our increment impact could itself be more than that.

Speaker #5: But that's where the productivity increases and rationalization come in. So, to answer your question, at the end of the year, year on year, your cost increase should be around 5% for employees.

Speaker #3: And for a more medium-term guidance, like if I were to ask you for a period of FY28, FY29, do you think this is a sustainable number on an overall sort of so for employee cost and even the other expenses, if you could give us some color whether you could continue to sustain this kind of efficiency levels going forward?

[Analyst] (J.P. Morgan): For a more medium-term guidance, like if I were to ask you for a period of FY28, FY29, do you think this is a sustainable number on an overall sort of, for employee costs and even the other expenses, if you could give us some color, whether you could continue to sustain this kind of efficiency levels going forward.

Speaker #4: Yeah. So, we are confident of two things. One is that there will be further rationalization that happens in terms of, you know, driven by productivity and automation, especially after we are goes live.

Ram Charan Sesharaman: Yeah. We are confident of two things. One is that there will be further rationalization that happens in terms of driven by productivity and automation, especially after ER goes live. The second part of the equation is what Anuj was mentioning, which is that it is not a standalone employee count or cost that is relevant from a bottom-line perspective. It is also what we spend on other variable component, given that we are variablizing some of our costs in terms of cloud, et cetera. I think overall, from a cost perspective, we have taken a target that our cost increase should be less than 10% for the year, and that is the target that we will have for the remaining years also.

Speaker #4: But the second part of the equation is what Anuj was mentioning, which is that it's not a standalone employee count or cost that is relevant from a bottom line perspective.

Speaker #4: It is also what we spend on other variable components, given that we are variabilizing some of our costs in terms of cloud, et cetera.

Speaker #4: And I think overall, from a cost perspective, we have taken a target that our cost increase should be less than 10% for the year.

Speaker #4: And that's the target that we will have for the remaining years also. So, to answer your question, yes, we will keep our cost increase down to less than 10% overall across all heads of expense for the next two to three years.

Ram Charan Sesharaman: To answer your question, yes, we will keep our cost increase down to less than 10% overall across all heads of expense for the next 2, 3 years. At least that is the endeavor that we have.

Speaker #4: At least, that's the endeavor that we have.

Speaker #3: Got it, sir. Thank you. All the best.

[Analyst] (J.P. Morgan): Got it, sir. Thank you. All the best.

Speaker #1: Thank you. The next question is from the line of Lalit Deo from Aquarius Securities. Please go ahead.

Operator: Thank you. The next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.

Speaker #5: Yeah, hi, sir. Good morning. So this one question, on this non-asset-based MF revenues, so like in the past, we have highlighted that almost like 50 percent of the 50 percent of that revenue comes from the transaction business.

Lalit Deo: Yeah. Hi, sir. Good morning. Just one question on this non-asset-based MF revenues. Like in the past, we have highlighted that almost 50% of that revenue comes from the transaction business. Now if I look at the number of transactions on a YOY basis, that has increased by 20%. But on a YOY level, the non-asset-based MF revenues has declined. What is causing this decline? Could you explain the same?

Speaker #5: So now, if I look at the number of transactions on a YoY basis, that has increased by 20 percent. But on a YoY level, the non-asset-based revenues, non-asset-based MF revenues, have declined.

Speaker #5: So, what is causing this decline? Could you explain it—could you explain the same?

Speaker #4: So, two things. One is that the total transactions are fine, but most of them are digital transactions. If you see the paper transactions, they are only less than 10 percent of the overall transactions.

Ram Charan Sesharaman: Two things. One is that the total transactions are fine, but most of them are digital transactions. If you see the paper transactions, they're only less than 10% of the overall transactions. What we charge for is a subset of the paper transactions. On a year-on-year basis, actually if you see the contributing factors was there is also NFO decline. The transaction all was small decline, but there was an NFO decline, and there are some application fees that we do. We had some arrangement with some of our customers, like NSE, which has wound down. That's the contributing to this. On a quarter-on-quarter basis, there has been a drop in transaction. It's also driven by some MF Central-related revenues. It's also driven by OPE.

Speaker #4: So, what we charge for is a subset of the paper transactions. And so, on a year-on-year basis, actually, if you see, the contributing factors were—there is also enough of a decline.

Speaker #4: You know, the transaction was a small decline, but there was enough for a decline. And there are some application fees that we do. We had some arrangement with some of our customers, like NSC, which has wound down.

Speaker #4: So that's what is contributing to this. On a quarter-on-quarter basis, there has been a drop in transactions. It's also driven by some MF Central-related revenues.

Speaker #4: It's also driven by OPE. So I urge you not to take the overall transaction count as a proxy for this revenue, because a lot of it is actually digital transactions.

Ram Charan Sesharaman: I urge you not to take the overall transaction count as a proxy for finding this revenue, because a lot of it is actually digital transactions. We charge only part of the transactions and do part of the paper transactions.

Speaker #4: We charge for only part of the transactions and handle part of the paper transactions. Thank you, sir.

Lalit Deo: Thank you, sir.

Speaker #1: Thank you. The next question is from the line of Avijit from Kotak. Please go ahead.

Operator: Thank you. The next question is from the line of Abhijit from Kotak. Please go ahead.

Speaker #5: Yeah, hi. Good morning, everyone. So my first question was on the AI and automation-related gains. So in terms of like how do you think about being able to sustain and retain these gains, you know, beyond, let's say, the next maybe a year or so?

[Company Representative] (Kotak): Good morning, everyone. My first question was on the AI and automation-related gains. In terms of like, how do you think about being able to sustain and retain these gains beyond, let's say, the next maybe a 1 year or so? Because in the past, generally, the commentary on the industry has been that whenever you have AUM growth, AMCs always come calling, saying that part of it is led by the markets, right? In terms of absolute value addition, there's always a question mark. In this particular case, all the investments and efforts have been made by the industry, and in terms of being able to retain some of those benefits, how do you see that playing out beyond the next 1 year itself?

Speaker #5: Because in the past, generally, you know, the commentary on the industry has been that whenever you have AUM growth, AMC is always, some calling said that saying that part of it is led by the markets, right?

Speaker #5: So in terms of absolute value addition, there is always a question mark. But in this particular case, all the investments and efforts have been made by the industry.

Speaker #5: And in terms of being able to retain some of those benefits, you know, how do you see the how do you see that playing out?

Speaker #5: Beyond the next one year itself, the second question was specifically whether there has been—if I missed it—a yield outlook for the rest of the year.

[Company Representative] (Kotak): The second question was specifically if there's been a, if I missed it, there's a yield outlook for the rest of the year. The last question is, on the payment side, it's good to see the jump in revenue growth, but if you could give some color in terms of, let's say, any new segments which are contributing to this growth and whether it's all transaction-driven or there is like a one-time onboarding-related revenues here as well.

Speaker #5: And the last question is on the payment side. It's good to see the jump in revenue growth, but if you could give some color in terms of, let's say, any new segments which are contributing to this growth, and whether it's all transaction-driven or if there is a one-time, onboarding-related revenue here as well.

Speaker #4: Yeah, sure, Avijit. So I'll try to take your questions in sequence. As far as deployment of AI as such is concerned, don't overplay it in your mind.

Anuj Kumar: Yeah, sure, Abhijit. I'll try to take your questions in sequence. As far as deployment of AI, et cetera, is concerned, don't overplay it in your mind. Like I said that we have scaled this company significantly on constant headcount in 10 years. Basis, base automation. Automation as a story continues to play out. The benefits are seen in the way we operate, and all of you have seen that. The AI-led benefits are largely the new platform. Why are we building the new platform? Because we still operate off a platform which is two and a half decades old, and technologies were not available to do things that we can do today. It was a necessity. We are well into the process now. We will build a new platform.

Speaker #4: Like I said, we have scaled this company significantly with a constant headcount over the last 10 years, based on automation. So, automation as a story continues to play out.

Speaker #4: The benefits are seen in the way we operate, and all of you have seen that. The AI-led benefits are largely from the new platform. Why are we building the new platform?

Speaker #4: Because we still operate off a platform which is two and a half decades old, and technologies were not available for things that we can do today.

Speaker #4: So it was a necessity. We are well into the process now. We will build the new platform. All the incremental benefits, therefore—I will call them incremental benefits because base automation benefits would have happened anyway.

Anuj Kumar: All the incremental benefits, therefore, I will call them incremental benefits because base automation benefits anyways would have happened, is what you are seeing in not constant but a dropping headcount. I think this process will last maybe the next 3 years, perhaps 4 years. I mean, it'll certainly be 3 years where gradually as we take things live item by item by item, we will drive productivity inside our system. I must also tell you that we will be driving larger productivity outside of CAMS across the industry, where more and more transactions will become untouched. More and more remediation will be a single-shot remediation. More and more rework or excessive communication, et cetera, will get eliminated. This is accretive for the industry, and I would venture out to say that it'll be more accretive for the industry than it'll be for CAMS.

Speaker #4: What you are seeing is not a constant, but rather a dropping headcount. And I think this process will last maybe the next three years, perhaps four years.

Speaker #4: I mean, it will certainly be three years where, gradually, as we take things live—item by item by item—we will drive productivity inside the system.

Speaker #4: I must also tell you that we will be driving larger productivity outside of CAMS, across the industry, where more and more transactions will become untouched, and more and more remediation will be a single-shot remediation.

Speaker #4: More and more rework or, you know, excessive communication, et cetera, will get eliminated. So this is accretive for the industry, and I would venture out to say that it will be more accretive for the industry than it will be for CAMS.

Speaker #4: It will take cost out, not just from our base but from the base of the AMCs, distributors, exchanges—whoever you name—because everything, in the end, converges upon us.

Anuj Kumar: It'll take cost out, not just from our base, but from the base of the AMCs and distributors and exchanges, whoever you name, because everything in the end converges upon us. That's one part. Is all of that going to show up in our base P&L? Some of it certainly will, but like I said, and all of you are reading this, that the story which is playing out in the cloud cost data center hardware arena is very different, where things are becoming expensive faster than we thought. Some of that will hit us. Net-net, of course, it'll be accretive, but some of that will certainly hit us. As far as the AMCs are concerned, what are they going to see? They're going to see a more productive phase for themselves, for the industries that they deal with, and of course, a more productive CAMS.

Speaker #4: So that's one part. Is all of that going to show up in our base P&L? Some of it certainly will, but like I said, and all of you are reading this, that the story which is playing out in the cloud cost, data center, hardware, you know, arena, it is very different where things are becoming expensive, faster than we thought.

Speaker #4: And some of that will hit us. Net-net, of course, it will be accretive, but some of that will certainly hit us. As far as the AMCs are concerned, what are they going to see?

Speaker #4: They are going to see a more productive phase for themselves, for the industry that they deal with, and of course, more productive camps.

Speaker #4: Will that be margin accretive for us? Like we said, today we are not claiming that a 1% annual margin expansion will go to 2% or 3%.

Anuj Kumar: Will that be margin accretive for us? Like we said today, we are not claiming that a 1% annual margin expansion will go to 2% or 3%. We are not saying that. I said we may get 1.5%, but let's wait till the end of the year. The AMCs, will their fundamental behavior and their fundamental attitude to efficiency change? I don't think the answer is either ways. I'm expecting constant behavior on both sides. I would say this is a step-by-step accretive process. We are not announcing it like Big Bang, like the rest of the world is talking about what AI will do. We've not made a single statement. I will not make that statement even today. You should just assume that we will continue getting more efficient, and some of that, after everything is taken, will show up in the base.

Speaker #4: We are not saying that. I said we may get to 1.5%, but let's wait until the end of the year.

Speaker #4: So the AMCs, will their fundamental behavior and their fundamental attitude to efficiency change? I don't think the answer is either way. I'm expecting constant behavior on both sides.

Speaker #4: And I would say this is a step-by-step, accretive process. We are not announcing it like a big bang, like the rest of the world is talking about what AI will do.

Speaker #4: We've not made a single statement. I will not make that statement even today. You should just assume that we will continue getting more efficient, and some of that, after everything is taken, will show up in the base.

Speaker #4: So that was one of your questions. So, what was the question?

Anuj Kumar: That was one of your questions. What was the second?

Speaker #5: Payment revenue growth.

[Company Representative] (Kotak): Payment revenue.

Speaker #4: On payments, we had said that recurring payments inside insurance, mutual funds, and NBFC was a core base, one and a half years back.

Anuj Kumar: On payments, we had said that recurring payments inside of insurance, mutual funds, and NBFC was our core base one and a half years back. We had a PA license, now we do PG work with largely credit cards. Some of the revenue expansion you're seeing is credit card transaction-related. I said at the beginning that it's a low-margin business, and you know that our preference to have our book dominated by low-margin business is limited. We will grow cards, but we will grow it step by step. We do not want to do margin-dilutive stuff in the base. That's just against our nature. That's the new thing which has happened. Education as a segment has opened, but I will not attribute a lot of revenue increase to that. I think cards is certainly revenue accretive, not as much payment. There was nothing one time.

Speaker #4: We opted to get the— we had a PA license. Now we do PG work, which is largely credit cards. Some of the revenue expansion you are seeing is credit card transaction-related.

Speaker #4: I said at the beginning that it's a low-margin business, and you know that our preference to have a book dominated by low-margin business is limited.

Speaker #4: So, we will grow cards, but we will grow it step by step by step. We do not want to do margin-dilutive stuff in the base.

Speaker #4: That's just against our nature. But that's a new thing which has happened. The education segment has opened, but I would not attribute a lot of revenue increase to that.

Speaker #4: I think cards are certainly revenue accretive, not as much as payments. And there was nothing one-time. We've said this in the past, Avijit, that to build the book, we never take anything one-time and then drop it in the next quarter. Go back to our entire listed history of, I don't know, 40 quarters.

Anuj Kumar: We've said this in the past, Abhijit, that to build the book, we never take anything one time and then drop it in the next quarter. Go back to our entire listed history of, I don't know, 40 quarters. Sorry, not 40. 24, 26 quarters, you'll not find a single instance. There's nothing one time.

Speaker #4: You will not find—sorry, not 40, 24, 26 quarters—you'll not find a single instance. So there's nothing one time.

Speaker #5: Sorry, yield.

[Company Representative] (Kotak): Yield.

Anuj Kumar: Sorry?

[Company Representative] (Kotak): Yield.

Speaker #4: Yeah. As far as the yield is concerned, I think we said this—and I said this in my commentary, and so did Ram—that we've come out of the compression that we'd reported in Q4 '25 and Q1 '26.

Anuj Kumar: Yeah. As far as the yield is concerned, I think we said this and I said this in my commentary, so did Ram, that we've come out of the compression that we'd reported in Q4 2025, Q1 2026. That is now all in the base. A lot of the stuff which belongs to this year, whatever had to be done, is in the base in the Q1. What is residual for the next 3 or 4 quarters will not be significant. That is what I would think you should take as broad guidance. Now, the telescopic part of the contraction has nothing to do with any negotiation. It's anyways in the base. You will see that play out, but we've said historically that you should see 2.5% to 3% annually.

Speaker #4: So that is now all in the base. A lot of the stuff which belongs to this year, whatever had to be done, is in the base in the first quarter.

Speaker #4: The residual for the next three or four quarters will not be significant. So, that is what I would think you should take as broad guidance.

Speaker #4: Now, the telescopic part of the contraction has nothing to do with any negotiation. It's, anyway, in the base. You will see that play out, but we've said historically that you should see 2.5% to 3% annually.

Speaker #4: My guess is that's perhaps the number you'll end up seeing when we speak to you in May.

Anuj Kumar: My guess is that's perhaps the number you'll end up seeing when we speak to you in May.

Speaker #5: Got it. Thank you so much.

[Company Representative] (Kotak): Got it. Thank you so much.

Speaker #1: Thank you. The next question is from the line of Sunil Gandhi from AM Securities. Please go ahead.

Operator: Thank you. The next question is from the line of Sonal Gandhi from AM Securities. Please go ahead.

Speaker #6: Hi, this is Sunil from AMSEC. Thank you for taking my question. I have a couple of them. How do you see Capex playing out by 2027 and, if possible, in 2028?

Sonal Gandhi: Hi, this is Sonal from AMSec. Thank you for taking my question. Just a couple of them. How do you see CapEx playing out FY27 and FY28? What are the components of this CapEx expense? Just wanted some clarity. Do you capitalize AI-related headcount expenses into CapEx, or is it shown as part of employee cost? Another one was on the depreciation. We've seen that depreciation is down on a quarter-on-quarter basis. How do we see depreciation playing out for the rest three quarters? I think you've alluded to EBITDA growth of 16%. How do we see path to it for the year? Thank you.

Speaker #6: And what are the components, you know, of this Capex expense? Also, just wanted some clarity—you know, do you capitalize AI-related headcount expenses into Capex?

Speaker #6: Or is it shown as part of employee cost? Another one was in the depreciation. So we've seen that depreciation is down on a quarter-on-quarter basis.

Speaker #6: So how do we see, you know, depreciation kind of playing out for the three quarters? And I think you've alluded to EBITDA growth of 16 percent.

Speaker #6: So how do we see those numbers for the year? Thank you.

Speaker #4: Okay. So I'll just take the first question on Capex Outlook. So for the current year, I think the last quarter also we mentioned that we expect for the, you know, for the coming year, the on-prem related Capex, including tools and servers and storage and premises, et cetera, to be in the region of 75 crores.

Ram Charan Sesharaman: Okay. I'll just take the first question on CapEx outlook. For the current year, I think the last quarter also we mentioned that we expect for the coming year, the on-prem related CapEx, including tools and servers and storage and premises, et cetera, to be in the region of INR 75 crores. This will progressively go down in the subsequent years once the cloud infrastructure gets up and running and we migrate to the cloud for the re-arch architecture project. From a re-arch perspective, we expect to spend the overall project cost, as we have said, is around INR 500 crores. We have so far spent INR 123 crores on this, and part of it is CapEx, part of it is OpEx. On the overall INR 500 crores, we expect around INR 290 crores to be the CapEx number. Out of which, in the current quarter, we have capitalized around INR 40 crores.

Speaker #4: This will progressively go down in the subsequent years once the cloud infrastructure gets up and running, and we migrate to the cloud for the re-architecture project.

Speaker #4: From a re-arch perspective, you know, we expect to spend—the overall project cost, as we have said, is around ₹500 crore. So far, we have spent ₹123 crore on this, and part of it is CapEx, part of it is OpEx.

Speaker #4: On the overall ₹500 crores, we expect around ₹290 crores to be the Capex number, out of which, in the current quarter, we have capitalized around ₹40 crores. Right?

Speaker #4: So, because some of these projects have gone live, we have transferred them to Capex and started amortizing, which has happened in the first quarter.

Ram Charan Sesharaman: Because of going live of some of these projects, we take it to CapEx and start amortizing, which has happened in the first quarter. In the rest of the year, we will expect that at least another INR 80 crores will get capitalized. Going forward, a similar number will get capitalized the year and year after. You should expect, and this is a 10-year amortization. If you average it out on a yearly basis, you should expect in the current year at least an increase in depreciation to the extent of INR 4 to 5 crores. For the rest of the year, because of the re-arch capitalization. Next year onwards, this will be additive with INR 8 crores plus another INR 4 to 5 crores. It will have another INR 12 crores additional depreciation next year, and similarly for the year after.

Speaker #4: So, in the rest of the year, we will expect that at least another ₹80 crores will get capitalized. And going forward, a similar number will get capitalized in the year and the year after.

Speaker #4: So you should expect—and this is a 10-year amortization—that if you kind of average it out on a yearly basis, you should expect in the current year at least an increase in depreciation to the extent of ₹4 to ₹5 crore.

Speaker #4: For the rest of the year, because of the re-arch capitalization, and next year onwards, this will be additive with ₹8 crores plus another ₹4 to ₹5 crores.

Speaker #4: So, it will have another ₹12 crore capitalization and additional depreciation next year, and similarly for the year after. After that, everything will be in the base.

Ram Charan Sesharaman: After that, everything will be in the base. This is the re-arch part of it. The other capitalization, what you see, will go on as it is. The reason why you saw a decline in depreciation this year was basically the written down value actually has a steep decline in depreciation quarter on quarter, because that's the way depreciation is charged. We had a large CapEx outflow similar quarter last year, which kind of went off year one. The year two depreciation is significantly lower, and our further capitalization for the quarter has been very muted from an on-prem perspective. If you see the net of debt, there has been a drop in depreciation. This is not something that you will see every quarter.

Speaker #4: So this is the re-arch part of it. The other capitalization, what you see, will go on as it is. The reason why you saw a decline in depreciation this year was basically the return on value actually has a steep decline in depreciation quarter on quarter because that's the way depreciation is charged.

Speaker #4: So, we had a large capex outflow in the same quarter last year, which kind of went off in year one. So, the year two depreciation is significantly lower.

Speaker #4: And further, capitalization for the quarter has been very, very muted from an on-prem perspective. So if you see the net of that, there has been a drop in depreciation, but this is not something that you will see every quarter.

Speaker #4: This is more to do with a very muted capitalization in the first quarter, which will pick up as we go along. So I would urge you not to extrapolate the decline in depreciation this quarter for the rest of the year and say we will have a ₹15 crore drop in depreciation.

Ram Charan Sesharaman: This is more to do with a very muted capitalization in Q1, which will pick up as we go along. I would urge you not to extrapolate the decline in depreciation this quarter for the rest of the year and say we will have an INR 15 crore drop in depreciation. That will not happen. In fact, you will see an increase in depreciation because of the capitalization we do for that re-arch expenditure. The policy that we follow has been very conservative in terms of capitalization development cost. The core mutual fund platform, the KRA platform, the payments platform, everything, all expenses that we do, whether it is AI, not AI related, automation, maintenance, bug fixing, et cetera, is taken as a part of the employee cost. We have a 100% subsidiary, Sterling Software, whose cost is taken as employee cost in the base.

Speaker #4: That will not happen. In fact, you will see an increase in depreciation because of the capitalization we do for the re-arch expenditure. The policy that we follow has been very conservative in terms of capitalizing development costs.

Speaker #4: The core mutual fund platform, the KRA platform, the payments platform, everything, all expenses that we do, whether it is AI or not AI related, automation, maintenance, bug fixing, et cetera, is taken as a part of the employee cost.

Speaker #4: We have a 100 percent subsidiary, Sterling Software, whose cost is taken as employee cost in the base. Only for the fresh re-architecture project, the people who are actually involved in coding the new platform on the cloud—their cost alone is taken as a capital expenditure.

Ram Charan Sesharaman: Only for the fresh re-architecture project, the people who are actually involved in coding the new platform on the cloud, their cost alone is taken as a capital expenditure, and that is the INR 290 crore that I spoke about earlier, out of the INR 500 crore cost that we talked. On the EBITDA growth, I think Anuj has spoken in detail about how we plan to get there. Is there any specific component of it that you have a question? I would be happy to answer.

Speaker #4: And that is the ₹290 crores that I spoke about earlier, out of the ₹500 crores cost that we're talking about, right? On the EBITDA growth, I think Anuj has spoken in detail about how we plan to get there.

Speaker #4: Is there any specific component of it that you have a question about? I'll be happy to answer.

Speaker #6: So, my question was more to do with how do we see bad growth for the year?

Operator: My question was more to do with how do we see PAT growth for the year?

Speaker #4: so you will see, right? So you see that there is a if your EBITDA growth is around 45 percentage, your bad growth is around 31 percentage.

Ram Charan Sesharaman: You will see. You see that if your EBITDA growth is around 45%, your PAT growth is around 31%. We expect that our PAT margins will continue to be around 30%, 31% going forward also.

Speaker #4: So, you know, we expect that our bad margins will continue to be around 30-31 percent going forward as well.

Speaker #6: Okay. Thank you so much.

Operator: Very well. Thank you so much.

Speaker #1: Thank you. The next question is from the line of Divyansh Raju from TriNetra Asset Managers. Please go ahead.

Operator: Thank you. The next question is from the line of Divyansh Jaju from Trinita Asset Managers. Please go ahead.

Speaker #5: Hello, sir. Thank you for the opportunity. My major questions have been covered. Still, I want to know more; in recent quarters, at the overall business level, the revenue growth has been muted.

Divyansh Jaju: Hello, sir. Thank you for the opportunity. My major questions are covered. Still, I want to know more about, in the recent quarters, the overall business level, the revenue growth has been chain muted. In our distributor service space, the competition is also rising. What are the key things as a business we are doing to accelerate revenue going forward?

Speaker #5: And in our distributor service space, the competition is also rising. So, what are the key things, as a business, we are doing to accelerate revenue going forward?

Speaker #4: Sir, I'm still trying to understand your question. You're saying that in the distributor servicing space, competition is going up. In the MF segment, distributor-led services are not very revenue accretive.

Anuj Kumar: Sir, I'm still trying to understand your question. You're saying in the distributor servicing space, competition is going up. In the MF segment, distributor-led services are not very revenue accretive. If you take out MF Central CAS and some of the APIs that we sell to them, and we may have done a few websites, et cetera, it isn't a very large segment. I'm not clear what you mean by that. Just think of it this way, that the MF spares most of the money, neither the individual consumers nor the distributors pay any large lumps of money for that to be meaningful. Competition there, I would again kind of grope a little for the genesis of that statement. Competition perhaps remains what it used to be.

Speaker #4: If you take out MF Central CAS and some of the APIs that we sell to them, and we may have done a few websites, et cetera, it isn't a very large segment.

Speaker #4: So, I'm not clear what you mean by that. But just think of it this way: in the MF spheres, most of the money—neither the individual consumers nor the distributors—pay any large lumps of money.

Speaker #4: For that to be meaningful, competition there—I would again kind of group a little for the genesis of that statement. But competition perhaps remains what it used to be.

Speaker #5: Okay. I'm not sure if anyone has asked this question before, but apart from our mutual fund space and the non-mutual fund space, what is the current EBITDA margin?

Divyansh Jaju: Okay. I'm not sure before anyone asked the same question, apart from our mutual fund space and the non-mutual fund space, what is the EBITDA margin currently we have, and maybe expect in the upcoming year?

Speaker #5: We have, and we expect in the upcoming year?

Speaker #4: Yeah, so this first quarter, given the KRA revenue was a little less than what it generally is, the margin was around 13%.

Ram Charan Sesharaman: Yeah. This first quarter, given the KRA revenue was a little lesser than what generally it is. The margin was around 13%, but I think our outlook for the year, we said will be 16% to 17%, given that KRA will recover and the losses in a few other businesses will come down as the year progresses.

Speaker #4: But I think our outlook for the year, we said, will be 16 to 17 percent, given that KRA will recover and the losses in a few other businesses will come down as the year progresses.

Speaker #5: Okay, sir. Thank you.

Divyansh Jaju: Okay, sir. Thank you.

Speaker #1: Thank you. The next question is from the line of Renga Varshini K from Wealth Field. Please go ahead. Hello? Please go ahead. Hello, Renga Varshini.

Operator: Thank you. The next question is from the line of Rengavashini K from WealthField. Please go ahead. Hello, please go ahead. Hello, Rengavashini, please go ahead.

Speaker #1: Please go ahead.

Speaker #7: Yes. Am I audible?

[Analyst] (WealthField): Yes. Am I audible?

Speaker #1: Yes.

Operator: Yes.

Speaker #7: Yes. Yeah. This is Ajit here, Renga Varshini's colleague. Yeah. The question is that again, on the margin side, so the EBITDA margin is right now at around 47 percentage.

[Analyst] (WealthField): Yes. This is Ajit here, Rengavashini's colleague. Yeah, the question is that again on the margin side. The EBITDA margin is right now at around 47%. No, we are aspiring to reach there. The non-MF business contribution of 14%. See, when these businesses mature, based on what Anuj has stated, is it safe to assume that they are going to be margin accretive in nature?

Speaker #7: No, no. We are aspiring to reach there. And so, the non-MF business contribution of 41%, as and when these businesses mature—based on what Anuj has stated—is it safe to assume that they are going to be margin accretive in nature?

Speaker #4: So, most of these businesses in the non-MF portfolio are platform-based businesses, which means that once you build the platform, you've taken a large part of the cost of operation in the base.

Anuj Kumar: Most of these businesses in the non-MF portfolio are platform-based businesses, which means that once you build the platform, you've taken a large part of the cost of operation in the base. Once you start selling, you've taken the cost of sales. Beyond a point, revenue contributes significantly to profit. Some of our businesses like BIMA Central and Account Aggregator, especially those two, and to an extent, MF Central, are in that category where revenue is scaling. Revenue is still not cost. Most of the cost is fixed cost. Variable cost on incremental revenue is a smaller component. As and when that happens, you will see profitability by individual business lines.

Speaker #4: And once you start selling, you've taken the cost of sales. So, beyond a point, revenue contributes significantly to profit. Some of our businesses, like CAMScentral and Account Aggregator, especially those two.

Speaker #4: And to an extent, MF Central or in that category, where revenue is scaling. Revenue is still not covering cost; most of the cost is fixed cost.

Speaker #4: Variable cost on incremental revenue is a smaller component. So as and when that happens, you will see profitability by individual business lines. But like Ram had said, if you take all of non-MF as a single lump, we're expecting that to grow in excess of 20%.

Anuj Kumar: Like Ramit said, if you take all of non-MF as a single lump, we're expecting that to grow in excess of 20% and for profitability to scale from our 16% to 17% last year to get closer to 20%. That's the broad statement on the portfolio.

Speaker #4: And for profitability to scale from our 16–17% last year to get closer to 20%, that's the broad statement on the portfolio.

[Analyst] (WealthField): Out of this, which one of them are yet to become EBITDA break-even?

Speaker #7: So out of this, which one of them are yet to become EBITDA break-even?

Ram Charan Sesharaman: From an individual business perspective, Account Aggregator, pension, and CAMS repository are not yet EBITDA positive. Of this, we do expect CAMS rep at least on a final quarter basis to become EBITDA positive. Think Analytics is almost there. We have these businesses which are not yet EBITDA positive.

Speaker #4: So, from an individual business perspective, Account Aggregator, Pension, and CAMS Repository are not yet EBITDA positive. Of these, we do expect CAMS Repository, at least on a final quarter basis, to become EBITDA positive.

Speaker #4: Think Analytics is almost there. So, we have these businesses which are not yet EBITDA-positive.

Speaker #7: So, on the Account Aggregator side, are we seeing any kind of difficulty in terms of adoption on the industry side? Is there any bottleneck there?

[Analyst] (WealthField): On the Account Aggregator side, are we seeing any kind of a difficulty in terms of adoption in the industry side? Is there any bottleneck there?

Speaker #4: Well, I would say there is a bottleneck. It's just a brand new concept. It seems to be getting adopted on the fintech and lending side. On the capital market side, not as much.

Anuj Kumar: Well, I wouldn't say there is a bottleneck. It's just a brand-new concept. Seems to be getting adopted on the Fintech and lending side. On the capital markets side, not as much.

Speaker #7: All right. Okay, thank you very much, and good luck for the quarters ahead.

[Analyst] (WealthField): All right. Okay. Thank you very much, and good luck for the quarters ahead.

Speaker #4: Thank you. Thank you.

Ram Charan Sesharaman: Thank you.

Anuj Kumar: Thank you.

Speaker #1: Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments.

Operator: Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments.

Speaker #4: So, thank you to all the participants for your time spent on following CAMS and attending this call. In case of any questions, please feel free to reach out to Orion Capital MUFG or to Anish Savlani, Investor Relations at CAMS.

Ram Charan Sesharaman: Thank you to all the participants for your time you spent on following CAMS and attending this call. In case of any questions, please feel free to reach out to Orient Capital, MUFG, or to Anish Savlani, investor relations in CAMS. They will be happy to take your questions. Thank you once again.

Speaker #4: And they will be happy to take your questions. Thank you once again.

Operator: On behalf of Computer Age Management Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

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