Anil Mascarenhas: Good evening, ladies and gentlemen, and welcome to 360 One WAM's earnings call for Q2 FY2027. As a reminder, all participant lines will be in listen-only mode. In case you wish to ask a question or require assistance during the call, kindly signal the host by tapping on the raise hand icon. Please note this conference is being recorded. On the call today, we have with us Mr. Karan Bhagat, MD & CEO; Mr. Yatin Shah, CEO of the Wealth Business; Mr. Anshuman Maheshwary, CEO of 360 One Alternates; and Mr. Sanjay Wadhwa, our CFO. I now hand it over to Mr. Sanjay Wadhwa to take this call forward.
Sanjay Wadhwa: Thank you, Anil. A very good evening to all the participants. Starting with the macros. Q2 was a quarter of two halves for Indian equities. Benchmark indices stayed under pressure through the quarter, weighed down by persistent FPI selling, global rate concerns, and geopolitical uncertainty. At the same time, domestic flows and primary markets were remarkably resilient. Monthly SIP flows touched a record of INR 32,500 crores in September, and close to 70 companies raised INR 90,500 crores through IPOs during the quarter, including the landmark listing of NSE. We continue to believe that the long-term tailwinds clearly outweigh the near-term concerns. Let me call out four of them. First, wealth creation in India. The UHNI segment continues to grow at 13% to 15%, and monetization events such as IPOs, block deals, stake sales, keep releasing liquidity to promoters and families. Second, the financialization of savings.
Sanjay Wadhwa: SIPs, the newly launched SIF category, and democratization of AIFs are steadily expanding the investable pool. Third, the shift to professional wealth management. Clients increasingly want transparent, fee-based advice, and a growing number of family offices want curated access to opportunities. Fourth, global connectivity. Resident Indians want to invest globally, global institutions are refocusing on India, and GIFT City is opening new opportunities in asset management and broking. We remain mindful of the near-term challenges, including market volatility, competition, evolving regulation, and pressure on costs. Our response is to stay the course, give the right advice to our clients while running the business in our shareholders' interests. Now, coming to our performance for the quarter. Total AUM stood at about INR 9 lakh crores, up 31% year on year.
Sanjay Wadhwa: ARR AUM stood at INR 353,000 crores, up 19.7% year-on-year, and ARR net flows of INR 12,482 crores during the quarter, compared to INR 10,815 crores in Q1. Clients with more than INR 10 crores of AUM are over 4,100 and account for 95% of our ex-custody wealth AUM. Revenue from operations was INR 896 crores, up 17.5% year-on-year. ARR revenue grew 27.5% YOY to INR 706 crores. ARR now contributes 79% of operating revenues, and ARR retention improved to 79 basis points from 74 basis points in Q1, driven by higher carry income for the quarter. Excluding carry income, the ARR retentions remain stable at 67 basis points. During Q2, carried interest from third-party funds contributed approximately INR 60 crores. Transaction and brokerage income was INR 190 crores, down 9.1% year-on-year.
Sanjay Wadhwa: Other income was -INR 44 crores this quarter, primarily on account of mark-to-market impact on our treasury investments. As a result, total revenue was INR 853 crores, up 4.8% year-on-year. Total costs were INR 462 crores, up 15.5% year-on-year. Employee costs were INR 342 crores, up 19.9%, and include a one-time impact of about INR 9 crores from restructuring of one of our businesses. Admin and other costs were INR 120 crores, up 4.6%. Our cost to operating income ratio improved to 51.5% from 54.3% in Q1. Operating PBT grew 19.7% year-on-year to INR 434 crores. Given the lower other income, PBT was INR 391 crores and PAT was INR 302 crores against INR 316 crores in Q2 FY2026. Tangible ROE stood at 16.9%. The board approved a second interim dividend of INR 7.5 per share. The wealth business saw a strong quarter backed by strong flows and higher retentions.
Sanjay Wadhwa: ARR AUM grew 24.3% YOY to INR 252,627 crores. 360 ONE Plus, our advisory platform, has now crossed INR 1 lakh crores. The quarter saw net flows of INR 10,990 crores that were broad-based across engagement models. New client additions and deeper wallet share with existing clients contributed towards the flow. ARR revenue grew 40.5% year-on-year to INR 503 crores. Retention improved to 79 basis points from 71 basis points in Q1. Operating PBT grew 30.2% year-on-year to INR 326 crores. The UHNI franchise remains the firm's anchor with unchanged priorities, grow share of wallet, widen our reach beyond the metros, and be the first call for families after a liquidity event. That last point matters more than ever, given record IPO and monetization activity over the last few years. More clients are moving to portfolio-level advisory mandates, which make relationships deeper and stickier.
Sanjay Wadhwa: The HNI business continues to scale as a natural extension of UHNI. It now manages over INR 8,000 crores at healthy retentions for over 1,500 clients and about 60 relationship managers. With productivity improving and a growing feeder pipeline into UHNI, we expect the business to break even on direct costs soon. With the business reset behind us, ET Money is now built for profitable growth. Its base of 5.5 lakh plus active users is being taken towards a full life cycle digital wealth platform. Clients will choose upfront between distribution and subscription-based advisory, and AI-assisted advice will extend into affluent segments. The distribution segment of the business clocked ARR AUM of over INR 700 crores over the last nine months. The expected synergies from 360 ONE Capital are now visible. Large IB mandates drove meaningful revenue accretion alongside an active block deal calendar.
Sanjay Wadhwa: With strong ECM pipeline and expansion in research coverage, the franchise is gaining scale and building a more durable revenue base. Our collaboration with UBS continues to progress across bi-directional client referrals, cross-platform product access, and exchange of best practices. In the asset management segment, ARR AUM stood at a little over INR 100,000 crores, up 9.4% year-on-year. Net flows improved to INR 1,492 crores after the large SMA redemptions in Q1. ARR revenue was INR 203 crores, with retentions of 79 basis points and operating PBT was INR 108 crores. In Alternates, AIF AUM grew 27.9% year-on-year to INR 58,139 crores. We are amongst the leader in private equity and credit space in India. During the quarter, we launched and mobilized funds across categories, including multi-stage AI fund, defense and space fund, ARISE credit fund. The pipeline remains strong for the coming quarters.
Sanjay Wadhwa: In public markets, fund performance was strengthened, and our SIF strategy has gained traction with DynaSIF AUM crossing INR 1,000 crores. We won our first European institutional mandate and received a top-up from an existing global mandate. Looking ahead, our priorities remain clear. In Wealth, focus on adding new clients, raising RM productivity, and scaling referrals across 360 One ecosystem. In asset management, we will keep sharpening our Alternates offering, expand our institutional reach, diversify domestic distribution, and build out the SIF platform. In 360 One Capital, the priority is converting the ECM pipeline, strengthening the team, and expanding research coverage. All of this will be delivered with continued cost discipline with technology as a key enabler. Compass, our proprietary and governed AI layer, is live across wealth asset management and enterprise functions.
Sanjay Wadhwa: It gives the RM a single integrated interface for research and product knowledge, market intelligence, prospecting, and pitch preparation. A 360-degree view of each client's family holdings and portfolio, and service and business at-risk alerts with next best actions. Compass runs entirely within 360 One environment with strict access controls. Client data never goes outside, and no data is used to train external models. The aim is simple, more time with clients and a platform that scales efficiently. We do not judge Compass on usage, but on definite outcomes, which is efficiency, commercial impact, quality, and control. With that, I would like to invite the participants for Q&A.
Anil Mascarenhas: Thank you. Thank you, Sanjay. We now go to the Q&A. To answer your queries, we have a panel comprising Mr. Karan Bhagat, Mr. Yatin Shah, Mr. Anshuman Maheshwary, and Mr. Sanjay Wadhwa. In case you wish to ask a question, please tap on the raise hand icon. First in line, we have Prayesh Jain. Prayesh, kindly unmute and ask your question.
Prayesh Jain: Thanks, Anil. Hi, and congrats on a good set of numbers. Just two or three questions here. Firstly, a financial question on what is this mark-to-market or fair value change that has come? I see that on your prime, it is a much larger impact. So how does it kind of relatively get lesser impact on the overall consol P&L? That is point number one. Point number two, you mentioned that the UBS integration is carrying on well, but how do you see flows coming through on this business? Should we see H2 flows coming through, or how should we think about that? Thirdly, from a cost-to-income standpoint, are we on that path to kind of reach that 48% by end of Q4? Are we on that path? Yeah, those would be my questions. Thanks.
Karan Bhagat: Sanjay, why don't you take the financials question and then I can take the remaining two.
Sanjay Wadhwa: Sure, Karan. Well, on cost to income, I think we had guided for a 1%, 1.5% kind of overall improvement year-on-year. I think we are well on course to achieve that. You would have seen that the overall cost to operating income, which is actually a better measure to look at as against the cost to income, which we used to disclose earlier. That has improved significantly during the quarter, and I think we are well on course to achieve that 100 to 150 basis points of improvement over the last year. In terms of the mark-to-market change, I think it is purely a result of the overall markets. The previous quarter, we had a positive in terms of overall market trends in the secondary market. This quarter has actually been negative, so it is purely a reflection of that moment in the secondary market.
Prayesh Jain: Before, Karan, you kind of get into the UBS question. Sanjay, just clarification, is it related to NSE getting listed and that impacting the fair value change? A large part of that would be because of that.
Karan Bhagat: Yes. That's right. So it's largely NSE. So roundabout fair value change on account of NSE is close to roundabout INR 110, 120 crores, which is largely invested through our funds. So that's the broad impact of the fair value change.
Prayesh Jain: Got that. Yeah, Karan, over to the UBS question.
Karan Bhagat: Yeah. So I'll take the UBS and your second last questions. Broadly, I think from a UBS perspective, you're right. I think onboarding has got initiated. So in some senses, I think we've internally looked at a target of roundabout exchanging $600 odd million of flows for the current financial year. We've not really tried to get into whether the flows move from us to UBS or UBS to us. But the idea is essentially to ensure that agreements get into place. And I think out of the $600, $650 million of flows, we're fairly confident we'll get there by March end. I think a little bit of flows have started from UBS and to 360 One also. I think our funds have just got empaneled. I think we've got roundabout $15 odd million of flows from UBS as a start.
Karan Bhagat: And we've also additionally got a couple of client referrals who have given us similar or slightly more, maybe $20, 25, 30 million. On our side, we've got three or four of our clients at potentially, not potentially, at another $230 to $40 million of funds which have kind of moved to the UBS system. So in all total, I think roundabout 300, 325 millions happened over the last three months. I think all things being equal, we would expect it to grow to the 600 to 700 odd million number over the course of this year. On the cost to income, just to supplement what Sanjay said, I think pretty much in line. I think still we've got some productivity gains to achieve, especially on the employee cost side. I think we'll continue our journey and keep it going over the next 12 to 18 months.
Karan Bhagat: It doesn't necessarily mean our standalone employee cost numbers will reduce, but we'll continue to try and make the firm as productive as possible. As we build out our teams across all our businesses, we continue to hope that we'll make it more and more efficient and try and move that 48 towards the 46, 47 number.
Prayesh Jain: Yeah, Karan, just last one. Ashish Agarwal joining, what's the kind of role and how kind of things change for the company overall?
Karan Bhagat: Yes. I think Ashish obviously joins in a senior leadership role, and along with me will be kind of spearheading the business. I would look at it in multiple parts. Honestly, I don't see a change on day one. Obviously, our business is spread across three different lines of business, capital markets, wealth, and asset. Ashish has got deep financial services experience over the last 20, 25 years, right from research all the way to corporate finance, to finally kind of working on the sell side. His recent role running Jefferies India office. I think to be honest, over the first six to eight months is really about getting into the business, kind of integrating, spending time where his key strengths are. At the same point of time diving deep into the other parts of the business, including asset and wealth.
Karan Bhagat: I think honestly, I think it's a process. Pretty much all of us are here. Over the next three to four years, we'll build it out together. It's a great addition to our leadership team. I think we've got 10, 15 leaders with us from the last 10 to 15 years, and I think potentially Ashish and the two other people who are joining with him add to that leadership strength. From there on, we'll take it forward. We're not really spending time trying to define a single monolithic line of business or a line of activity for each of us.
Anil Mascarenhas: Thank you so much. All the best.
Karan Bhagat: Thank you.
Anil Mascarenhas: Thank you. Next in line, we have Himang Sangai. Himang, kindly unmute and ask your question.
[Analyst 1]: Am I audible?
Karan Bhagat: Yeah.
[Analyst 1]: Yeah, thanks for the opportunity. I have three questions. Firstly, on the flows part, we are seeing strong flows in the wealth vertical, but relatively weak flows in asset management. Can you please explain this divergence? On the AMC side, how much of the weakness reflects the large institutional redemption versus the softer underlying demand? Second, on the carry income, has there been any reversal of previously accrued carry linked to NSE exposure during the quarter? Thirdly, again on the new leadership, with the recent additions to the leadership team, how should we think about the incremental cost impact and the revenue opportunities they bring? That's it. That's my three questions, yeah.
Karan Bhagat: On the flows, I think you're right. I think honestly, I think the wealth flows have been super strong. I think maybe potentially Yatin can add on to it slightly later, but I think from a winning the mandate perspective, I think I've spoken about this a couple of quarters back. From a brand perspective for the UHNI, we're finding 360 One in a very sweet position. Secondly, obviously, we've continued to expand the platform in a very comprehensive way and without a tongue and cheek, in a 360 manner, where we are able to essentially ensure that the client is able to pretty much get all his needs serviced. That's honestly reflecting the flows. On the mid-level client, which is effectively, let's say, INR 25 to 100 crores for us also, I think we are seeing a lot of traction.
Karan Bhagat: I think one of the data points we're proud about, which is leading to the net flows is the number of new families. I think we've steadily grown that number from 1,800, 1,900 five years back to around about 4,200 families today. I think that's the number which is really kind of spurring the net flows. Once the client comes in, the platform is being exhausted, will allow us to kind of creep in more and build a wallet share with the client. Those are the two factors which are kind of supplementing on the net flow side. On the asset management side, actually, the flows have been quite good, actually, to be honest. The gross flows have been exciting. I think could have been slightly better on the net flow side.
Karan Bhagat: I think we had an institutional redemption from one of the mandates, which a part of it was in Q1 and a quarter of it in Q2. But I think that's a little bit, I think it's behind us, to be honest. Towards the second half of the quarter we saw us winning two institutional mandates. We're seeing a little bit of interest come back in India from a pure flows perspective. So we are quite positive. On an asset class basis, I think outside of listed equity, we were able to kind of convert a couple of decent accounts, both on domestic as well as overseas institutions for our private credit and real assets business. Overall, I think asset management well in track.
Karan Bhagat: I think flows will kind of come back and overall should be in a position to meet our targets for the current year. I think in terms of cost, in terms of new hires, I think early days. I think obviously we have right now kind of looked at three people. So in that sense, it does not necessarily structurally change it. I think our desire to add people on the sales side and in wealth, if there are gaps on the investment side in alternates on the listed side as well as on the capital market side, we will continue to be very, very hungry for talent. The good news is we are not recruiting talent at the junior or mid-level. We are really searching talent right at the top quartile, and we will be able to attract.
Karan Bhagat: I think honestly, as long as the platform is there, which today it is there, the flywheel is there. There will always be a time gap between talent coming in and breakeven happening. But for a firm like ours, I think today we feel comfortable. That is the shortest on the wealth management side, slightly longer on the asset management side, and maybe on the capital markets side it will be slightly longer. But overall, all three things put together, I think we should be able to kind of keep it within the 100, 200 basis points cost to income ratios as we build it out. Obviously, if you do a big build somewhere, maximum our cost to income ratios might go up by 100, 150, 200 basis points. They are not going to be dramatically different.
Sanjay Wadhwa: On the carry, I can take the question, Karan.
Karan Bhagat: Yeah. Sorry. Carry, I will answer. Yeah. Carry is largely, I think it is a function of two things. One, obviously there is a little bit of carry reversal on account of the carry which had already got recognized. But on the flip side, with the NSE listing, a couple of our funds have come into carry. The first one is more than offset by the second one.
[Analyst 1]: If I could just put in one more question. Why are the yields low on the mutual fund asset management side? I can see a decline in the yields part. Can you just explain it?
Sanjay Wadhwa: Yeah, I can take that, Karan.
Karan Bhagat: Yeah.
Sanjay Wadhwa: Q1, there was a one-time kind of admin fee accrual that had happened. It was purely on account of that. But if you go back, I think it is fairly stable.
[Analyst 1]: Okay, thanks. Thanks a lot.
Anil Mascarenhas: Next in line we have Aditya Das. Aditya, kindly unmute and ask your question. Aditya?
[Analyst 2]: Yeah. Hi, am I audible?
Anil Mascarenhas: Yes.
[Analyst 2]: Yeah. Thanks for the opportunity. I have a couple of questions. Number 1, looking at the competitive scenario in the industry. Over the past, let us say 2, 3, 4 years, a lot of private equity venture capital backed, so-called digital players have entered the wealth space in the UHNI segment, HNI affluent segment they have entered, right? Just wanted to understand the implications for the rising competitive intensity on your business, on the economics of this business. Do you expect material impact, let us say over the medium to long term? Any sort of impact that you see on margins of our wealth or the AMC business? So that is my first question. Second, just wanted to get the split on a new to existing clients on the net flows this quarter and probably H1. How do you see this split going forward, right?
[Analyst 2]: Do you expect the new client addition to kind of power through the net flows or how do you see this mix going ahead? So that is my second question. Third was just a follow-up on a previous participant's question on the mutual fund business. I think the business has been quite subdued for the last few quarters. How do you see this business coming back over the remainder of this year, probably next year? What are your broader aspirations for this business? So yeah, these are my 3 questions. Thanks.
Karan Bhagat: So great. I will take the first one, and I will request Yatin and Anshuman to take the next two. So I think, sorry, what was the first question?
[Analyst 2]: Competition.
[Analyst 2]: [Crosstalk]
Karan Bhagat: Yeah, competition.
[Analyst 2]: Private equity is getting a lot of new businesses. How the economics are.
Karan Bhagat: Well, I think on the first question, I think obviously it is a sector which has got a huge amount of tailwinds on the business side. So rightfully, it is a sector which is attractive for new competition to get in. I honestly do not see that changing. It has been fairly similar, to be honest, since 2013, 2014. I think over the last 14, 15 years, we have seen private equity put in private equity together with banks have been fairly active in the space. I think overall, I do not see a reason why that should change dramatically. From a platform perspective, I think I can break it up into three parts.
Karan Bhagat: I think impact and the way I am saying it is it is obviously something which competition will add, but at the same point of time it is also an opportunity for us because the real moat in the business is about getting the people and the product and the platform, all three in a single room together and kind of really taking it to the client. I think that takes a little bit of time to happen. I think to be honest, if I look back over the last 10, 12 years, and even as we go forward, I think that is something which we have kind of very uniquely positioned. All three have to come into place. Good thing is I think if there are competitors out there who get all these three things together, I think there is a good reason and good chance to succeed.
Karan Bhagat: The even better thing is the size of the market is very large. I think there will be an opportunity for newer players and along with the newer players, for us to grow. In terms of margins, I am not quite sure if there is a kind of dramatic impact on margins. I think it is always a constant war for talent. I think margins are quite well set up in the industry. Honestly, I think over the last six, seven years, from 2020, 2021 to 2028, 2026, now 2027, we have been in a state of hyper competition, both on talent and on AUM. I think a big reduction or big kind of reset in margins happened in 2021, 2022. I think it stayed there. I do not really see that changing dramatically. I think we are very competitive from a margin perspective, locally, domestically, from a global perspective.
Karan Bhagat: I do not really see any new business getting differentiated on margin. If at all, new players as well as existing players like us will get differentiated. It will get differentiated on a sum product of people, product and the platform coming together. I think from our side, we have to ensure these three things are right at the top. I think if these three things happen, we will maintain our moat, we will maintain our edge, and therefore we will maintain our pricing power. On the net flows question, I will let Yatin answer it.
Yatin Shah: I think particularly this quarter was good for new clients net flow. I think there is a lineup of a lot of IPOs. There is almost 60 IPOs we saw coming in this quarter post in IPO season. I think largely we look at one-third, two-thirds split, one-third from new clients and two-thirds from existing clients. If you look at our client segmentation, almost one-third of our clients are zero to three years vintage. So there is a lot of runway for those relationships to mature. Particularly, if you look at our five-year plus client vintages, almost 60% to 65% of AUM comes from our vintage client. There will be a solid retention in terms of how these clients have stayed with us for a very long period of time.
Yatin Shah: So largely, when we see five, seven, eight years of vintage happening with like a hockey stick growth, which comes in our existing clients consolidating their portfolios from other advisors or largely contributing new net flows to us with the way the relationship is shaping up. If you see last quarter, less than half percent attrition of clients and even so, less than quarter percent attrition on the AUM side. So this talks about the platform and how clients stickiness on 360 One. I do not know if, Sanjay, you want to let me choose some questions.
Karan Bhagat: Hi. Yeah. So just on the mutual fund side, Anshuman, we cannot hear you. Anshuman, we are unable to hear you. Yeah. So on the mutual fund side, obviously, I think we have traditionally been a little bit conservative in investing into that business. I think we build the business, the public markets business more with the mindset of building out a fairly strong institutional practice with segregated managed accounts. And we have conservatively invested in our sales teams across the board. I think for us now, obviously, the introduction of SIFs together with our sustained performance over the last four, five years, gives us much more confidence to maybe potentially kind of build out sales teams on the mutual fund side. Having said that, we will kind of always run a relatively differentiated strategy on the mutual fund side as opposed to running a large scale retail strategy.
Karan Bhagat: So on the mutual fund side, I think for us, I think it will be measured growth going forward also. But coupled with that, obviously, I think, the right retention numbers will be important for us. And where we can get our unique positioning right in terms of product initiatives is also going to get reflected on the SIFs side. So really, we do not look at our business in that sense as mutual funds, AIFs and PMSs. We look at it more from a public markets and a private markets perspective. And I think we would like to grow both on a steady basis and ensure that while we are building out these two businesses, both from a performance perspective as well as from a retentions perspective, we are able to ensure the right quality of business.
[Analyst 2]: Right. Thanks. I will just squeeze in one small question. So, Yatin, on your new to existing client thing. So basically, if you look at the number of clients, it is gone from 1,800, 1,900, let us say four, five years back to about 4,100. Are we kind of seeing this cohort of clients also contributing and also if I see your presentation, it talks about roughly a 3x multiplier on the contribution that these older clients give. Are we also seeing on this let us say five-year cohort of clients, are they contributing as much and are we seeing a similar trend for these clients?
Yatin Shah: I think we are seeing three trends. I think the first trend is, I think as clients' vintages increases with the firm, I think we see definitely a positive trend towards net new flow coming from the same set of clients. Also, second thing of course is that we are also seeing a segmentation change which is taking place. Clients would have started with INR 25, INR 50 crores with us. Suddenly after three, four, five, seven years are in ranges of INR 250, INR 300 crores. Largely the flywheel which we are creating also we are seeing an increased wallet share and other platform services getting added to a size of relationship which we could have thought unable to service five years back.
Yatin Shah: Third thing is, of course, the market remains quite fertile for us in terms of the way the wealth creation stories is happening at every segment, not just the IPO market. I think there are professionals, ESOPs, businesses. I think they are all looking for a professional wealth management firm. So the velocity of the new clients is seen in a tough market is, I think we have always seen a tougher capital market environment does help us in terms of getting market share out of other banks and wealth managers. That trend generally accelerates in such scenario. So I have to look at a five, 10 period going forward.
Yatin Shah: I think surely on ground the trend for wealth management, new clients addition to net flows and segmentation premiumization, which what we are seeing, which is more clients coming on 100 to INR 50 crore plus category is what I think the most promising and healthy for us to service client on a full 360 degree basis.
[Analyst 2]: Thank you so much. All the best.
Anil Mascarenhas: Thank you. Thanks, Nisar. We will move. As a reminder, in case you wish to ask a question, kindly tap on the raise hand icon. Next in line we have Siddharth Megandhi. Siddharth, kindly unmute and ask your question.
Siddharth Negandhi: Hi, congratulations on a great set of numbers. Couple of things. Just wanted to understand the breakup of the wealth flows between UHNI and HNI. The second part was on the institutional business. We have seen a sharp increase year-on-year in the TBR revenue there. How much of that is coming from broking versus incremental ECM revenue from IPOs, et cetera, that may have come in this time? One of the things spoken of was the synergy that one would get from B&K Research and our existing UHNI clients. If you could quantify any broking synergies that we have got. The third is just to understand on the asset management side, now that there is that carry income that is accruing, if you could give us some color in terms of therefore how should we think of outflows on those?
Siddharth Negandhi: Because gross inflows we have seen this challenge once before where gross inflows were coming in, but then there was also a set of outflows. Considering carry accrual happens towards the later stages of fund, how should we think of gross outflows over the next, say, 3 to 4 quarters on the asset management side?
Yatin Shah: HNI was close to INR 500 crores of organic flows last quarter. What we did was also we are also segmenting our each businesses to ensure that highest amount of attention for that set of clients at 360 One is kind of paid to, and we kind of deepen the wallet share for that segment. We also transferred some 2,000 odd relationships from UHNI to HNI, and that is where you are seeing the jump of total AUM close to INR 8,500 to INR 9,000 crores for HNI.
Karan Bhagat: All right. Yeah.
Siddharth Negandhi: The second one was on the institutional business TBR income. How much of that is broking and ECM and
Karan Bhagat: Yeah
Siddharth Negandhi: are any synergies flowing through?
Karan Bhagat: Well, I think to be honest, we have seen good growth across all three segments on the UHNI side, HNI side, as well as on the early experiments of ET Money on the regular plans side. I think ET Money, our overall advisory ARR mutual funded regular ports moved to around 3,300, 3,500 crores of ARR AUM, which has been quite a good healthy surprise over the last three odd months. The HNI portion, as Mr. Yatin Shah was talking about, has moved to around 8,000 odd crores, including 2,000 crores of flows from UHNI to HNI. The UHNI itself has done extremely well. So all three put together has become a good engine.
Karan Bhagat: On the capital market side we are still, as I said earlier, I think from a full stack perspective, we will be really ready 31 March, first week of April in terms of the entire team and talent being there. Needless to say early green shoots in terms of us winning the right set of mandates has always been on the cards. We have been appointed will be appointed in around about 8 to 10 issues across the spectrum. Having said that, obviously, I think as a full fledged capital markets platform on the banking side we see really ourselves coming in a big way Q2 of next calendar year or effectively Q1 of next financial year. In terms of the big pick ups in terms of equity brokerage, I think we spoke about this at the point of doing the acquisition.
Karan Bhagat: I think one of the big things which we hopefully kind of hope to leverage about from is the research availability for the HNI and the UHNI business. So there we do typically equity brokerage is around about INR 4.5 crores a month that we have been able to pick up to close to around about INR 8 to 9 crores a month. So I think that is something which I feel we have kind of under-delivered on for so many years. I think if you just look at our current UHNI, HNI clients, we should be doing around about INR 15 to 20 crores a month. And that is more or less business which should be captive within us because we have already got the clients with us and all their accounts are with us.
Karan Bhagat: I think that is to a small extent happened over the last 4, 5 months. We have seen the INR 4, 5 crore number move to the INR 8, 9 crore number. I see that growing steadily and that complemented and with the core equity capital markets business growing. And I think the rest of the ECM piece together with the banking piece will start flowing from Q1 of next year.
Siddharth Negandhi: Okay. That is very interesting because that is basically about INR 3 to 4 crores of synergies per month that you are quantifying just from the B&K acquisition on the broking revenue, which will then go ahead.
Karan Bhagat: Yeah. It's a good number, but it's not a great number. I think we've got the ability to do more there because the clients are already there.
Siddharth Negandhi: No, it's a great start.
Karan Bhagat: Yeah. It's a great start. It's a great start for sure. On the AMC, I think your observation is absolutely right. I think with carry income coming in towards the end, there's always going to be a potential outflow of the AUM we've had. I think if I just fast-forward the next 12 months, we've got our fund PE 1A, which we'd collected around about INR 1,000 crores in. I think that fund has done extremely well. We've already returned INR 1,500 crores back over the last few years, and we've got another INR 3,000, 3,500 crores of current value. It's only got two assets, NSC and Sibyl. I think, yes, that fund will go back over the space of the next, call it 6 to 18 months. So that's the only large fund, I think, which is up for redemption, which is around about INR 3,000, 3,500 crores. So yeah.
Karan Bhagat: We'll have to plan for that and ensure that our launches reflect that redemption. And hopefully, just given the performance of the fund and the fact that it's done, I think on a gross basis more than the late, I think it's done 36%, 37% CAGR over five years, and maybe on a post-carry basis, around about 32%, 33%. We'll hope most of the money comes back into the system.
Siddharth Negandhi: Great. Just one more question on the UBS side. You mentioned about $300 million of flow, a large part of which was existing UHNI clients allocating about $200 to 250 million outside. If you could just give us some color around how does revenue sharing in this work, and what is the kind of ease or attention that one could expect on those flows?
Karan Bhagat: Well, it is really early days to be honest. I think we have just about finished our collaboration agreements and revenue sharing agreements and stuff like that in March of last year. In effect, it will come to stream May to June. But I will give kind of a broader indication. I think on flows both ways, I think it is safe to assume 40 to 50 basis points of retention would broadly kind of come through.
Siddharth Negandhi: Got it. This is useful. Thank you.
Karan Bhagat: Thank you.
Anil Mascarenhas: As a reminder, in case you wish to ask a question, kindly tap on the raise hand icon. Next in line, we have Dipanjan Ghosh. Dipanjan, kindly unmute yourself and ask your question.
Dipanjan Ghosh: Hi, everyone. A few questions from my side. Firstly, Karan, at the start of the call, you or I think Sanjay mentioned that in terms of new mandates, you are able to see a very high win rate or portion of wallet that you are able to get. Now, obviously, the primary market pipeline is very strong, and you would have some visibility of incremental monetization even if that happens with existing clients or existing firms where your private equity would have invested, or even in existing clients where there might be some monetization because of them having holdings in some unlisted entity which is about to get listed.
Dipanjan Ghosh: From that perspective, even the 12% to 15% of flows to opening AUM, given how the H1 has turned out and the pipeline of IPOs that is there for the next maybe 6 to 9 months, do you think there is a possibility of you kind of delivering either towards the higher end of the spectrum or maybe even higher? Because you have some visibility on the primary side of things. That was on the flow side. The second question is on the TBR, and this is more on the UHNI TBR, which is maybe the core TBR that we used to understand of INR 100 to 250 crores per quarter way back in time. Now, I think this quarter it was a little soft, maybe one of the softest in quite some time.
Dipanjan Ghosh: I just wanted to get some visibility of deals on that part of the segment. I understand it is lumpy and volatile and maybe variable also. But if you can give some color on that ex of the broking business, which you kind of mentioned, the synergies out there. How does that look like for the H2? Third, on the carry bit, I do not know if I understood this correctly. Did I hear it correctly that you mentioned that around 60% of the carry for the quarter was recognized by the wealth segment due to distribution of third-party products? If that is the correct understanding, then between your carry recognition between wealth and AMC, I think this quarter was more towards the wealth side. Is that more recurring like a normal carry which gets adjusted every quarter, or this was some lumpiness out there?
Karan Bhagat: Thank you. Thank you, Dipanjan. Very quickly, I will start off with the second question, which is on the
Dipanjan Ghosh: TBR
Karan Bhagat: on the TBR side. I think you are right. I think TBR, generally speaking, has been soft in the last quarter. But I think as I specified in some of my previous calls in the previous quarters, I think the nature of TBR in this business is dramatically changing. I think what used to be TBR practically doesn't exist anymore. If I just go back and look at the TBR 5 years back, it had an element of upfront income on AMCs. It had an element of, and if I go back further, 10 years from today, it had an element of mutual fund upfronts, and then before is in between it had PMS upfronts and so on and so forth. Now all of that has disappeared. In the middle, we obviously had a lot of activity on the unlisted side and so on and so forth.
Karan Bhagat: Today, I think practically speaking, the components of TBR are very little. If you actually come back, because all financial product distribution has no upfront income at all. In the middle you had, not that we did much of it, but you had structured notes between 2021, 2022, 2023. That is also practically zero today. Honestly, if you see what is TBR, it is just a function largely of, for the lack of a better word, it would be brokerage. Brokerage obviously could spread across listed equity, listed debt. It could be real estate to a certain extent. It could be physical real estate. It could be unlisted equity and so on and so forth. Then obviously you supplement it with banking and capital market transactions. Then obviously in the third segment you have got is the institutional brokerage piece.
Karan Bhagat: I think as things go forward, I think, generally speaking, I have been talking about this. I think the quality of TBR, generally speaking, will improve because some of these are going to be, in that sense, more recurring than being ad hoc. But at the same point of time, I think I do not see that dramatically increasing. If I just go back 7, 8, 10 years back, I think if our revenue was around about, 6, 7 years back, INR 1,000 odd crores, TBR was practically INR 550, 600 crores. Fast-forward to today where let us say revenues is give or take, I am just going to use
Dipanjan Ghosh: Sorry, 34.
Karan Bhagat: Yeah. I am going to use the number revenues, let's say around about INR 1,000, INR 1,100 crores or let's say INR 1,000 crores a quarter. TBR is still in that zip code of around about INR 200, INR 225 crores. If you actually see the growth in TBR, it is going to happen in a more late single digits to early double digits way, as opposed to the growth in ARR AUM, which obviously has the benefit of having flows and also getting a mark-to-market growth. I think, if I just fast-forward my head, the day we are doing around about INR 5,000, INR 5,200 crores of revenue or INR 5,500 crores of revenue, I see the TBR being in the zip code of INR 800 to INR 1,000 crores. I think that is really the way I would look at it. I think the components will largely become brokerage, the way you want to call it.
Karan Bhagat: I think the asset class within brokerage will be six or seven. That is our strength. Our strength is the fact that we are active in broking across all of these six, seven asset classes. We are not only dependent on pure equity. We are also active in broking across multiple segments, whether it is wealth or institutional. At the same point of time, if you build out the banking capital markets piece, that would also supplement it. All put together, I think I see this broadly being in that zip code. Carry income, our accounting is very conservative even for the third party in funds. We follow the same operating principle. It should have become carryable for the entire life of the fund. Only then it starts coming into the carry calculation. In that sense, it mirrors exactly the same process pattern as our own funds.
Karan Bhagat: Coming to your first question was
Dipanjan Ghosh: The beta and the flows.
Karan Bhagat: Yeah, so the flows. I think flows, honestly, I think is quite interesting because we were doing some analysis internally, and for the first time we saw the. Even though the flow number is quite healthy, we are quite excited about the fact that 50% of the flows actually came from enhancement of wallet share. 50% actually come from new mandates. Typically for us, that has been 65% to 70% coming from new mandates and 30% coming from wallet share gains. But I think the completeness of the platform is allowing us to go deeper with our clients.
Karan Bhagat: I think if you can reach this number, it is true it is just one quarter, but I think if you can reach the number of where we are able to go 50/50 with our clients, I think that will give a fair degree of confidence for us to keep achieving our net flow targets. There is a revived degree of excitement on the private market side also. In the last quarter we have seen at least four transactions where we have seen flows come out of dilution or sale of unlisted businesses. I think it is quite exciting. I think flows will continue. But at the same point of time, we will have to ensure that we go deeper with our existing clients also to increase the net flows.
Dipanjan Ghosh: Karan, just one data-keeping question. You mentioned the CAGR on gross sales in AMC. Possible to quantify the gross sales number for H1 in the AMC or the AIF?
Karan Bhagat: I will let Sanjay come back to you in 2 minutes on that, or Anshuman knows the number.
Anshuman Maheshwary: If I look at the last quarter, I think it is important to note that given our size and scale on the alternates side, as well as the multi-asset, and now we are at a multi-vintage stage. Last quarter for us, we saw distributions of about INR 2,500 crore plus. But irrespective, despite the INR 2,500 crore plus of distributions across asset classes, we actually saw close to INR 2,500 crore net inflows coming in. So gross inflows was closer to the INR 4,800, INR 4,900 crore mark. I think it is just a reflection now, unlike earlier, where we had chunky flows going out. Now quarter-on-quarter, we will have a combination of inflows and outflows, but the multi-asset class and the multi-vintage allows us to go through it in a relatively smooth manner.
Dipanjan Ghosh: Well, thanks, Karan and Anshuman, and all the best.
Anil Mascarenhas: Thank you. Next in line, we have Abhijeet Sakhare. Abhijeet, kindly unmute and ask your question.
Abhijeet Sakhare: Hi. Good evening, everyone. A broader question, Karan, you mentioned on the mix between new clients and old clients, and Yatin earlier mentioned that you are seeing more traction towards mandates with bigger sizes, which I am guessing tend to go through the advisory route. Now, does this sort of play out in a way where, on the new wins, generally the realizations are lesser, whereas the older existing clients, where deepening is happening, take care of some of those lower realizations in the early stages?
Karan Bhagat: I think it is fair to say that the newer larger mandates, most of them are either coming through advisory or through non-discretionary PMS, I think. But in terms of engagement with the client, both are the same because they are both fiduciary in nature. I think on the core portfolio, which is largely, let us say, the mutual funds and the PMSs and the AIFs and so on and so forth. I think there on the advisory side, retentions would be in the 35, 40 basis points range. I think in some select mandates that the numbers do go into four digits. In terms of growth, obviously, the retentions can come closer to the 20, 25 basis points. But having said that, today reality is that the portfolio looks quite diverse. The portfolio today has a combination of listed equity.
Karan Bhagat: It has a lot of REITs and InvITs, it has a lot of AIFs. It has some bit of global feeders put together, plus it has its own elements of family office structuring and so on and so forth, plus a trusted succession angle, and sometimes through the year also a little bit of lending and so on and so forth. So overall, I think generally speaking, the larger mandates we've seen end up giving us a fairly decent retention, sometimes as close to, if not slightly higher than the mid-size accounts also. It's just that the nature of revenues are slightly different. I think the core advisory revenue remains in that ZIP code of 20, 25 basis points on the absolute large guys and coming to the 30, 35 basis points to the mid-size large mandates.
Karan Bhagat: I think if I look at the relationship overall, I think this is coming back to the same 65 to 72, 73 basis points overall.
Abhijeet Sakhare: Got it. Thanks a lot.
Anil Mascarenhas: Thank you. We have a follow-up question from Prayesh Jain. Prayesh, kindly unmute and ask your question.
Prayesh Jain: Yeah. Thanks for the opportunity again. Just one question, actually, Karan, and it is again a slightly longer-term question. Our tangible ROE was about 16% in this quarter. We have inflows of warrant conversion that would come in from the UBS. That also kind of comes in. How do you think about tangible ROEs moving back to 25% kind of range, and what should be the duration that we look at, and how do you think you would utilize the warrant conversion money that comes in February?
Karan Bhagat: I think it is a great question. I think to be honest, that is one of the biggest priorities, and I think to keep it relatively simple, I think we have to reach a profitability of. I think the first target really is if you look at our tangible net worth, we have got around about INR 7,400 odd crores, give or take. I think INR 7,400 crores and we are effectively, you add another close to INR 1,600 crores or thereabouts coming from UBS. And we are obviously adding, let us say, around about INR 1,000, INR 1,200 crores of profit after tax post-dividend for the next 2, 3 years. I think we are sitting on around about, give or take INR 10 to 11, INR 11,500, INR 12,000 crores of tangible net worth.
Karan Bhagat: I think our first target really in that sense will be to ensure that over the next 2 and a half, 3 odd years, we are able to kind of inch more. Rather, 3 and a half years, we are able to double our profits. If we can double our profits over the next 3 and a half years, and honestly do not see any need to raise capital. We can ensure that we hit the 20% number. I think as time goes by, depending on the operating leverage we can get in and some of the tailwinds we can get in the rest of the businesses, we can try and push the 20% to 25%.
Karan Bhagat: But I think in the short term, I would say over a 3 and a half year period, given our requirement of capital both on the NBFC side, which is a core part of the wealth business, together with our sponsor capital on the alternate side, I think I feel more comfortable with the 20% number as opposed to the 25% number. Obviously, if we individually kind of look at all the 3 businesses, the ROE numbers can look different. The wealth business itself can show a 45%, 50%, 60% ROE. But factually, it needs to be complemented with the lending business on the NBFC side. The pure listed business can obviously show an ROE of 35%, 40%, but that is only one part of the business. On the alternate asset side, I think we definitely need to put in 3% to 4% of our AUM as our sponsor capital.
Karan Bhagat: All put together, I feel quite comfortable with the 18% to 20% ROE. I think if I kind of merge all the three businesses together with the lending business, I think we definitely would aim to kind of, over a period of 3 and a half years, ensure that we are around that 20% ZIP code on the tangible net worth.
Prayesh Jain: Great. Thank you so much. All the best.
Karan Bhagat: Thank you.
Anil Mascarenhas: Thank you. I think that is all we have time for. Thank you, Mr. Karan Bhagat, Mr. Yatin Shah, Mr. Anshuman Maheshwary, and Mr. Sanjay Wadhwa, and thank you everyone for joining us for this conference. Have a nice evening.
Karan Bhagat: Thank you.
Operator: Goodbye
