Speaker #1: 7, earnings conference call. As a reminder, all participant lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Speaker #1: Should you need assistance during the conference call, please signal an operator by pressing * then 0 on your touchscreen phone. Please note that this conference is being recorded.
Speaker #1: I now have the conference over to Mr. Prayesh Chen from Motela Roseval Financial Services Limited. Thank you, and over to you.
Speaker #2: Thank you, Steve. Good evening, everyone. On behalf of Motela Roseval, I welcome you all to the Nippon Life India Asset Management Q2, FY27 earnings conference call.
Speaker #2: We have, along with us, Mr. Sandeep Sikha and Ging Director and CEO, and the Senior Management Team. We are thankful to the management for allowing us this opportunity.
Speaker #2: Just to inform, Mr. Sandeep would be there on the call until 4:40 PM, post which the other senior members of the management will take the Q&A.
Speaker #2: I would like now to hand it over to Mr. Sandeep for his opening remarks. Over to you, sir.
Speaker #3: Thanks, Prayesh. Good afternoon. Welcome to our Q2, FY27 earnings conference call. We have with us President and Deputy CEO, Sugata Chatterjee, CFO, Parag Jolekar, Deputy CFO, Amol Delagi, Chief Digital Officer, Arpan Saha, CEO of our AI subsidiary, Ashwin Duggal, Matsui Sun, nominee of Nippon Life, and Head of our Alternate, Andrew.
Speaker #3: I would like— I would first like to share key highlights of our performance and post that I will hand over to Parag to speak in greater detail on the recent industry trends as well as our performance post which we will move to Q&A.
Speaker #3: Coming to the key highlights, I would like to start by mentioning Nam India was the fastest-growing AMC in the top 10 AMCs in H1, FY27, on overall and equity AUM.
Speaker #3: We also had the highest increase in overall AUM market share as well as equity AUM market share amongst the top 10 AMCs in H1, FY27.
Speaker #3: Our market share stood at 9.02% relatively flat quarter-on-quarter, importantly both equity net market share and SIP market share remained well above our equity market share both in high single digits.
Speaker #3: Moving to our financial performance, Nam India received— achieved its highest-ever quarterly operating profit of INR 5.23 billion, a growth of 25% year-on-year. Also, happy to share the Board of Directors have declared an interim dividend of INR 9.50 per share, along with Q2, FY27 results.
Speaker #3: Now, I would like to hand over the call to Parag for further details on industry trends and our performance.
Speaker #2: Thank you, Sandeep. Let me start off with the markets. Equity market in Q2, FY27 witnessed a correction from prior quarter levels. The Nifty was down 5% quarter-on-quarter, the Nifty mid-cap index was down 4% quarter-on-quarter, while the Nifty small-cap index was relatively flat quarter-on-quarter.
Speaker #2: The report was flat quarter-on-quarter at 5.25%, while the 10-year GSEC yield increased by 44 basis quarter-on-quarter to 7.19%. Gold prices were flat up 2.5%, while silver prices were down 1% quarter-on-quarter.
Speaker #2: Now, moving to industry AUM and flows, industry quarterly average AUM grew by 13% year-on-year and 5% quarter-on-quarter in Q2, FY27 to INR 87.2 trillion.
Speaker #2: The share of equity in overall AUM increased by 1% quarter-on-quarter ending at 58.2% for Q2, FY27. The equity ex of index and arbitrage witnessed a gross inflow of INR 2.69 trillion, higher by 9% quarter-on-quarter and a net inflow of INR 1.08 trillion, lower by 5% quarter-on-quarter.
Speaker #2: Categories with the highest inflows were small-cap, mid-cap, and flexi-cap funds. The fixed income category witnessed a net outflow of INR 59 billion in the quarter after an inflow in the previous quarter.
Speaker #2: The ETF category had a net inflow of INR 367 billion higher on quarter-on-quarter basis. Quarter-end unique investor in the mutual fund industry increased 11% year-on-year to 63.1 million.
Speaker #2: Moving on to SIP, industry SIP flows for the quarter stood at INR 967 billion, up 12% year-on-year and 3% quarter-on-quarter. Monthly SIP flows in September 2026 stood at INR 325 billion, another all-time high.
Speaker #2: Contributing SIP folio for September 2026 increased 9% year-on-year and 3% quarter-on-quarter to 100.6 million. Now, moving to our business performance, we closed the quarter with total asset under management of INR 8.66 trillion, this includes mutual fund, managed accounts, offshore fund, and gift city.
Speaker #2: Our mutual fund quarterly average AUM grew 19.9% year-on-year and 4.7% quarter-on-quarter to reach INR 7.87 trillion. We were the fastest-growing AMC in the top 10 in H1, FY27, on overall and equity AUM, and had the highest increase in overall and the equity quarterly average AUM market share among the top 10 AMCs in H1, FY27.
Speaker #2: I would like now to share a few key highlights for the quarter. Our mutual fund market share increased 51 basis year-on-year to 9.02% on quarter-on-quarter basis.
Speaker #2: It was relatively flat. Our equity market share increased 27 basis year-on-year and 2 basis quarter-on-quarter to 7.4%. We achieved a high single-digit net sales market share in equity segment ex of index and arbitrage.
Speaker #2: We continued to have the largest investor base in the mutual fund industry with 24.3 million unique investors. We are humbled to have over 1 in 3 mutual fund investors invest with us.
Speaker #2: During the quarter, we also completed the NFO of the Nippon India income plus arbitrage only fund of fund, raising INR 1.8 billion. I would also like to touch upon some of the important aspects of our systematic book.
Speaker #2: Our monthly systematic book rose by 2% year-on-year to INR 37 billion, for September 2026. This resulted in an annualized systematic book of INR 445 billion, excluding STP, SIP book growth was 9% year-on-year.
Speaker #2: SIP market share stood at 9.84% for September 2026, similar to June 2026. Moving on briefly to the ETF segment, we continue to be one of the largest ETF players with AUM of INR 2.49 trillion, and market share of 21.12%, which increased by 135 basis year-on-year.
Speaker #2: Our share of industry ETF folio and volumes remain strong at around 45%. Our ETF average daily volume across key funds remains far higher than the rest of the industry.
Speaker #2: For gold and silver ETFs, combined closing AUM for NIMF was INR 882 billion, up 6.6% quarter-on-quarter. In quarterly average AUM terms, our gold and silver ETFs represent 32% of the ETF AUM, and 12% of the MF AUM.
Speaker #2: Moving on to our digital franchise, digital purchase transaction and new SIP registration rose to 9 million in H1, FY27, up 15% year-on-year. Digital business contributed 78% of the total new purchase transaction in H1, FY27.
Speaker #2: NIMF digital business continues to strengthen its focus on long-term investor behavior driving initiatives to scale business and deepen SIP adoption, while reinforcing confidence in the disciplined investing and market volatility.
Speaker #2: Now, I would like to briefly update you on the subsidiary and the gift city. Starting off with AI, under Nippon India AI, we offer category 2 and category 3 AI, and have raised cumulative commitment of INR 99.8 billion across various schemes of 14% year-on-year.
Speaker #2: In Q2, FY27, we raised INR 4 billion of commitment across various asset classes. Fundraising is currently underway for our listed equity fund, private credit fund, and direct VC fund.
Speaker #2: During Q2, FY27, we launched our second SMIT category fund, undiscovered India opportunity fund 2, a Nippon India credit opportunity fund, NICO 2, with the third capital call in Q2, FY27, is drawn down to the extent of 55%.
Speaker #2: On offshore fund, our managed AUM stood at INR 135 billion, while our gift city AUM stood at USD 45 million. Now, on to our financial performance.
Speaker #2: For Q2, FY27, revenue stood at INR 7.96 billion, up 20%, 21% year-on-year, and 4% quarter-on-quarter. Operating expenses stood at INR 2.72 billion, up 14% year-on-year, and flat quarter-on-quarter.
Speaker #2: Operating profits stood at INR 5.23 billion, up 25% year-on-year, and 6% quarter-on-quarter. Profit after tax stood at INR 3.24 billion, down both YOI and QOQ.
Speaker #2: However, this is mainly related to the exceptional item which I will speak about shortly. For H1, FY27, operating profit grew by 28% year-on-year, profit after tax grew by 12% year-on-year.
Speaker #2: Further, the board of directors has declared an interim dividend of INR 9.5 per share, along with the Q2, FY27 results. Lastly, I would like to speak about the exceptional item recognized in the financial.
Speaker #2: During the quarter, SEBI accorded its in-principle acceptance of the settlement applications filed by the company and its certain officials in respect of an ongoing regulatory matter relating to the past investment made by certain NIMF scheme in YES Bank 81 bonds.
Speaker #2: This related to the so-called notice received by the company from SEBI dated August 30, 2024, and subsequent settlement proceedings. Considering the time and the cost and uncertainty that is potentially associated with the generally prolonged legal proceeding, the board has decided to pursue the settlement process in the best interest of the company since it brings the matter to quietus.
Speaker #2: Which in turn allows the management to remain focused on its core business. As a part of agreed terms settlement terms, an amount of INR 96.76 crore has been paid comprising of INR 89.08 crore as a reversal of management fee earned by the company over the said investment, including interest, and INR 7.68 crore as a regulatory cost in respect of the company and certain company officials.
Speaker #2: The settlement amount of INR 96.76 crore has been fully paid and recognized in the financial result for the quarter and half-year ended September 30, 2026, as an exceptional item.
Speaker #2: However, further communication from SEBI is awaited. With this, I would like to conclude my remarks and open the floor for questions.
Speaker #1: Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone.
Speaker #1: If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question.
Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Shreyas with Nomura.
Speaker #1: Please go ahead.
Speaker #3: Hi. Thank you so much for the opportunity. First question was on yields. We have seen slight deterioration in yields as compared to last quarter.
Speaker #3: While other AMCs and peers have seen quarter-on-quarter increase in yields, can you explain why is this so?
Speaker #2: Yes. Hi, sir. Amol here. So the compression in the yield was mainly on account of the increase in the equity AUM and due to telescopic pricing.
Speaker #2: That was the remaining reason for that.
Speaker #3: Sure. I mean, what we have seen in peers is that the equity mix has changed and hence the equity yields have improved. In that relation, has our equity yield I mean, the mix in equity AUM, has it changed or has it been similar?
Speaker #2: If you look at our equity growth, that has been the highest in the industry. And that's why you see the compression in the yields, basically.
Speaker #3: Sure. Understood. And can you, through some light on the 81 bond case and what exactly it was, that was the second question.
Speaker #2: No, Shreyas, I parag here. So I think so we have covered in my opening remarks what the details of the case that the settlement which we have paid.
Speaker #2: We don't have anything at this point further on that.
Speaker #3: So what was the non-compliance that, you know, SEBI alleged regarding certain provisions of securities law, if you can explain that a little bit, please?
Speaker #2: Shreyas, there is nothing further to add on that. Appropriate point, we may come back and disclose on the sheet. But currently, we have covered in the financial and the opening remarks, so whatever we have to submit currently.
Speaker #3: Sure. My third question was on SIFs. How has been the process that we are taking when we can see SIFs being launched by the company?
Speaker #3: Because peers have said, and we have seen in the industry as well, that it has been a very important product and has been garnering a lot of flows.
Speaker #3: What's the strategy there?
Speaker #2: Yeah. So hi, Shreyas. How about the site? Of course, we as we have spoken in the past, you know, we definitely have started working at the, you know, the drawing board as to what will be our SIF launch strategy.
Speaker #2: We are, of course, awaiting for the SIF, you know, clearance to come in from SEBI. Once we get that, of course, we will be in the market to launch our ideas.
Speaker #2: And as we have also spoken, we have Andrew Holland and team who have been working on this space for the last, now, one year.
Speaker #2: And this particular category requires experience. We feel that we have enough experience on in the system to, you know, exhibit the two SIF strategies in the market.
Speaker #2: And at the right time, we will come and, of course, explain and launch our ideas.
Speaker #3: Sure. Thank you so much. Those were my questions.
Speaker #2: Thank you.
Speaker #1: Thank you. Participants, if you wish to ask a question, you may press star and 1. The next question comes from the line of Sunil with Diamond Asia.
Speaker #1: Please go ahead. I hear you. There's a lot of disturbance coming from your line.
Speaker #3: Hello. Is it better now?
Speaker #1: Yes, sir.
Speaker #3: Yeah. So thank you for the opportunity. I just wanted to ask you ask again on the yields part. So, sir, if we, you know, look at the yields for other AMCs as well, while they have also seen a mixed improvement, the decline over year looks sharp because this quarter we also have an additional day.
Speaker #3: So adjusted for that, the yields decline looks sharp. Now, is it just because of telescopic or maybe because of, you know, the commission to distributors that may not have been passed on because of the regulatory change?
Speaker #3: So if you can throw some highlights there because the drop seems a little high, if we compare.
Speaker #2: No, sir. Sunil, parag here. Just to tell you that our growth in the equity AUM is one of the highest in the industry. And it is purely on the telescopic pricing.
Speaker #2: Any changes due to regulatory change has already happened in the first quarter. So there is nothing on that in this quarter. This is purely due to the growth of our AUM and the flows which we are garnering, which has resulted in lower due to telescopic pricing and lower equity yields.
Speaker #3: Oh, okay, okay. Thank you, sir. And secondly, if you know, see the current market trends, a lot of our flows are coming in the small cap and the flexi cap and the mid-cap kind of schemes.
Speaker #3: But recently, you know, a lot of correction has happened in the small cap recently. A lot of MTF book has seen some drawdown over here.
Speaker #3: So how are we, you know, seeing investor thought process over there? Or because the flows in this category, if there's, let's say, see a sharp decline or redemption, so what kind of investor you know, psyche we are seeing over here?
Speaker #3: And if this correction continues, then what are the mitigants do we have? Because these are our technically are one of the biggest schemes. So how do we, you know, look at this category going ahead?
Speaker #2: Okay. Yeah. Sunil, so you know, if you typically see the Nippon India Mutual Fund flows, we have had flows in our traditional funds like multi-cap, large cap, mid-cap.
Speaker #2: Small cap and our hybrid funds. You know, the industry flows in small cap and flexi cap may be higher, but as you know, that we have stopped taking any lump sum flows in our small cap fund for the last three years.
Speaker #2: So what is happening is the money flow which is coming to us is more dispersed, coming into more multi-cap and large cap opportunities. Yes, market volatility does impact the investor sentiment.
Speaker #2: We are seeing now HNI investors slowly taking exits from large caps. You know, till about last month, the large cap category had seen some negative net sales, though our fund has not seen any negative net sales.
Speaker #2: But at an industry level, the net sales has been negative. So we have to wait and watch. As we progress from here, if the downside is going to be sharper from here on, then maybe some of the fund houses who have got flows in small cap and the other sector funds, et cetera, might see some erosion in might see some higher redemption.
Speaker #2: But from our perspective, we have a very, very strong SIP book which actually protects us in these circumstances, as we know that we have almost close to, you know, 3,200 crores of inflows coming in every month.
Speaker #2: Which is more structurally in nature, more fragmented, coming from deeper part of India. So we definitely have more you know, we have protection around the around net sales across our equity funds.
Speaker #3: Okay, sir. Thank you. This was very helpful. And just lastly, you know, if I may ask, in this current situation, what is the communication do you have to the distributor network you have?
Speaker #3: Because what's the communication right now to all the distributors, you know, what kind what strategies are you using or anything if you can throw some light on that?
Speaker #2: So, as I mentioned, you know, we have for the last, now, one year, we have been propagating hybrid funds. We have been speaking about multi-asset allocation products.
Speaker #2: We have been speaking about our, again, large cap, multi-caps, and more broad-based strategies. We are also bringing in a lot of fixed income focus into our distributors as we all know this industry is very lowly penetrated.
Speaker #2: When it comes to fixed income funds, typically in the retail and HNI space, we as a fund house have taken a lead much earlier.
Speaker #2: And, you know, the asset diversification along with some more you know, with lesser riskier lesser risk-oriented products is what we are trying to, you know, communicate.
Speaker #2: We do a lot of activities and communication with our distributors and
Speaker #4: investors around why should the SIPs, uh, you know, not stop in these markets because the, uh, you know, SIPs become more fragile, uh, if the long-term return starts becoming negative.
Speaker #4: So we are doing a lot of proactive stuff digitally as well as, uh, you know, face-to-face with our distributors to arrest these, uh, you know, investor behavior and volatility, uh, in the flows.
Speaker #5: Okay, okay. Thank you, sir. This was really helpful. Uh, thank you for answering the questions and all the best for it. Thank you.
Speaker #4: The next question comes from the line of Madhukar Lara with JP Morgan. Please go ahead. Hi, uh, greeting. Thank you for taking my questions.
Speaker #4: Uh, first, I, I'm not sure whether you gave this out or not. Can you give me the asset class-wise yield that you've got. Second, can you comment on how your net inflow market share is trending?
Speaker #4: So maybe you can give a comparison between, you know, 1Q and 2Q and whether you're seeing an improvement, decline, and, you know, some sense of there.
Speaker #4: And third, I noticed that in the equity mix, we've, uh, we've seen a little dip in the direct share. So, uh, what is, uh, really, uh, driving that?
Speaker #4: Is there anything that we should, you know, lead into it. Uh, yeah, those would be my, uh, 3 questions. Thanks.
Speaker #5: Time of your call, Amulya. Uh, so the yield part, uh, so the equity yield is 52 basis points, uh, debt is 25 basis points, liquid is 12 basis points, and ETF is 25 basis points.
Speaker #5: Oh.
Speaker #4: और ऑन द नेट इनफ्लो मार्केटशेयर आह वो भी क्या है कौनसा? या हाय मधुवर आह रिगार्ड तू दी फ्लोज आह यू नो इफ यू टेक कंपेयर क्यू वन एंड क्यू टू आह वी आर स्टिल इन दी हायर आह Uh, you know, double or higher single digit, basically touching around 10%.
Speaker #4: Uh, that's the net flows when it comes to equity. Uh, there has— there hasn't been any major deviation from the, from a flow point of view.
Speaker #4: The color of the money which is coming to us, as I mentioned, is, uh, you know, coming into more diversified funds as well as hybrids, which is where we would like the investors to participate and not get into NFOs and, uh, you know, smaller cap products which are there in the market.
Speaker #4: Uh, so, so we will continue to be in that camp, and that's probably helping us to maintain our net sales growth. Uh, when it comes to, uh, यू नो रेशियो ऑफ़ डायरेक्ट वर्सेस रेगुलर, मेबी दिस आर आर टेम्पररी क्वार्टरली फेनोमेना नथिंग तू रीड इनटू दोस नंबर्स, बिकॉज़ वी कंटिन्यू आर एफर्ट तू Uh, you know, for, for us it is flows which come into our funds and, uh, you know, typically HNIs try to exit Uh, when it comes to when there are market volatility, so it might skew the percentile of direct AUM in certain quarters.
Speaker #5: मधु जस्ट तू ऐड ऑन द ईल पार्ट, द ब्लेंडेड ईल स्टूड एट 37 डेसीज़ पॉइंट। सॉरी। राइट। कैन यू आल्सो सॉरी जस्ट ऑन द ईल
Speaker #4: Can you split the equity yield between arbitrage and, uh, the, the balance, like equity and hybrid funds, that far?
Speaker #5: तो जरूरी डोंट प्रोवाइड डेट किंड ऑफ़ बैकअप मतलब
Speaker #4: And we are, we are not very significant in arbitrage. We don't focus on that category. Okay, okay, understood. Thank you. Thanks, that'll be all.
Speaker #4: Thanks. The next question comes from the line of Mahak with MK Global. Please go ahead.
Speaker #5: Yeah, hi, uh, thank you for the opportunity. Uh, I have 2 questions. So first is on the employee costs. So, um, employee expenses have been largely लैक ऑन अ सीक्वेंशियल बेसिस सो जस्ट वांटेड टू यू नो अंडरस्टैंड हाउ शुड वी लुक एट इट फ्रॉम द बैलेंस ईयर पॉइंट ऑफ़ व्यू एंड गोइंग फॉरवर्ड फॉर द नेक्स्ट मेबी ओवर द मीडियम टर्म And secondly, my question is on the ETFs.
Speaker #5: So our ETF market share has been largely stable sequentially. However, we have seen some contraction in the volumes market share. So if you could just help us with some of your comments on the same.
Speaker #5: Yeah.
Speaker #4: So I'll take the ETF part first. Uh, so I think the, uh, if you see the entire, uh, ETF, uh, you know, market space इन दे फॉर इन इन दे लास्ट वन ईयर इफ यू डाइसेक्ट लास्ट वन ईयर इनटू टू हाफ्स फर्स्ट सिक्स मंथ्स वाज रन बाय बिकॉज़ ऑफ़ दी इंटीरियर कमोडिटी Uh, you know, momentum in the commodity ETFs.
Speaker #4: The flows were very, very strong. Uh, in the last 6 months, the flows have, you know, sort of slowed down on the commodity side.
Speaker #4: And hence the volumes look to be lesser. And of course, equity market being volatile, the inflows into the equity funds have Uh, you know, sort of slowed down.
Speaker #4: But when it comes to us as an asset management company, our flows continue to— the net flows into our ETF product continues to be strong.
Speaker #4: Rather, our net flows are higher than our market share. So, you know, so that's the, uh, that is how we are pegged in the system.
Speaker #4: The good part is, you know, The reason why our volumes are higher than competition and in the industry we stand out is because of, you know, like we have been historically talking about, we believe in volumes.
Speaker #4: So we have enough volumes in the, uh, in, in the exchange because of the strong retail base which we have built in all our equity ETF products.
Speaker #4: We have very strong, uh, you know, tracking error, uh, you know, our tracking errors are very, very competitive, and we have least, the least impact cost when it comes to ETFs.
Speaker #4: So investors do prefer us as a go-to, uh, you know, category, as well as the multi— multiple category, multiple options which we, which we provide to the investors.
Speaker #4: So, so from ETF standpoint, we continue to remain relevant in the market.
Speaker #6: Actually, so on the employee cost front, uh, probably, uh, the, the employee cost should remain in the similar range except for the new hires that we may, we may do to strengthen our, our teams and also Uh, if we spend on training or investment on that front.
Speaker #6: As I've guided in the Q1, on the overall cost front, uh, we maintain— continue to maintain our guidance of 18 to 20% growth over the next 6
Speaker #5: to a getting quarter. I just like to add more, you know, on this. You know, I mean, while on the mutual fund side, AMC, it will be almost flat, uh, but AF business, when you look at the consolidated That is where we plan to expand, uh, and I think we are in the process of, you know, uh, some new senior team members have joined and we are in the process of adding more, uh, professionals.
Speaker #5: So you may see, uh, incremental cost in our AIF subsidiary over next 3 to 6 quarters. Got it, sir. Thank you so much. Thank you.
Speaker #7: The next question comes from the line of Praesh Jain with Motilal Oswal. Please go ahead.
Speaker #6: Yeah, hi, thanks for the opportunity. Firstly, on, you know, while this is kind of a small decline, very small decline, uh, but on your unique investors count as well as your total folios, we have seen marginal declines in this quarter sequentially.
Speaker #6: Uh, anything to read into it? Any challenges that you're looking at?
Speaker #5: especially towards the exit rate of the quarter?
Speaker #6: Where we have also seen some bit of fund performance kind of weakening. So have we faced any challenges towards the end of the quarter in terms of client addition as well as Uh, flows in any sense?
Speaker #4: No, I think, uh, see, uh, good observation. See, what, what is happening is, uh, if you see, uh, the market, uh, because of the volatility in the market Uh, there has been, uh, uh, you know, the, uh, the investor flows into the mutual fund industry has also started slowing down.
Speaker #4: Okay, the, uh, the investor growth is— has, has been flattish. Uh, that's what is also reflective in the SIP industry AUM book as well as the, uh, the SIP inflows are also sort of flattening.
Speaker #4: Uh, when it comes to us, uh, we don't— we have not launched any NFOs also in the last, uh, say, 2 quarters. Uh, NFOs do have a tendency to bring in new investors.
Speaker #4: Uh, we stay away from that. Uh, second part is, uh, what we measure— we measure ourselves on the control levels. Our SIP— number of SIP folio growth continues to be positive, as well as our total investor acquisition is also positive.
Speaker #4: Some bit of moderation can happen because of market dynamics, but we are not looking at that as a major concern area. Because we still feel that there is a lot of opportunity for investor growth.
Speaker #4: But yes, there is a slowdown in the industry for sure.
Speaker #8: And secondly, sir, you know, while we attributed to slowdown in the industry, have you seen any divergent trends between a direct customer and an assisted customer?
Speaker #8: Um, and wherein direct, uh, the channel test what we've done is kind of indicating that direct customer seems to be churning far more than the uh, than the advised customers.
Speaker #8: So are you seeing that trend changing? And what would be your thought on the— thoughts on the new PMS product of mutual funds that has been allowed by SEBI.
Speaker #4: So, so from an investor, see, the direct investor and the HNI investor, uh, of course, you know, like I mentioned earlier also HNI investors do tend to have short cycles, and when it comes to volatility and 1-year, 2-year performance not reflecting in their portfolios Uh, as you have seen, you know, there has been a sort of a migration of investors to SIF.
Speaker #4: There has been some migration of investors into alternate assets. As well as, uh, you know, the direct bond and other, other categories where definitely investors are getting positive returns.
Speaker #4: Uh, so of course, in any market cycle, there will be Uh, you know, investor behavior which can change. We are also experiencing that, uh, behavior.
Speaker #4: So I think regarding this PMS, MF-only PMS,
Speaker #6: I think it's a very good new initiative by the regulator. It will help in expanding the market on ground, you know. So, and also it gets more and more, you know, advisors, you know, who've been advising, gives them a formal route to, you know, I mean help them, help their investors to invest.
Speaker #6: While it is very early to comment on it, how things will play out, but since they are supposed to— I mean, this is supposed to invest in mutual fund schemes.
Speaker #6: I think, uh, at Nippon, we believe— I think because of the long-term track record of the schemes which we have, I think we will benefit from that.
Speaker #6: But even more because of a very substantial position our strong position in ETF. A lot of this money will also— this indirectly can flow into us.
Speaker #6: But like I said, these are very early days. We need to evaluate how investors respond to it. But I think it will be good for the industry, and we also believe it will be good for established mutual funds, and especially mutual funds which are very established in ETFs.
Speaker #6: Got that. Thank you so much. Thank you.
Speaker #7: The next question comes from the line of Mohit Mangal with Centrum Broking. Please go ahead.
Speaker #5: Yeah, uh, good evening everyone and thanks for the opportunity. Uh, my first question is on employee expenses. So I was looking at your press release and it said that, you know, the ESOP expenses was about 16-odd crores for H1.
Speaker #5: Uh, and you've guided for about 60 to 80 crores for the entire year. So, so should we assume that your ESOP expenses would be higher for H2?
Speaker #6: Sorry, when you're referring to 60 to 60 to 60 crore that you mentioned, that was for the new ESOPs granted. That would— that the expense that actually would come over the period of 4 years.
Speaker #6: So, uh, and what we have mentioned, the financial results is basically about the only the new ESOP grants. So if you look at the overall ESOP expense For the quarter, it was around 155 crores, and for the half year, it was around 28 crores.
Speaker #5: Oh, okay. So actually I was looking at your press release of, you know, slide 12 of 14. So basically it said that, you know, uh, that, uh, your ESOP expenses were about ₹15.93 crore for the half year ended targeted level.
Speaker #5: The non-cash component of the employee benefit expenses.
Speaker #6: Okay. So for the year, for the year, the expense is expected to be about around 58 crore for the entire year. Okay, and for the first half it was 28 odd crores, right?
Speaker #5: Okay, understood. That's helpful. Second is basically on the offshore business. I mean, we understand that due to a lot of macroeconomic issues, the AUM has kind of declined.
Speaker #5: Uh, but are we doing something, you know, wherein we can increase the growth? Any, any particular strategy towards that?
Speaker #4: So I think the reasons for offshore AUM overall has been that because owing to, you know, the rupee-INR equation, rupee depreciation of the last 1 year or so Okay, there has been decline in flows from FPIs into India.
Speaker #4: Okay, what we have seen though is that you are seeing money come in real assets, but
Speaker #9: I think we will have to improve, uh, you know, that is just the global macros have to improve. And, you know, once we see, you know, the West Asian crisis possibly you know, nearing some resolution, you could see, you know, the rupee coming back, uh, you know, strongly.
Speaker #9: So that, uh, I think that is one of the main reasons that
Speaker #10: we are seeing both institutional as well as, uh, you know, retail flows from overseas. You know, uh, we are just— we continue to engage with important investors and placement agents overseas.
Speaker #10: So that continuous engagement is, is happening.
Speaker #5: Okay, uh, any particular newer schemes that you'll launch in the next 3 to 6 months?
Speaker #4: Uh, this is— you are talking about offshore or onshore? Offshore, offshore.
Speaker #10: So we would be looking at, uh, you know, looking at a couple of ideas, maybe feeders into one or two, or, uh, you know, through gift into our master funds in India.
Speaker #10: And there is also possibly a chance of, you know, a strategy of, you know, outbound funds with one of our strategic partners. But the— at formative stage right now, so we will not be able to really share too many details about it.
Speaker #5: Uh, understood, not, not a problem. Uh, lastly, in terms of the yield, so you said that, you know, that equity has, has been around 52-odd bps excluding arbitrage.
Speaker #5: And if I look at that, you know, in Q1 that number was around 54 bps. Uh, so, so just wanted to know that 2 bps was primarily on account of just telescopic pricing, or there's another element to that as well?
Speaker #5: Nothing to— uh, so there is, uh, it is mainly on telescopic pricing and the new flows which keep on coming.
Speaker #6: We are gardening them. That is the only reason. And obviously there is— will be between the various schemes across the equity, there may be some shifts.
Speaker #6: Otherwise there is nothing other than that.
Speaker #5: Understood. That's very helpful. Thanks and wish you all the best. Thank you. Thank you. Thank you.
Speaker #7: The next question comes from the line of Meghna Luthra with Incred Equities. Please go ahead.
Speaker #11: Yeah, hi, thank you, uh, for the opportunity. I just had a few questions. One around the gold ETF. I wanted to just understand what proportion of our SIP comes from gold, uh,
Speaker #4: Uh, we don't share, you know, team-level SIP book, but this will be a small portion of our SIP book because Mostly it is equity-oriented.
Speaker #11: Got it. And this comes in context of the recent restrictions on flow on FOF funds. Do we see any impact? And if yes,
Speaker #4: What sort of an impact are we assessing on this fund? Actually, uh, uh, the, uh, if you, if you just go back to 3 months back Uh, you know, the entire industry had stopped taking lump sum and last ticket flows into commodity ETFs.
Speaker #4: Uh, it did not impact the flows at all. Because, uh, you know, in, in, uh, in ETFs there is a buying and selling which happens.
Speaker #4: So even if there are investors who are coming in to build a gold or a silver portfolio the counterparty, uh, you know, there's always a counterparty to, uh, you know, create a market.
Speaker #4: So the net growth in gold tonnage is very, very insignificant. And even when it comes to current, uh, you know, which we have undertaken in the fund of fund It doesn't impact the ETF business because ETF still continues to be open for investors to come in and do, uh, their buying and selling.
Speaker #4: So actually ETF is more prominent when it comes to gold and silver rather than the fund of fund. So there, the buying and selling continues irrespective of flows being restricted in funds.
Speaker #11: Thank you. And, uh, just, uh, I, I just wanted to understand regarding the, uh, the expense or the one-time exceptional item on 81 bonds.
Speaker #11: Uh, we did not have any sort of provisions, uh, for it, right?
Speaker #6: So we, we booked that as an expense in the current quarter.
Speaker #11: Right. Uh, that's it from my side. Thank you.
Speaker #1: Thank you.
Speaker #7: The next question comes from the line of Abhijit with Kotak Securities. Please go ahead.
Speaker #6: Hi, uh, thanks. Good evening everyone. So my first question is I wanted to clarify the, uh, point on OpEx. If I got it right, you mentioned 18 to 20% growth for the full year of action.
Speaker #6: And just a clarification that given how we are heading into the current quarter as well in terms of the top line momentum, just wanted to clarify you're still kind of, uh, sticking to that guidance of 18 to 20% growth.
Speaker #6: Second question was on, on the flows, but more broadly for the industry and then specifically for Nippon, like 2Q flows were weaker than the first quarter.
Speaker #6: And if you could highlight like across all the channels like where have you seen, uh, flow pressure to be maximum, uh, for Nippon specifically?
Speaker #6: And third question is, uh, on AT1, just wanted to again, uh, check, uh, like what was really the trigger that we had to take this particular action in the current quarter.
Speaker #6: Was it regulatory driven? Was it like board discretion? If you can provide any color on that.
Speaker #4: Yeah, so, uh, coming to the first part, when it, uh, you know, uh, from, from the flows point of view, uh, you know, as I mentioned, uh, between the 2 quarters, our net flows has been more or less similar.
Speaker #4: But what's happening in the industry, if, if you are tracking the entire industry flows on the equity side, the pegging order of the fund houses are changing every quarter.
Speaker #4: Uh, the, uh, you know, there are a few new fund houses who have come in and started garnering assets because of the new strategies they have launched in the market.
Speaker #4: Some of the older fund houses, uh, you know, have started losing, uh, you know, market share there. Uh, so, so it's, it's a, it's a very interesting, uh, you know, a trend which we are seeing in the marketplace.
Speaker #4: Uh, Fund houses like us who have been trying to be in the traditional space, uh, you know, advocating large cap, mid cap, multi-cap, uh, you know, uh, the multi-asset strategies We continue to, uh, you know, continue to get flows which are, uh, normal.
Speaker #4: We are not getting any abnormal flows and, uh, we are happy with that. Uh, but there are, uh, you know, uh, AMCs which are— who are getting flows in certain categories because of the— as I mentioned, either it's a new fund or some existing fund has been repositioned.
Speaker #4: Uh, so that's how the trend line is shifting, um, and we are clear that we will continue to, to do what we think is the right for the— from an investor standpoint, and we'll continue to, to talk about our traditional products.
Speaker #6: So Abhijit, on the expense side, uh, I think so we have been mentioning that we will keep on investing for long term, and that thought process remains Obviously, we, we are watchful on, on the moment market cycles and all, but the idea is that it is important to keep on investing on technology, brand, on digital, on people, on various segments of business.
Speaker #6: That is, that is critical, and we will keep on doing it, but we will be mindful of the overall environment in the market.
Speaker #8: What was your third question? I just missed it.
Speaker #6: Uh, on the EAT1, sir, uh, like what triggered the provision, uh, this quarter. No, so we got the in-principle settlement from SEBI, and that is why we paid the amount and made the necessary provision as we mentioned in the opening remarks.
Speaker #6: Understood, sir. Just one follow-up for Chhattisgarh on the first point, uh, like if you can give some color on, uh, whether Nippon compared to rest of the like large listed space, uh, in terms of the market share, flow market share from the, the digital, uh, the self-directed channel.
Speaker #6: if it's like higher than the, the broader peer set, or is it lower, which is kind of leading into more stable flow behavior?
Speaker #4: Yeah, so, so I think that part of your question I could not answer. Uh, you know, the flows which are coming to us, uh, you know, the digital, uh, the fintech flows continue to be steady.
Speaker #4: Uh, and we, we being more of a retail fund house, uh, we continue to get, uh, higher share from our MFDs and Uh, you know, the both the digital channel and the MFDs continue to be our, uh, you know, uh, the higher— the contribution is higher from these 2 channels.
Speaker #4: And then we have the other channels contributing to our flows. Because these 2 channels are more retail-oriented, we haven't seen any sort of large impact when it comes to flows, uh, which I think is slightly different from the other AMC's behavior of inflows.
Speaker #4: All right, thank you so much. Thank you.
Speaker #7: The next question comes from the line of Shobhit Sharma with Elara Securities. Please go ahead.
Speaker #5: Yeah, hi sir, thank you for the opportunity. Uh, so I'm just to continue on the earlier participant question on the unique customers. So if I look at the incremental unique customer count, uh, or the acquisition or the market share on the incremental unique customers, I think it has been significantly lower than what it used to be in, in the previous 10 to 12 quarters.
Speaker #5: So any kind of any channel where we have seen kind of moderation in our counter share which is leading to this? And secondly, is it right to assume that because our flagship schemes, both small cap and mid cap, has grown faster than the overall equity AUM growth, uh, is actually leading into the yield dilution?
Speaker #4: Uh, so I'll answer the first question, then maybe Parag can take the other question. Uh, see, uh, um, see, the investor count behavior, as I mentioned a few questions, few, you know, to the previous participant.
Speaker #4: Uh, the NFO, uh, you know, NFOs, when they come in the market Uh, still, as an Indian investor, the ₹10 is an attraction, okay?
Speaker #4: Uh, and whenever any NFOs who have been— which have been launched by the new AMC who are coming in the industry, as well as some of the existing AMCs having launched some new ideas, that definitely attracts, you know, volumes both digitally as well as through channels.
Speaker #4: Uh, we definitely are away from that space because we don't want to, uh, you know, in a market which is very volatile we would not like investors to come in with an experience which, uh, in funds which don't have a track record.
Speaker #4: So, so we, we stay away from that. Hence, maybe you are finding us you know, flattening on the investor count growth. But let, let me also say, uh, you know, which has also been communicated in the opening remarks, that we crossed the 4 Uh, for, uh, 40 million, uh, uh, folio count in this quarter.
Speaker #4: So 40 million folio count and 2.5 crore unique investors. PEXAs at 37% of the total unique investors in the MF industry, which itself is a very large number, and that is incrementally growing.
Speaker #4: for us. So few lakhs here and there should not, you know, probably, uh, you know, worry us because we are definitely growing our investor base.
Speaker #6: So with the mix, basically the overall yield has been dropped mainly due to the yield on equity. With the growth of AUM and the new flows which we are getting, that has impacted the yield overall and, and the mix between the various schemes across the equity.
Speaker #6: Nothing specifically on the distributor or the investor side to read into it. It is generally a growth and flows which are coming.
Speaker #5: Just a small follow-up, uh, if, if you can give us some color on if, if there is an NFO launch which happens, so which is the channel which actually helps in garnering most of the flows?
Speaker #5: Because I believe you are pretty large on the, on the fintech side and the MFD side. So if you can give some color around that, that would be helpful.
Speaker #4: Yeah, so, so we, we have stopped launching NFOs, so I can talk about the industry, uh, because we behave very similar. Uh, see, whenever any new idea is launched in the market Uh, the, the retail comes in.
Speaker #4: So the retail comes in through the MFDs and the fintechs. So these 2 channels are the go-to channels for any asset management company. And then the remaining channels like banks and the direct investors or the wealth managers, they come in.
Speaker #4: So it is definitely skewed towards the, uh, 2 retail channels. And see, today mutual funds are coming in from 300 locations in, in India.
Speaker #4: So you know, getting investors from any part of India becomes convenient because of— because the fintech reach is very large and the MFD distribution network is also very, very strong.
Speaker #4: So these 2 are the go-to channels for any fund to be launched.
Speaker #5: Oh, okay, understood. Thank you and all the best. Yeah.
Speaker #4: Thank you.
Speaker #7: Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Speaker #6: Uh, thank you all for taking out the time to join us on the call today. If you have any further queries, we will be happy to address the same post the call.
Speaker #6: You can get in touch with Arash For those, and thank you, thank you.
Speaker #12: And you, thank you very much.
Speaker #7: Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
