Aditya Birla Sun Life Amc Ltd
NSE:ABSLAMC
Earnings Call Analysis
Q2-2024 Analysis
Aditya Birla Sun Life Amc Ltd
India's economic growth remains strong, with a solid 7.8% GDP increase, indicating resilience amid global uncertainties. The mutual fund industry experienced notable growth, with average assets under management (AUM) climbing 20% year-on-year to INR 46.98 lakh crore from INR 39 lakh crore, signaling a healthy investment climate. The inflow of investments into new fund offerings and various fund categories, including equity and hybrid funds, evidences investor optimism. The industry's Systematic Investment Plan (SIP) flows grew by 24% year-on-year, reinforcing the trend toward regular investment habits among a growing investor base of 15.9 crores, a 14% year-on-year increase.
On the performance front, our company's overall average AUM, inclusive of alternate assets, has grown by 10% year-on-year, crossing INR 3.24 lakh crore. Drive for growth and recovering from market share loss has been influential in our company's strategy. We have launched focused fund offers combining existing successful funds, which have been well received in the market. Additionally, our equity funds have shown improved performance, beating benchmarks and peers, and we have strengthened our team with new key investment officers. In fixed income, the team has capitalized on opportunities in U.S. treasury ETFs amid high global bond yields, looking to entice investors seeking U.S. dollar assets.
Our passive business offerings witnessed substantial growth, rising 68% year-on-year to INR 28,400 crores, while also growing our customer base to about 5.4 lakh folios. We are actively raising funds for the India Special Opportunities Fund in addition to launching innovative products like the ABSL Global Emerging Equity Fund. These moves aim to enhance our position in the alternate investments space and to capitalize on emerging market opportunities, which is expected to improve overall profitability.
Financially, our company's revenue from operations grew by 8% year-on-year, reaching INR 3,350 million, while operating profit increased by approximately 5% to INR 1,811 million. Looking ahead, the pipeline includes products such as ABSL Structured Opportunity and Index-Linked Funds, part of our strategy to grow the alternate business. Our commitment to building customer base and improving profitability—both from alternate business and Portfolio Management Services (PMS)—signals intent for sustained growth.
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Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Earnings Conference Call of Aditya Birla Sun Life Asset Management Company Ltd., hosted by InCred Equities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Jignesh Shial from InCred Equities. Thank you, and over to you, sir.
Thank you, Michelle, and good evening, everyone. On behalf of InCred Equities, I welcome all to Aditya Birla Sun Life AMC 2Q FY '24 Earnings Conference Call.
We have along with us Mr. A. Balasubramanian, Managing Director and CEO; Mr. Parag Joglekar, Chief Financial Officer; and Mr. Prakash Bhogale, Head of Investor Relations. We are thankful to the management for allowing us this opportunity.
I would now like to hand it over to Mr. A. Balasubramanian, Managing Director and CEO of Aditya Birla Sun Life AMC, for his opening remarks. Over to you, sir.
Yes. Thank you, and good evening to everyone, also for the introduction for this call. I hope you all had the opportunity to go through the earnings presentation, which is available on the stock exchanges and our website. Let me quickly give you the broad economic outlook and the mutual fund industry update before I give an update on our performance for the quarter 2 of 2024. Broad economy, the growth story for the country as a whole remains intact and resilient despite global macro uncertainties. The latest quarterly GDP release at 7.8% was robust and broad based and economic conditions remain favorable with various high-frequency macro indicators, including CapEx gaining ground and strong GST collection and PMI numbers and better capacity utilization and credit activity, all of them leading to a reasonably good positive outlook.
And also what led to more credence to the strong growth outlook is that it is unfolding while maintaining macro stability parameters and strong global advances. The Indian markets have experienced a widespread recovery, which was demonstrated by the NIFTY 50 recently achieving a significant milestone, and the inclusion of India in the JPMorgan Emerging Market Bond Index has further elevated India's global perception and signifies substantial progress for the economy on bond flows as well interest rate and rupee gaining strength then.
The festive season has started in full swing, and on a cheerful note, which is poised to drive higher consumption India and I uphold the strong positive sentiment in the market. The domestic economy is structurally strong with sound fundamentals and we expect they will withstand the recent geopolitical volatility as well as the market volatility assessed recently.
With respect to the mutual fund industry, as of 30 September 2023, the Indian mutual fund industry quarterly average AUM grew by 20% on a year-on-year basis, reaching [ INR 46.98 lakh crore ] versus INR 39 lakh crore as on 30th September 2022.
During the quarter, the industry witnessed net equity sales of about INR 99 crores through new fund offering and also the existing funds. And within the existing funds in the hybrid categories, arbitrage, small cap, sectoral, thematic funds, multi-allocation funds, multi-cap and mid-cap funds, they're the highest net inflows. The mutual fund industry also witnessed good inflows coming to the NFO collections to the extent of about [ INR 20,200 crores ].
The industry SIP flows grew by about 24% year-on-year from INR 12,976 crores in September 2022 to INR 16,042 crores in September 2023. The total number of mutual fund investors also stood about 15.9 crores investors with an increase of 14% on a year-on-year basis. The individual average AUM grew by 24% on a year-on-year basis and contributed to 59% of the total AUM. And B-30 cities accounted for an average of about 17.5% of the total industry AUM.
Coming to the ABSL AMC performance. In Q2 FY '24, our overall average assets under management, including alternate assets, reached INR 3,24,000 crores, growing by 10% year-on-year compared to last year. The mutual fund quarterly average AUM has crossed INR 3,00,000 crores, as I mentioned earlier, about INR 3.24 lakh crores. And quarterly average assets under management also crossed INR 1.3 lakh crore size.
SAP flows have increased from INR 939 crores of last year to INR 968 crores in September 2023 with an overall full year count being somewhere around 80 lakh full year's time. In our overall mix between individual and institutional customers, individual investors account for about 52% of our total assets then.
In the recent months, our business has been proactively pursuing many strategic initiatives in order to drive, one, the future growth; and second, the broad market share loss that we have seen in all data that there are certain steps that have been taken.
In fact, the steps that have been taken have also been yielding positive results, which I would like to highlight as follows. On the investment side, most of our equity funds are not only between -- not only beaten the benchmark in their respective category on a 1-year basis, but also the peer average with the higher margins compared to the last few quarters, which gives me confidence that our equity fund performance, which is a bit lagging behind are coming back with changes that we have made.
We also strengthened our team by bringing in core CIO equity very recently and which has come on board and it was likely to drive the broader investment processes as well as work along with the team to take the game to the next level.
And furthermore, we've also given growth to our internal talent who have been part of the system for a good number of years and larger responsibilities now take on a [ better response ] in the fund management side while they continue to serve our senior analysts for a few large sectors, which are key to the overall economic growth.
Under the guidance of our CIO overall, [indiscernible] these changes have brought in [ newly regained ] confidence, new energy and poised in full momentum into our efforts [ takes time ] our equity assets further.
On the fixed income side, the team is led by Kaustubh and Sunaina, have always remain committed to lead the fixed income at pace with robust performance and also the -- create a strong presence in the fixed income market.
With the global bond deals reaching their highest levels over a decade in developed markets, our U.S. bond deals are about approach 5%, which allow for an attractive entry point for investors looking to invest in U.S. dollar assets.
And to seize this opportunity for investors, we have, as I speak, launched a fund of fund investing in U.S. treasury ETF, providing a powerful tool for diversity and [indiscernible]. Additionally, on the domestic front, addition of global bond indexes by JPMorgan also provides an opportunity to investors to consider fixed income as an asset class for them to invest. We identified certain products in this space given the view that interest rates remain higher for longer.
Therefore, we continue to keep a high focus on building the fixed income space and identify new opportunities in order to build our [ retail ] participation in the fixed income product offering.
Our strategic efforts across various channels to enhance our market presence have delivered favorable outcomes in this quarter. In fact, we started a company called Focused Fund offer, basically combining the existing funds, which has got a greater acceptance in the market. At the same time, those products also have got a long -- data for long-term performance to back it up and has yielded positive results and gained good traction in the marketplace.
As a result, we have seen an upswing. In those finances therefore, Focused Fund what I call it, and key numbers on various parameters, especially gross sales are the things we have seen good improvement, which is again a reflection of the focus that is bringing in on building our retail is something should yield results.
At the same time, the sales ecosystem is created to support the entire retail initiatives such as the virtual relationship manager, Sampark and service to sales around [ responsibility ] and also digital distribution has also been yielding results as the time progresses.
Coming to alternate and passive business, our passive business offerings grew by about 68% on a year-on-year basis to INR 28,400 crores as on September 2023. We have also been growing our customer base to about 5.4 lakh folios. Our current product offering in this category runs almost about 40 products as it stands today.
On the AIF front, fundraising is underway for India Special Opportunities Fund category AIF, which have recently launched he on the lines of factors that we have launched in the AIF product with [indiscernible] funds. On the back of that, we have product pipeline launch in this area as well.
After setting up of GIFT City, as we all know that we are the first one to take initiatives in the mutual fund industry to create [ our person ] in GIFT City. In fact, we have launched the industry-first ABSL Global Emerging Equity Fund. This strategically feeds into emerging market equity fund of global boutique investors, enabling our investors to access and benefit from emerging market opportunities. We have closed this fund as the first fund we have closed and we garnered close to about $11.2 million assets in this fund. Of course, now it's open for subscription for the next incremental money.
Our upcoming product pipelines include ABSL Structured Opportunity Fund in the Category II AIF, as well as Index-Linked Fund in the Category III AIF. That's something the product pipeline we have created in order to build the alternate business, want to get more customer base as well as improve overall profitability coming from that alternate business as well, including PMS.
Moving on to conclude the financial number for the quarter. Our revenue from operations for Q2 FY '24 was at INR 335 million versus INR 311 million -- sorry, INR 3,350 million versus INR 3,111 million in Q2 FY '23, up by 8% on a year-on-year basis.
Operating profit for Q2 FY '24 was at INR 1,811 million versus INR 1,728 million in Q2 FY '23, up by about 5% on a year-on-year basis.
With this, I'd like to conclude and open the floor for any questions and observations that you may have on our current strategy as well as future strategy. Thank you.
[Operator Instructions] We'll take the first question from the line of Dipanjan Ghosh from Citigroup.
Firstly, to data keeping questions. If you can give the SIP AUM number for 2Q and 1Q and also the overall employee base for 2Q and 1Q?
Second, if you can just give some color on what is the current payout in the market and your yields -- net yields in equities on the blended versus the incremental yields that you're getting on fresh business? If you can give some color on that. And lastly, you mentioned some points on strategies that you've adopted to kind of stabilize the SIP market shift. So if you can give some color on incremental trends in October and November and what are the strategies, if you can outline some of them. Those are my questions.
I'll just ask the first question to be answered by Prakash. And on the margin front, I'll request Parag to answer. The last question I'll answer.
Dipanjan, the SIP AUM for the Q2 FY '24, which is September is INR 60,814 crores. For the last quarter, it was INR 57,543 crores.
The number of employees in September is 1,437, which was 1,449 in last quarter.
Dipanjan, the yield on equity remained more or less similar in the range of around 70 basis. And the yield on flows -- new flows will be in the range of around 55 to 60 basis.
I have it correctly 55 to 60 bps on fresh, right?
Yes. So we generally share around [ 65% to 60% ] of the total [ DDR. ] So depending on the scheme, it comes -- generally, it will be in the range of 55 to 60 basis.
Got it. Got it.
With respect to, Dipanjan, on the SIP strategy, one, in order to support SIP strategy, we did launch a series of the SIP product such as Sampoorna SIP that we just launched, as well as there is a feature that we created. In fact, the entire retail team is, one, focusing on building size in that thing. That's why we have also seen in our overall SIP incremental basis, there is an improvement in terms of ticket size as again coming from the Sampoorna SIP that have started to grow. It's just a small number is coming in, that's something we have done.
Second is having seen improvement in performance, we're also, of course, working closely in terms of the teams that one gets upgraded from external rating fund [ that we have already seen ] on a large cap fund have moved up in star rankings, which essentially reflects on improving performance, which also, of course, get featured in various platform, uses the data point for pushing the product.
And second, we're also engaging with the online platform, which, of course, have been quite aggressive in terms of building SIP book recently. We have been having engagement with them and see the improved performance of the equity schemes, where all you can fit in on various categories, done some analysis and basis which we're also engaging with them, which I think gives me confidence that, yes, we'll see some improvement coming in the space.
And third, of course is given a fact that the markets have been quite volatile recently, I think SIP is something which we continue to believe that the best way to participate in SIP, therefore, increase the engagement level with all our partners, especially MFD partners who have been also contributing quite well as well as some of the national distributor partners more than the banks that have been contributing quite nicely on the SIP book.
These 2 engagements that we have done in the recent past. I think all the 3 of these activities that I just mentioned about should help in actually improving the overall, one, the registration, therefore, the gross number improves; as well as the net number that currently are about INR 970 crores then targeting the number should cross INR 1,000 crores kind of a number to start with and then move up in the rank. So that is why we are doing it.
Of course, we also launched 1 NFO as I speak, I just added today, which is Transport and Logistic Fund. And normally, what happens is NFO 1 not only give the incremental AUM, it also gives a new customer base. It also helps in getting new SIPs and that's something should help. Even the U.S. bond deals that have started, of course, it's in the mutual fund platform. It does not have any restriction in terms of what the minimum ticket size and we can participate. We're also seeing some really good participation coming in the fund also from retail side.
So all these initiatives makes me feel that I think we will see some -- the combined efforts should see that improvement coming on the SIP space there.
Bala, sir, if I can just squeeze in 1 small question. If I look at the industry and where incremental SIPs are coming from and if I look at your market share losses, can you give some color on what would be your accounted shares across all the major channels like you mentioned that you're working closely with a digital partner. So if you can give some color on what the mix would be internally or where you're probably seeing some pressure or where you're kind of probably higher than your blended market share? If you can give some color on that from a channel perspective.
Just on a broader basis, there are 5 channels. One, of course, AIF; second is the bank; and third is the MFDs; and fourth is the digital; and fifth is the direct.
In terms of the channel-wise contribution, the significant contribution on an incremental basis is coming from the digital platform. That's something we are paying for our various strategies apply that we discovered -- or the strategy that we applied and basis which we can engage with them, give them some kind of input in terms of where our product can feature basis which we can actually get some incremental market share. That's something we have already been working on, which includes Groww, Paytm, PhonePe, Kuvera and so on and so forth.
The other channel, direct as a channel, on an incremental basis also is contributing. In fact, we set up a separate team of people, of course, comprising about 30 people to drive our direct. In fact, we have seen contribution from this team on a quarter-on-quarter basis is showing with the sells. And also, we have set a target for each of the branch locations to also keep a high focus on direct as a business, building in fact part of our customer expansion strategy. That's something is contributing to the industry. And even for us, is something we are keeping our focus.
Third, of course, is the IFA channels continues to remain active. But of course, incremental growth from all the traditional channels is not as high as what we are seeing on the digital platform and direct platform. So that is something, one, we can maintain our strategy on the traditional channel. These are the 2 channels also we are revisiting how we can get higher market share in this space, for which we have taken some steps, as you just mentioned.
[Operator Instructions] We'll take the next question from the line of Prayesh Jain from Motilal Oswal.
So just firstly, on your product launch pipeline. So what are the products that can be envisaged in the, say, next couple of quarters?
Yes. One, of course, we already started, the fund we have launched one currently. The 2 funds, which are currently open. One is the U.S. bond yield fund, which is 1- to 3-year and 3- to 10-year duration. We were the first and largest product to take -- to provide an opportunity for Indian investors to participate in the best [ industry ] in the world. And reason that, of course, the non-larger deals are high and the other benefit that could come in terms of any potential operation that come next year is that something we have done.
And this product is going to be open-ended product, too, which is new fund we have launched now. And after the closure, it will be open for subscription.
And as you know, that total limit that's available for this product for the whole industry is about $800 million. And we have limit about $200 million in the sales. And hopefully, [ flexibility of price ] stays quite extensively.
The second is the Transport and Logistics Fund. Steadily been having a roadshow across the country. And we were the third or fourth one to launch this product in the space. Again, we see real [indiscernible] India story. This product has got longer-term shelf life there for a launch product, which again started today, is likely to close on 10th of November.
And third, of course, we have AIF product pipeline we have created given the fact that we had good success on the first AIF launch that we have done, currently close to about INR 900 crores. We have created 2 pipelines, the Phase 1 special opportunity -- Structured Opportunity Fund in Category II as well as Index Linked Fund for Category III funds. And these 2 we are doing.
And fourth, of course, is -- subject, of course, getting clearance from SEBI. We have plan account fund with -- could be coming in with Harish Krishnan coming on board. We also plan to have a quant-based fund, which again will be driven by the Co-CIO of Equity supported by the quant managers whom we also recruited and likely to be onboarded soon.
These are the immediate product pipeline that we have. And as we see opportunity in thematic category, we'll continue to keep that as a focus. As you know, that given the fact that we are the payroll fund and the various attribution of things have been given, we'll have a limited scope for a new fund offerings, but still within that we'll operate in terms of looking for opportunities in large-sum fund sets.
On the yield front, the yield improvement in this quarter is primarily because of the mix, and right, there's nothing else to it?
Yes, yes.
Anything on the debt side where the mix has changed, then I reacted favorably?
Yes, there is a slight uptick in the debt side also due to mix and generally opportunity to have a higher -- a little higher income. So anyways right uptick on debt side also and the other reason is the mix change towards the equity.
What would be the debt yield in the quarter?
Debt yield will be around 24 to 25.
25 basis points.
Yes.
Okay. And on the sales front, we -- in the last couple of quarters, we -- our monthly run rate has been much -- has been declining rather than industry which has been hitting new highs. Would you ascribe only that to performance? Or what else is playing out there?
One is mix, I would say, Prayesh. I think I'll just give you some color of the past. I think we have been pioneer in building SIP for very long in the Indian mutual fund industry, even much ahead of most of my -- the key competitors. And building SIP is a way of building our business. Therefore, we had a huge subscriptions coming almost about 5 years back [ MFD ] for about 5 to 7 years. And -- very ahead of time. So that's one. Therefore, the incremental AUM from equity would, of course, gone to some other people as well.
And second, of course, we did go through 1, 1.5 years of equity performance lagging behind competition. They've been last 1.5 years that also led to significant contribution coming from some of the online platform, which I mentioned about it. I'm only happy to say that they gave us a quick briefing on how the steps that we have taken in terms of building back the performance, which I'm happy to say that we are seeing a significant improvement, which ultimately should lead to improvement on the overall participation from all channel partners, which, again, I'm saying it in terms of acknowledgment, first one, that industry, the participants should acknowledge. Yes, the performance are on track or back on track. And secondly, of course, willingness to give always is there.
And these 2 things going well, I think we should see that coming back. As I said, the online platform [ has a goal ] better than certain QAAUM models that's why you would have probably seen the rate of growth for rather than top 10 is much higher than the first 10. It's also coming from the fact that stabilization also comes to the MF world offering also contributes to overall success. It's not just coming only in existing funds. It also comes in the new fund offering.
It's a combination of these 3. So -- but net debt, I think our renewed focus, we are bringing on 3 areas, I think, should help us in building back the momentum for that.
Just last question. How has been the NFO commission, particularly for your newly launched NFO? And how has been the industry?
Yes, trend in industry.
We haven't launched anything currently, Prayesh.
Okay. But what would be the trend in NFO commissions in the industry, whether -- because we've seen in the first half there was some relief. And although AMCs had been talking about some cognizance about commissions inching back again or how is the trend?
Generally, it will be slightly higher than the normal sharing, which we do in the normal sales of our existing funds. NFO, generally, you estimate some amount and generally accordingly pay the brokerages. And depending on the collection, which you do, the amount differs. But it will be slightly higher just for -- because it's a new fund offer. So we need to create that traction. It's slightly higher than the existing one.
Yes. What is interesting about NFOs is your expense, of course, starts at the higher slab. And as it is become bigger, it goes down. To the extent that the [ payout to land ] is favorable to the distribution community, no doubt. But still, at the end of the day, the broad principle that we have, it is to make the product more profitable in whichever way is possible. At the same time, remain remunerative for the distribution channel and yet doesn't become too costly for the investors.
These are the 3 combination put together. I think that's more or less remains from a strategy point of view. And anyways we operate within the overall [ ideal ] guideline that in otherwise all of us are supposed to operate there.
We'll take the next question from the line of Lalit Deo from Equirus Securities.
Sir, just a question like so last quarter, we have highlighted that we have selected a pool of schemes where we have seen improvement in our performance. And then flow market share has been improving.
So could you tell us like what is your strategy over there? Like have we added any more schemes over there? And what is our [ last ] market share in the last 3 to 4 months over in those schemes, particularly?
Yes, Lalit. What we did is, one, the basket of products, which we are to build size at the same time acceptance in the market was very high, up on the longer-term performance [ in the style of ] managing these funds and also relevance of this product that we have seen an improvement such as the large cap fund and flexi-cap fund as well as small-cap fund.
Even at small-cap fund we have seen inflows into the small-cap fund, though the flows will not have been as big as some of the other key competitors would have seen. But at least on an incremental basis, we have seen inflows. And that's also being reflected in the form of overall growth volume on these schemes improving, which again reflection of how the focused strategy also is working.
And even moving forward as well, we'll keep identifying the product that have got 1 acceptance. And at the same time, from a relevant point of view remains. And third, of course, we can also build the volume. That's something strategically applying it. And that should actually lead to both improving the gross sales contributions as well as net sales contribution.
Yes. Just to follow up in this, so within these schemes like currently, what would be our -- qualitatively, what would be our gross smart flow market share in the last 3 to 4 months. Like if any quantification could be helpful.
Yes. No. Generally, we do not disclose this number. That is not specifically given out anywhere. But I can only say that what we have seen in the previous quarter -- from the previous quarters almost, we have seen an improvement of about 3% to 4% on an average out of these 3 schemes.
Sure, sir. And sir, on the expenses side. So we have -- so during the quarter, we have seen it on a sequential basis it has remained in the same range. So like what is the outlook on the expenses for like FY '24 for the remaining 2 quarters in FY '25 like?
So Lalit, the expenses have gone up slightly on the people side. This is mainly due to the increments, which we had happened in the month of -- in this quarter that has resulted slight increase in that.
And the other expenses have gone up on the fees and commission, which was towards the [ AEI ] commission, which we had paid, which is getting amortized over the period. So this is the main changes.
On people side, I think it should remain in the similar range or if there are any hiring which we do, then slightly it may go up. But otherwise, should be in the similar range.
[Operator Instructions] We'll take the next question from the line of Abhijeet Sakhare from Kotak Securities.
Just 1 question in terms of the steps that has been taken. Any other major gaps that need to be filled in either on the talent side or on the distribution side?
Carrying -- one of the areas, of course, we, of course, keep looking at improving the contribution, one of course are the retail side, bringing -- I think we did have seen -- we had seen some talent attritions as it happened across our industry. Therefore, that one part remains a high focus area. Second is beefing up the team, especially on the credit opportunities that we are seeing. We have, of course, 1-member team. We are looking at building the team so that we can offer more product in the fixed income space, especially credit-related opportunities. That's something we are beefing up.
And third is our offshore contribution has remained somewhat flat for quite some time. Once again, given the fact that India has been the forefront in getting inflows from overseas, again, we're revisiting our strategy in terms of what are the incremental steps that we can take both on the people as well as on getting assets from some of the mandates that we already have. We have similar mandates whether we can win from others -- from [ institutional ] investors based and how the GIFT City can actually help us in building the space, that's something we are working on it.
And these are the key steps that we are taking. And the skill, of course, is our ongoing thing business, the specific one that we do, the talent identifying and getting -- bringing some external talent wherever there's a need. And then both, of course, go hand in hand. And that's something we are -- it's one of ongoing stuff for our business to give on that space then.
And on the investment side, of course, the last time also have mentioned that we'll further strengthen and what we have done already giving the internal existing talent, highly skilled internal existing talent, and bring in external talent and both the combinations we have already done as far as the mutual fund investments is concerned.
[Operator Instructions] We'll take the next question from the line of Devesh Agarwal from IIFL Securities.
First question, sir, is slightly on a macro thing. In the past, we've been talking about financialization of household savings, and some of the recent data is suggesting that there is a reversal in that trend. And next financial savings have seen a bit in terms of within the household.
And so in that light, how do you see although we understand that the flows have been pretty strong for equity segment over the last 3, 4 months. But going ahead with this trend that we are seeing and also the interest rate on FDs has been pretty high, do you see any risk for the inflows into the equity segment?
Yes. I think interesting, Devesh, while the view, of course, keeps getting formed linking to the market, definitely one thing that seems to have got established for the industry, even for ourselves, the SIP way of investing is gaining more and more strength.
If I just look at it, the broader basis, so add up the numbers contributing coming from SIP, the number coming from NFOs and then a number coming from existing schemes, increasingly, the contribution coming from SIP has been going up. And the lump sum investments have not been going as much as, which normally grows, which again reflects the one-off view of the market. At the same time, conviction of profit and equity from longer term point of view that's coming to the SIP. That I see is a trend emerging. Second is, we still have a lot of untapped investor base. But over certain time we have only 4.2 crores, 4 crores unique in customer base. And we have [indiscernible] about 52 lakh customer base. And these numbers can easily double in the next few years given the fact that interest rates have been quite high, but not as high as somebody to drive the money from equities to either come FDs and other things. Therefore, the wealth creation aspiration still remains.
Therefore, I believe equity will continue to be attractive from investor's point of view. But of course, if there is a correction in the market, any charge that I can generally have seen historically, it's put the break on the flows and SIP generally gets slowed down, which you have seen historically. We have seen after many crisis, after every crisis in the past. I would assume this time I'm not rolling out a more trend like this.
But only thing in this trend could be a little better than the previous trend we have seen. Therefore, I don't see a significant dip in terms of growth there.
But one area where we see the household savings could potentially come into the mutual fund space despite the tax benefit not being there, which is the fixed income space.
The carry-in fixed income schemes have been pretty good, ranging from 7.5% to over 8% kind of carry. And we also have a view that interest rates will remain higher for longer. We are setting up a focus in terms of -- in the current market conditions, if fixed income could also be [ one ] suitable opportunity for investors. That's something we are pushing in.
Therefore, we'll probably see increased participation coming both in the fixed income space as well as the hybrid space like multi-asset allocation fund if something is invested in all the 4 asset classes. Again, people would like to use the hedge for any equity market volatility. That is what something I see is overall momentum.
And lastly, today, if you look at the INR 43 lakh crores, a significant proportion of assets coming from equity. And any normal basis, it could be 50-50. It could be towards equity and debt or maybe in some conditions, it could be 45-55 towards equity and the debt, assuming that the [ general ] facilitation model gets set in. But naturally, other asset classes will grow a little faster if the momentum of the way to the market, I guess, altered by -- for any unknown reasons.
Understood, sir. Sir, you did mention that given the increased contributions coming from SIP close, the overall stickiness is kind of increasing of the net flows into the equity segments. . I just wanted to understand, based on the kind of investors that we have, generally, or is the tenure for these SIPs that gets [indiscernible] and if tomorrow -- this is again, a hypothetical question, if markets would fall, say, by 10%, 15%, do you think that the stickiness will be there or there could be some churn in terms of these investors not reopening the SIP. And to that extent, the SIP can also be addressed.
Sure. See, I think one of the areas where I think people like us who have been building SIP for quite some time with the longer-term goal in mind, definitely, those assets will be the key that we historically have seen. But you must also have to accept the fact that all the incremental large subscriptions coming into the online platform, it will be largely a good mix of millennials and first-time job -- the first-time job kind of people who get employed.
These are the people generally tend to move away from the market. Their experience, it doesn't meet up with their own expectations of making quick money and so on and so forth.
And these are some of the trends, I think, will always evolve. My belief is these investors also learn lessons from this kind of behavior in the market, and therefore, they become a long-term investors when they come back to the market once again for the second time. So that is what historically I have seen.
And this trend, I don't think we should also rule out [indiscernible] canceled. It normally happens. But as long as the macro acceptance and the -- what we call the registration number keeps rising, even with the cancellations, I don't think we should worry about it because those guys, again, I have seen them coming back in the market then. Maybe they'll come after a delay, but of course, I see it coming back to the market also after sometime then.
But millennial is probably what you said is right. Millennials would always test the water for some time, and they may tend to cancel it and then restart once again.
Sir, any number that you can share of this INR 15,000 crores flows that we see on a monthly basis, how much would be coming from this online channels or millennials?
That I mentioned, I think, for the quarter just whatever the number I saw it was about 37% or 38% were coming from online platform. Basically, the digital platform. Roughly about 39% of the various channel concepts I mentioned above, the traditional channel and then digital channels and direct channels. The digital channel has been -- they have currently become the larger contributor, again I see coming from these millennials, [ youngsters ] coming on board, INR 1,500, INR 2,000 kind of ticket size. And they generally tend to buy and sell kind of behavior obviously there. That is what I see currently.
Of course, one good thing is the way I see is positively new customer additions definitely -- ultimately, they become a permanent investor for mutual fund as time progresses then.
Understood, sir. And sir, this -- we read this morning that you are thinking about this AIF fund. Any thoughts around that? What is exactly those? And what kind of assets would be? And do you think there is a strong case for investor interest in this kind of category?
No. The very fact that AIF fund has been created is to create a separate category for all the risk takers, which has meant for the accredited investors kind of investors. Therefore, I'm not paying currently much weight to the article that came in, given the fact I don't think we are having a part of the discussion that is [ wrong ] time to have this kind of product on the mutual fund space. Therefore, I'm not very sure how much of the weight you have to give for this then.
Okay, understood, sir. And lastly, sir, on channel mix. We've been seeing more or less these contributions have been steady, especially if we talk about on the equity side, the national distributors are around 20%, banks are around 10%, given that you said that incremental money is coming from fintechs. Do you think there will be any channel mix change that we should expect over the next, say, 1 to 2 years? And would that have any impact on our yields?
From a channel mix point of view, I think definitely, MFD continues to remain a dominant player. And so they may be focused on long-term thing and handle customers. They're doing all periods of market volatility and ensure they make them -- make their investors in it for a longer-term hold purpose. . I feel that they continue to maintain the -- among the traditional channel, MFD will remain a dominant player, absolutely no doubt on that. Incremental wallet share will continue to come from them.
Second, of course, the national distributors who have deep presence, all India presence, and continue to stay focused only on building retail will remain a powerful channel. Banking of course, again, they have a larger focus on wealth management business. They will likely remain a dominant player, no doubt on that.
Of course, incremental AUM coming from the digital channel and direct, which again increased focus is coming in. Definitely, the contribution on a year-on-year basis compared to these channels will definitely be higher. Therefore, the higher the growth compared to the normal rate of growth coming from other channels if it continues, which is what I also feel will remain, then naturally the contribution will accordingly undergo change. But it doesn't mean it will come at the cost of other channels. At the end of the day, more channels contributing to the success of industry will only help the industry to grow on an overall basis. And the wallet share of each of the channels will continue to rise, and people like us should also get to participate in this overall contribution coming from all the 5 channels we have mentioned about.
Okay. And sir, this digital online channel that you mentioned, these are booked at the national distributors or MFDs?
No, it comes separately. It comes in MFDs only. RAEs and MFDs. Some of them are MFDs, some of them are RAEs. It comes in the RAE thing there. RAEs will come as a direct pay, sorry. It was RAE for the direct.
So direct MFDs.
Public domain. I'm just giving you a broader sense of what we keep track for ourselves.
As that was the last question for today. I would now like to hand the conference over to Mr. A. Balasubramanian for closing comments. Over to you, sir.
Yes. And thank you, everyone, for joining, and with this, we conclude our Q2 FY '24 earnings call. Do feel free to reach out to our Investor Relations Officer, Mr. Prakash Bhogale, for any queries that you may have. Thank you, and happy weekend.
Thank you, members of the management. Ladies and gentlemen, on behalf of InCred Equities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.