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Aditya Birla Sun Life Amc Ltd
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Ladies and gentlemen, good day, and welcome to the Aditya Birla Sun Life Asset Management Company Limited Q1 FY '23 Earnings Conference Call.
We have with us today from the management, Mr. A. Balasubramanian, Managing Director and Chief Executive Officer; Mr. Parag Joglekar, Chief Financial Officer; and Mr. Prakash Bhogale, Head, Investor Relations. [Operator Instructions]
I now hand the conference over to Mr. A. Balasubramanian for his opening remarks. Thank you, and over to you, sir.
Thank you. Thank you for the introduction, and good evening to everyone for attending today's investors call. And I'm sure you all would have had on opportunity to go through the earnings presentation, which is available in the stock exchange and also in our website.
Let me just give you a overview on the broad economy very briefly and the mutual fund industry in general, then I'll come to the ABSLAMC performance. The macroeconomic landscape, as is known to all of us, has been marked by fear of recession as well as geopolitical conflict. Economies all over the world have been witnessing inflationary pressures, which led to the monetary authorities turning hawkish and driving policy rates across global markets. On other side, supply constraints, rising march in raw material prices, along with the increased cost of borrowing has resulted in uncertain economic business environment across the globe. Against this backdrop, it is comforting to see the resilience shown within Indian economy. However, the PMI continues to expand. GST collections have been robust. Capacity isolation marginally has been rising. There's also a positive momentum in terms of our new project announcements.
However, the economic uncertainty has been reflected by the volatile market, which we had obtained in the first quarter of this year. The last few months have been challenging for investors globally, both on the equity and fixed income market. Indian equity has witnessed a sharp drawdown, but the Indian market have been relatively outperforming the global market on account of the economic resilience and policy reform continuation. And tightening liquidity conditions have forced foreign portfolio investors to be net seller consistently since October 2021. The outflow in Q1 of FY '23 have also been highest ever outflow we have witnessed from FPIs. However, the domestic, institutional and retail investors participations both the market directly as well as through the institutional has shown confidence and also be a measure via during the same time as the days pass.
From the broad debt market perspective, yields across the curve have moved up significantly in the start of the calendar year 2022 in anticipation of this successive rate hikes both in Fed as well as in India. In this kind of scenario, in this kind of uncertain period, due to the effort of mutual industry during the quarter, the average assets under management for the quarter for the Indian mutual industry at INR 37.70 lakh crores as on June 30, 2022, as against INR 38.36 lakh crores as on March 2022. Though it grew by about 14% from the last year, it also degrew from -- on a quarter-on-quarter basis on the basis of certain market fluctuation in equity, second set of withdrawal that we witnessed in the fixed income market. In FY '23, the mutual industries witnessed reasonably the net inflows in equity on a year-on-year basis continued significant proportion of inflows came mainly in the some sector funds, large- and mid-cap funds, flexi-cap funds and balance funds. These are the existing categories in which money was flowing in.
And as the market volatility, retail average assets under management saw a slight dip from both 30-30 and mid-30 markets during this period. As on June 30, 2022, the total number of mutual fund investors stood at 13.6 crores versus 10.4 core investors from June 30, 2021, an increase of 13%. In fact, our customer addition have continued to remain somewhat robust even during this period. This continued promotion of SIP has maintained the status quo in the monthly SIP contribution. In fact, we have seen a flat growth in SIP in the last 2 months. The overall monthly SIP book was about INR 12,000-odd crores in June 2022. On the quarter-on-quarter new SIP registration has been a marginal dip to close to about INR 59.5 lakhs investors as Q1 FY '23. The total number of SIP accounts for the whole industry was about 5.55 crores.
The industry witnessed net equity sales around INR 599 crores, excluding index spend in Q1 FY '23. However, there was a reduction in net inflows compared to the previous quarter. Broadly, the inflows came through the existing funds as I mentioned earlier, using the large cap and other funds. Given the plan in the first quarter of this financial year, there is no NFO due to related restriction. Therefore, all the management came in, they can the existing funds including ourselves. The return on investment concentration in industry continues to remain excess of 50%. At the same time, overall reduction in fixed income assets due to the withdrawal of fixed income interest rate order end of period also led to a higher dominance of individual asset mix, which is now close to about 55% of the total industry is represented as individuals. This regard this is the increase in individual contribution, but it is largely on account of the drop in the AUM in the fixed income side of the withdrawal. Therefore, the potential contribution has gone up by 1% or 2% compared to the previous quarter.
Coming to the ABSLAMC performance. Our total quarterly average AUM for the quarter ending June 2022 stood at INR 2.93 lakh crores -- INR 2.93 lakh crores with a yearly growth of about 2%. Our equity AUM grew by about 14% year-on-year to about INR 1.17 lakh crores size for the quarter ending June 2022. Our equity mix in the overall asset under management size jumped 41%, which again for us is one of the highest ever contribution getting in from equity and the overall asset mix. Again, one has to just keep in mind that the margin outflow in the fixed income also led to a marginal increase in the contribution coming from equity as well.
As we stated, the customer acquisition continues to remain integral part of our strategy. We have added close to about 2 lakh main folios despite the uncertainty that we have witnessed during this period from customer sentiment point of view, especially add about 2 lakh folios, which are now taking the total tally of portfolios above 80 lakhs. And our short-term equity performance has seen resembling good performance -- say turnaround performance across all categories. In fact, in our fixed income fund, we have seen net equity inflows on the ways of renewed interest on the back of performance as well as the focus that we are bringing in.
We are constantly working towards leveraging the booking of existing products or are launching new products to be size and scale. The increase of product per customer also has been one of the key agenda for us. We have been growing our retail franchisee over the last few years with a special focus on building our market on the equity market. Building SIP book size is our constant endeavor to ensure the customer stickiness as well as create long-term value for investors. As part of this drive, what we have launched in the last few quarters, such as Har-Ghar SIP, such as win-win SIP or multiple SIP. All-in we are seeing kind of traction at the ground level from a sales overall productivity point of view. Also helping investors to make more investment in the delivery world-based instinct.
As I speak, we've also been spending some money in terms of brand building as well as creating more awareness about investing in the equity portfolios. On which I'll give an update in next quarter results will you an update, given the fact we just launched in the last 3 weeks. All these efforts in terms of building of SIP have resulted in SIP book size moving from INR 816 crores in the month of June 2021 to what INR 898 crores as of June 2022. We also had about 2.8 lakh new SIPs registration during the quarter. Currently, we have about 32 lakh SIPs with us in terms of number of folios.
Our multichannel market activities to deepen our presence, our market share has been showing positive result and the virtual relationship model percent. But we have about 16 touch points across India. We also activated close about 900 distributors through this virtual model. Through our campaign, which is again, meant for activating more distributors and onboard new distributors as first time for mutual industry, but also something has been a factor of adding close to about 1,900 distributors to our overall equity to help us building our business and acceleration.
Customer loyalty and deeper engagement and service differentiation remains the cornerstone of our services, sales model that we have built in the last 3 years in order to increase the minds of the customers. Currently, we have about 100 dedicated trained personnel to get investors and serve their needs in order to create a good mind recall, which ultimately result in market share improvement. With effect overall mix between retail and institutional customers, we continue to have 48% of our assets contributed from little as of June 2022. In the same manner, the contribution from these 30 cities also have remained at 16%. Our focus remain in building retail, both in B30 and P30, which is again being part of the integral part of our overall data strategy in building our size.
In addition to some of the initial areas we are now focusing on executing, we also introduced a team cost hard an initiative to further the cause of the financial inclusion in the last mile percent. We've been extending our support to people, especially from low income growth by making them financially aware and setting them on the path of creating value to investment. That's something which has initiated as a new initiative for serving the growing needs of whatever home people. And I'll give more updates on this as we get more and more robust in terms of offering this product.
As it is known on alternate business, we have created a separate team of people about a few quarters back to drive alternate business as for the passive segment. I'm happy to share with you that this segment has been progressing quite well and yielding gradual results in terms of paying good progress. Our passive product offering grew by about 6x to about 12,000 to be crossed in June 2022. Our emphasis on building passive strategy other than the momentum by launch of new products through ETFs, fundamentals fund and multiple index fund, including the passive maturity of the fixed income side. Our existing passive book have grown to 28 schemes, with about 20-plus more schemes getting added in the pipeline in the next few months. And overall customer base in this category also now gone about 420,000 just start up about 72,000 to 5 lakh numbers, which is 0.5 million customer folios in the passive side, but also something I see as a good progress in terms of building our customer base in the past due side.
On the offshore front, as they have an updated last time, we have created a separate focus on creating a Greater India ESG Engagement Fund with the help of global money managers managing fund. While we have been busy, of course, reaching out to more customers globally, we also received our Swiss funding from our Sun Life as a partner. They have given us about $21 million. With this -- on the base of this success, we will take it to the next level of growth on this plan and getting more investment on base. We also have a plan to launch on a duty for NRIs and LRS investors. In fact, we have opened a opening office is already ready. And once the innovation is done and the products are launched, we will actually go and launch some of the products for LRS investors to invest in overseas market that something there in the pipeline.
On the PMS and AIF front, in order to build our size, we had recently announced appointment of a senior person coming with 25 years of experience to drive the alternate business who is also now on board. With his help, I think, we'll not see this a way of in the PMS front. While doing that, we also launched PMS product, which is a market-linked debenture product. Another credit opportunity fund. We already launched. We are in the process of engaging with the distribution community and hopefully, you'll see some of those factors.
While building sectors on some of the AIF products, we also saw some success on our real estate fund that we aligned in India Opportunities Real Estate Fund that we launched. We received our first tranche of fund close to about INR 190 crores. We are on the second front launch closing. And upon doing this, we will take this to the overseas market with the help of the bundle renewal for offering this product to the global investors.
Now coming to the financial performance for the quarter. Our focus continues to remain on achieving a robust asset mix of high-margin equity assets along with the long-term debt. We'd like to reiterate our equity mix is an all-time high about 41% for the last quarter. We maintain an operating revenue on PBT during a volatile market condition. During Q1 FY '23, despite market volatility during the quarter, our revenue from operations remain close to about INR 303 crores at compared to INR 305 crores of the similar quarter last year, FY '22 H2 and FY '22.
However, due to market volatility in the fixed income and equity market, the AMC treasury portfolio has seen a mark-to-market impact during the decline in other income compared to the previous year. For Q1 FY '23, our orders book as is disclosed is close to about INR 2,217 crores. This money, of course, investing across mutual fund schemes, inclusive of our capital, also the defined capital SEBI has given, and this investment had a mark-to-market. Therefore, they tend to fluctuate and depending upon the market conditions, that is what we are seeing in the current quarter. Therefore, the other income of margin lower compared to the last year of same period. As a result of this, our profit after tax stood at INR 103 crores in Q1, despite our operating performance is on record because of the other income being lower. The overall profit after tax came about INR 103 crores, and that's something I did want to highlight it.
With this, I would like to conclude and open the floor for any questions. I'll be joined by Prakash as well as Parag to take any questions that you may have. Thank you.
[Operator Instructions] We have the first question from the line of Anuj Singla from Bank of America.
First question is on the market share trend on the active equity side. You did talk about improved performance in some of the schemes leading to inflows. But when we look at the market share on a Q-Q basis on the activity side, it's still on a declining trend. Can you talk about what is your outlook on this side? And if there is any product launches on the active equity side as well, which can help stand this? The second is a data keeping question. Normally, you provide the SIP AUM, which was around INR 520 billion as of March 2022. Can you share the value as of June '22.
Thanks, Anuj, for your question. The response, of course, the market share both on equity and overall -- of course, our endeavor has been for, as you know, for quite some time to build the overall market share. While, of course, the initial, the effort was to ensure that we don't lose the market, at the same time, building our market share in the existing product or demand on other key focus area. On the base of this, this quarter up close, we couldn't launch any NFOs given the fact that NFOs were generally not permitted by regulatory framework in the first quarter of this year. While doing that, we've stepped up our engagement in promoting some of our product on the existing side, such as validating the effective category, such as large cap fund, our flexi-cap fund or even the mid-cap fund where you've seen -- fund where you've seen a significant improvement in terms of performance.
And the product now is coming in terms of the reckoning list of some of these banking channel as well. But that's something, again, we are pushing it. Given the initiative that we have taken to promote this as a category to be part of the overall core portfolio of investors in order to track spend on existing funds, that's something which you are doing. And that there we have of course target for our team to drive our existing schemes, both in the form of stating the lump sums that we need to actually increase the overall gross volume improvement, therefore, leading to a net inflow that and oscillating to our market share stability and improvement marginally.
With respect to the refund offering, we are looking at launching multi-asset fund, and we have filed awkward document of study. And hopefully, that should come in very soon and once it's done, we will actually launch this fund sometime in the month of either August or September, August too early. Sometime in September launch is fine once we get the approval, but otherwise, as I mentioned, it will be a good mix of promoting our existing products and few NFOs. Also the overall momentum creation, we see a great opportunity in the fixed income as phase. We have been quite successful in offering a product in the last 2 quarters, taking the advantage of interest rates moment that we have seen. We became the #1 fund other than government mandates that industry has got. In the target maturity of fund you can call it, or you can call it as a rundown kind of fund in the fixed income space. Our leadership will look into growth size.
We say there's opportunity to activate both HNIs and retail and the building our fixed income asset class, therefore, the launching some of our existing products, which are a flagship products and the respective category, such as diamond for a medium compliant. That's something, again, we have now put some kind of plan in place in order to drive 2 things. One, increase the participation in the fixed income space from both HNIs and retail, given the fact rates are attractive. At the same time, encourage people actually do STP and SIP from these schemes in order to build our equity portfolio from a longer-term restoration point of view. That is where we have planned and hopefully, we should see some success on this phase on these initiatives.
Anuj, regarding your second question on the SIPM, It's around 46,000 for June 2022.
Okay, I get it. And lastly, if I may, on the distribution side, obviously, distribution commissions last year were not very accretive for the EMCs. Have you seen some normalization happening there? And when you talk about the multi-asset fund waiting approval, should we be seeing the improvement versus what we saw last year on the distribution side or the scenarios still remain the same?
We'll ask Parag to answer this.
Yes. So Anuj, generally for all NFOs, we see a slightly higher brokerage in the first year. At current year, due to the embargo on various NFOs, the current year, the commission are basically in a normal rate, which we generally keep on sharing with our partners around 60%, 66%, 65% of our lower DTER.
So this is a decline from 85%, which we saw last year, right? That's a correct understanding?
There were a lot of NFOs last year. NFOs at a slightly higher cost.
We have the next question from the line of Pranav Tendolkar from Rare Enterprises.
If I wanted to calculate just equity AUM, but active equity AUM, then it is right to subtract the -- there is a slide where you can actually given passive AUM that you have. So it is right to subtract that amount from INR 1,168 billion crores, right? So I think that amount is around INR 1,068 billion deductive equity, is that right?
No, Pranav. Actually, in that slide, there will be a debt index fund as well. It will not be correct to deduct that entire amount.
Right. So how to look at this, like if I wanted to understand the discretionary equity portfolio, how to look template that?
So for active, you'll have to reduce from the whatever AUM we have, arbitrage and the equity index.
Perfect. And not the ETF?
ETF is not part of the equity AUM of which we have given.
Yes. Okay. Perfect. That is one thing. Second thing is that in terms of the passive AUM, how profitable that line is going to be like whenever it reaches a certain size, can you just share the economics of that vertical?
Broadly the approach that we are taking on passive, Pranav, is one, the easy ETF specifically miss, et cetera, all of them would be contributing anywhere around 10 to 20 basis points kind of expenses and AUMs at that can be about 10, 14 basis points kind of thing there. And if you have to take little, I think, what we intend to do, such as last time I shared which is the Nifty 50 equal rate index fund, the larger fund which could we are unable to charge expenses anywhere around 80 basis points. And therefore, it's about 40 basis points kind of management fees we'll get. So our target is I mean, this fees is -- and of course, we don't have much choice, but to have presence in most of the key indices in the market with lower profitability.
At the same time, our intention is to convey this kind of ETF, which can give us a slightly higher margins. But in any case, no ETF product, however, good they are, it'd be unfair to take more than 40 basis points of contribution to the overall AMC, given the fact that ETF generally supposed to be cheaper than active management. That's why we are looking at building. So right now, the ETF is not be seen from a profitability point of view. It should be seen point of our customer acquisition and giving far to the customers to give alternate opportunities or maybe what you call coexisting kind of product, along with active funds, if we can be seen as we're onboarding our customers as well. But as the size becomes a little larger in size as we move forward, and also we keep increasing our offering our product. Therefore, the contribution coming from ETF as a basket will show an improvement.
Right. Just a query about that. So there are a lot of opportunities, like you have a Nifty-50 like 5 other players who have that. But if you see Western hemisphere, where U.S. and Europe, the ETFs have actually a large amount of stylized portfolios. And why can't do that in India, so for example, something like there are many technicalities as well, there's a spy sovereign for example, sector-specific ETFs. Why can't we do that because that not many people are doing that rather than having the need to ETF, which is it doesn't matter for which is a treadmill and everybody has to be treading on it?
Yes. Basically, what you are saying is right, Pranav. I think one of the efforts that we are putting in the customized ETF that we can create right now like the way the extended arm of band of the ETF is there. At the same time, the customized index that can be created on the basis of a model, are we taking into account tailored investing, that's something has been caught up for process. At the same time, on the basis of our own assessment or some of the international products given the fact, ETF can be now today, even today, I can put into the ETF product overseas. So there's no limit available for naturally managed funds because there are $6.5 billion.
But we as a funder also have launched some of the ETFs that fit into the global market, that's something is that. I think what you're saying is right. Our idea is actually use our expertise that we have internally. After differentiated products using the customized index, which can be created different style by buyers or factor business. That is our whole idea. But at the same time, in general, the flows it comes into the industry largely is coming into the traditional conventional ETF product if one counts ETF as a category as assuming passive and media categories are resuming is close to INR 3 lakh crores. Large compound inflows are come the Sensex, Nifty and international banking ETF, I think more than that. So therefore, in our case, while we have to have a mighty product, as you pointed out, our intention is to build capability and offer this kind of product.
Right. So just last question from my side. When we say that you have experienced -- you are focused on consumer experience. Will not taking money or will stopping money if you think that there is -- so there can be a once in a year provision in your funds where you can stop taking money if you see that market is extremely overvalued because that will add ultimately to the consumer experience. So are you thinking from consumer's point of view holistically? Can you stop AUM, that is, maybe one of the parts, that obviously, there will be many other factors of consumer experience and consumer life cycle experience will be improved. So I just wanted to understand how holistically you are thinking about the fact.
We have done in the past, Pranav, I think when we saw about 3 years back, the credit opportunity in the industry is not going to be as big as what is being thought about. More than an opportunity, the risk in the system would increase significantly. In fact, you stop taking inflows of high-ticket pressing to the inflows for investors, there we see inflows. The same way we have done in the case of our equity as well in Birla dividend in the past. Therefore, it is part of our strategy. But as and when we feel there is a merit in doing that, even if it means it's going to come at the cost of not able to increase our size and is as long as going to benefit investors, and gives right messaging, we'll do open up directly.
Right. Perfect. If that perception gets created, then if you have a pitch in distribution channel. Perfect.
[Operator Instructions] We have the next question from the line of Dipanjan Ghosh from Citi.
So just a few questions from my side. The first is, if I just look at your distribution channels and split it between, let's say, banks, MFT, the national distributors and more thinking in terms of the equity flows that you're seeing through this channel. If you can give some color on the wallet share that is there across the channels or the contribution from the top 10, 20 players in those channels, how they are staging up and how it has changed like over the past 1 or 2 years? Second, more on the new fintech channels or the digital channels, if you can give some color on the flows for the industry. It was increasing. Has there been any trend changes? And how is ABSLAMC really positioned in that channel? And third, a data-keeping question. If you can give the number of unique investor accounts as of June and how it has changed Y-o-Y/Q-o-Q?
Sure. Dipanjan, as far as the channel concerned, and I'll give you first on the overall basis, then I'll give you the broad sense that we have from the distribution channel point of view. See, as you stand today, because of our overall 31% of our assets coming from on overall this is including fixed income coming from MFTs notes and roughly 10% is coming from bank and 13% coming from national distributors and 45% is coming from direct child, so the number looks larger because most of the institutional customers come directly. If you were to look at the same number for our equity, 17% comes from direct and 15% comes from IFAs, MFDs and 18% comes from national distributors and 13% come from other banks.
In fact, in the last 1 year, however, contribution coming from banking has gone up from 12% to 13%. We have seen improved contribution coming from the banking channel, one, thanks to the NFO that we did last year. And in general, our trends are being part of the recommendation list both on fixed income and equity. Therefore, we try seeing contribution coming from the banking channel as well as national distant channels. As you know, the top 5 contributor the banking channels, I am making an exception of SBI because anyway they don't deal with us. As we don't sell any mutual fund other than SBI, therefore, I'm not taking them.
And the same case is with ICICI, they're not selling retail other than their own fund. If you were to knock out these 2 from the top, then left with HDFC Bank and Axis Bank and the foreign banks. These are the names which comes in. In fact, we generally have anywhere between 9% to 10% from the bank, the HDFC Bank and actives will be somewhere around 5.5%. That is a broad range in which we get. But other ways, lever saying this to some of the other foreign banks we would have anywhere between 10 to 11 kind of percent market share. That's gradually going down, the size also will be lower, though we'll have higher market share. So that's a broad trend that we have. In fact, the trend has been a little better compared to what you have seen in 2021. There's 2 national distributors. We have seen improved contribution coming from the largest international distributors in the country, which is MG as well as Prudent, we have seen increased contribution both in SIPs as well as in the equity AUM. These are the 2 -- and those are the places we've been maintaining somewhere around 8% to 9% in our market share. So that's a broad trend.
With respect to the number of unique investors, I'll just give you the number exact. 52.5 lakh unique customers. And this number compared to the last year would have gone up marginally, from 51, if I'm not wrong -- 47, it has gone to about 52.5 as our unique customer base.
Just one follow-up on your first answer. So this market -- the wallet shares that you mentioned are on outstanding AUM basis on a flow basis?
It's on both.
Okay. And this will only be for the equity portion, right? Or is that like for the overall business?
Generally, I give it to the equity only. But if you have to add fixed income, a little bit higher in channels who sell distribution, because not all distribution sales in fixed income go quite aggressively. Given the fact last year, there was not much of opportunities. But some of our products, which are part of the accommodation list, let say, I'm thinking that the HDFC Bank is a large in the country, as an example. We have our product as part of the list. All we get almost about 14% contribution from that if you have to look at only the fixed income. In fixed income, my contribution a little higher, given the fact that these products that we offer got a longer-term funding in terms of ascertain and in general, the fixed income contribution from these channels will be at least 3%, 4% higher than the equity, except the volume of the fixed income will be lower than equity as these the distribution houses focus more on equity rather than debt.
So just if I can just kind of close the loop based on whatever you mentioned, it looks like across the top banking partners, across the top national distributors, your market share on the flow side, since we were definitely higher than your outstanding market share on the equity business today. So if that possibly boils down to the fact that on the flow basis, either the market share on the MFTs or through the direct channel probably has been on the lower side. So even that kind of also brings me back to my last question, which is on the new fintech channels, the digital channels, how things are stacking up? And if you can kind of close this loop for me.
Yes. See, as far as the -- just to correct you on this, as far as the banking channel is concerned, the market share that they have, which is what you said is right, it'll be marginally higher in terms of flows coming in. I'll just give an example of Axis. The market share what they have with in outstanding assets and what they give a little bit more than that. And more than that, it will have a significant impact in terms of on the volume would be marginal, that's one. Second, IFV channel in general has been flat for the industry. That's also something, I think, what you summed up is right.
But as far the fintech channel concern, I mean, the whole industry AUM coming from the top 80 fintech partners we track, right from Zerodha to Groww to everyone, the total industry size, the numbers are roughly about INR 75,000 crores, INR 75,000 crores is the size, and we have roughly about 7.5% market share from this channel. But if I go into individual channels, my market share in some places could be lower, some players will be higher. They're putting upon what kind of tiers that we have, for example, PhonePe as a channel is also equally a powerful channel, but may not be as big as Zerodha or Groww, but however, we do get 30% market share in PhonePe. I think it can vary from partner to partner.
We have the next question from the line of Lalit Deo from Equirus Securities.
Sir, just wanted to understand on the [indiscernible] side. So during the quarter, so our share of equity AUM has increased marginally. And you also mentioned that there were no low yielding NFOs. So despite that, our revenue is to have declined on a sequencing basis. So could you highlight the reasons for the same?
Sure. Parag?
Lalit, if you look at it, it's a really marginal drop on last quarter to this quarter, if you see on the yield, even the Y-o-Y basis also, there is a marginal drop, even though the equity size as a percentage might have gone up, the yield has over compared to last year has gone down because most of the NFOs has come later part of the year over the first quarter. The second part is the movement of assets within the debt scheme has made from various scheme which are slightly higher yielding to a lower yielding theme. And the debt mix has slightly gone down compared to the last year, which has resulted from impact on the yield rise.
Yes. Sure, sir. And sir, on the index front, so I can understand that within the index console like 90%, 92% of it is contributed from the debt indexment. So could you highlight the yield and difference between the debt index fund and the equity investments [indiscernible] and like going ahead, like if we have any products in the pipeline. So how do we expect the share between the indexed funds between debt and equity?
Sure, you want to answer?
So yield will be on the debt side, maybe in the range of around 10 to 12 basis. And on equity, it will be around 15 to 20 basis range.
See, what we have done, Lalit, as far as fees income target maturity fund concern, we started off with 20 basis point expenses with about 10 basis point contribution coming to us. But as we started seeing more acceptance in the market, and as we started seeing this product is more relevant even for HNIs and retail customers, we also launched 1 or 2 product with higher expense of about 40 basis points with intention to have 20 basis point contribution coming from that segment. So that becomes win-win for everyone as interest rates moved up. For example, we are launching our dynamic bond fund, while we may produce expenses, but expected increase in volume will actually lead to an increase in revenue. That's why we are building that space. But as the interest rates move up, definitely, your ability to charge on 3 base points higher, literally higher. That is a model in which we are just looking at the list.
Sure. Just one data...so what were the ESOP expenses during the quarter?
[indiscernible]
[Operator Instructions] We have the next question from the line of Madhukar Ladha from Elara Capital.
See, most of my questions have been answered. I just wanted to understand what is happening on the fixed income side, we are seeing a consistent drop in market share even there. And the other thing, this monthly SIP book that we get from the industry, this, I believe, is the gross number. I want to understand from you what is the real net inflow that we are seeing? And what have been the trends on this?
Yes. With respect to your first question, on the fee income, One, the first quarter was pretty volatile for the fixed income point of view, in general, with our behavior from institutional customers to redeem from mutual funds and either go for fixed coupon bonds or fixed deposits, or repay loan are more into the target maturity fund. That's why we have seen, therefore, some bit of -- we normally enjoy high market share in the [indiscernible] institutional customers and due to that withdrawals and volatile period [indiscernible] marginal dip, we still have about 10.9% market share, which is a pretty decent market share that we have. But having said that, that's not something which generally is worrying factor, and we as a fund house, we do have reasonably good, confident and engagement with customers in order to get that our new market share, which is historically maintained.
But having again said that, this phase also in the competitive landscape, [indiscernible] much presence in this space, but they also [indiscernible] to get somewhat of contribution coming from the customers also gaining some strength in the space. That's one. Therefore, there's something was the phenomenon that we have witnessed in the first quarter. But this is something, I think, once we launch some of open and debt funds from HNI point of view, we will see incremental addition coming from [indiscernible]. And second question is on the SIP [indiscernible].
This second question on the SIP, the amount is the same is that the inflow that we receive from the SIP book size.
So that is 9 billion, right? That is your. But is the industry number gross or net?
Industry number are the same. These are the comparable numbers with the industry.
We have the next question from the line of Jignesh Shial from InCred Capital.
Sir, most of the questions have been answered. Just more like understanding it, we are seeing a bit of a dip from the contribution from new 30 cities, [indiscernible] missed it earlier, but any specific reason for it that there is a bit of a dip that we are witnessing this time?
Yes. I think mid-30s -- see, mid-30 AUM I think for centrals very signing say it's about 14.9%. However, the numbers the truckers 16%. And I mean one -- the reason is the low [indiscernible] last year, you recall, most of the equity managers came in last year [indiscernible] for the industry, largely has come from equity and [indiscernible] contribution generally has been very, very negligible. Therefore, that has resulted in big 30 AUM remaining somewhat stagnant for some of the incumbent players. At the same time, those who had [indiscernible] launches, they would have had incremental contribution coming from the market. That's one.
Second is one fact remains which anyways are active, as I mentioned, even the distribution update that I gave, I knocked out SBI from my consideration, but if you have to look at that one, the presence in B2B market, little much higher than what the competition is doing. Therefore, to the extent that they can pay the numbers were in stagnated. If I knock off that, then actually have a number look little better, of course, I can't lock it up [indiscernible] as part of the industry itself.
So are we facing competition revenue in the 30? Or I mean even ex-SBI is competition getting a little troubled because most of the AMCs right now is focusing on deepening the penetration and all I agree that more or less it is coming for equity and not on debt. But are we facing competition getting built up already? Or do you think there is enough scope still there for everybody to grow in this particular space?
Yes. No, in general, of course, competitive landscape is gearing better, no doubt. At the same time, given the fact that we as fund house have been creating presence to the emerging market channels, looking at the market on a continuous basis and level of engagement that we have in the deeper parts of the country, which can contribute the equity AUM. At the same time, the percent of these assets could be longer. That's something as a fund house, we have been quite successful in building this market. In respect the comfort landscape is in. I think we'll remain extremely committed to build this business. That's something I'm not worried about that.
Understood. My second question on being that we have been doing pretty good on the direct side, even now roughly around sourcing comes out roughly 42% of setup now. But it has been declining. Is it because of the debt fund, which as seen a bit of an adversity due to the external factors or the focus has been reduced or any pressing reason for overall share of direct on reducing or the contribution coming from the other is the reason why one should see that the direct is in declining?
I think largely due to the debt on you rightly pointed out largely to the debt, of course, if my remain my present number, INR 13.5 lakh crores for industry has dropped over 37.2 or 37.3, that largely on account of fixed income outflow, we did also see [indiscernible] tilted the direct exposure to some extent.
Understood. And lastly, just third question from my side, [indiscernible] but being a veteran in the industry, just getting a sense over here. We are seeing that overall, not for one part, but across, we had been compressing across, whether it's equity or debt or even liquid and obviously, the surge of passive has also been one of the reasons. But now with yields remaining stagnant or more or less at the lower end right now and limited scope for further consolidation on the -- or further cut on the OpEx side, we think we are almost going to see the similar kind of cater for most of -- I mean for the AMC general for at least a case we don't see the combination allowing the yields to move up. The overall sense, I want it from your side, not commenting specific on ABSL assets. But what's your view that how we can see that the profitability will be improving, the [indiscernible] yields would be improving from here for the industry in general. Just if you can give some sense over it.
I'll only put it to in a simple manner on this. In the last few years, if you see the industry has seen declining margins, declining expense ratio, which is linked to the size as well. At the same time, in general, the profitability has been improving because of volume improvement. I think industry dynamics will continue to remain the same way even going forward, scale players like us who have a large profit pool is coming because of efficiency as well as the cost benefit one will get on with us increased volume at that continue to remain every part of the strategy.
But of course, given the new fund offering will come from smaller sized funds. And as the size becomes larger for everybody, I think everyone will go through the same situation and it comes to question of reduction in the margins on before. But my own belief is that from a bigger perspective, I think we are more or less getting consolidated. Therefore, there's not been a significant pressure getting [indiscernible] industry, except the differential advantage one will have between the smaller sized funds and the bigger sized funds. That advantage element, that's created by regulatory environment is not created by the comparative landscape.
We have the next question from the line of Prayesh Jain from Motilal Oswal.
Firstly, recently, in the last few months, the intermittent SIP accounts have kind of slowed down. And you thought as it it's just a slowdown or [indiscernible] to the market? What's the factor that is impacting this.
Which slowdown you are saying, Prayesh?
Hello?
Which slowdown, which one you're referring to slow down?
Intermittent SIP accounts that are [indiscernible] basis points.
No, definitely it's a function of market and function of how the past return generally works. I think even for the industry as well as for us now having reached certain size and last quarter we saw marginal dip in SIPs. Sometimes what happens is in during the volatile market period, generally there is a tendency for people to stop the SIPs. And that's something historically we have seen. Again, they come back.
While we see marginal dip, I mean we as a fund house having now built SIP to close to about INR 900 crores now getting supplied from last year [indiscernible] crores the same quarter, today has been [indiscernible] crores, in act, we have been aiming this number, how we can actually cause a 4-digit number and for which what we need to [indiscernible] That's something remains given the fact that SIP we have investing now is becoming, we have investing in mutual fund more to investors, and that's why I think we as fund house also doing it. So the marginal dip in terms of what you're seeing for even industry also has seen a marginal dip. That's something I have always seen historically linked to the market volatility. At the same time, there is a higher acceptance for SIP Investing by investors. Of course, that's something I have not seen as a trend reversal, it's more temporary.
Okay. Okay. Right. And secondly, sir, on the overall expenses for I would say [indiscernible], is there any lever to cut absolute costs that we have been talking about scale benefits, but is there a scope to cut costs anywhere which can help improve the profitability as well as PAT margins because it seems to be kind of would continue decline at least in the near term. So what is any cost that can be controlled or can you reduce in absolute terms?
Mr. Prayesh, on the cost, as you know, we have currently some hit on ESOP, which we keep on getting every year as it is a dropping trend of 40:30, 20:10, over the 4 years, that cost will keep on going down over the period. And after 4 years, that cost will go away unless we issue some new ESOP to employees. So that is one cost plus wherever we are -- like we have been experimenting on a lot of digital way of engaging with people. So once that gets stabilized over the period, that may also look at some cost benefit we get. And on one ABC, as we mentioned on the consolidation of branches, we are doing at the ABC level, this will help us to save cost as that is a smaller space compared to the current branches we are holding. So those are the areas currently, we can see that there may be some cost reduction over the period. But it may not be very significant on the overall cost basis. But those kind of small, small things which we keep on doing and trying to explore.
Okay. And last question is on the other end. Over the last couple of quarters when they were rising, we have seen no other income kind of relatively stable in Q4. In Q1, you see a negative other income. What changed in the quarter that caused such a sharp reversal in the other income? And what kind of projection we see out there?
So on other income side, generally, we were investing most of the funds in the debt portfolio. But post the regulatory changes of the scheme in the game, we have started investing in the equity schemes of our fund. And currently, the market as equity has declined in the last quarter, we have seen a hit down that say plus on the debt long duration fund or the target maturity fund, where we have invested our funds to get higher returns over a longer duration period because the investment horizon is much longer. We have seen a dip because the interest rate has gone up. So that has created some negative impact on the overall other income for the company.
Just to add to that, Prayesh, by the investment that we have made in the fixed income target maturity funds, there's incentives to hold until maturity. Therefore, you get the desired return on the basis of the yield that's prevalent at the time of investing. But that's the intent, unfortunately, we have the mark-to-market during the interim period, so that's one which has had an impact on this quarter. As Parag mentioned, in addition to regulatory led limit investment that we have to make, we also have been of course receive some of the funds in building about ETF and passive on the innovation that we are doing on the product. We do of course, receive the funds and to the INR 25 crores or INR 30 crores or INR 50 crores kind of [indiscernible] but also sometimes go through this kind of volatility, which, again, I would say, is more of a quarter-on-quarter kind of thing, but I don't think any other things [indiscernible] about it.
We have the next question from the line of Bhuvnesh Garg from Investec Capital.
I have 2 questions. Sir, firstly, I just want to know your thoughts from competition from smart data platform, like [indiscernible] small case and even broking companies are launching their own funds and then some distributors are launching their own funds. So how do you see competition coming from that side? And what your something going to mitigate that completion? And secondly, I just want to understand the revenues from ETF funds. For example, that how would that revenue will grow, for example, for a normal fund revenue will grow as the fund size grows. But how does in case of ETFs your revenue will grow with increase in fees, just these 2 questions.
So as far as the fintech platform concern around in that space [indiscernible] from the competition point of view. At the same time, we do evaluate options that we have in front of us in doing a proper tie-up with say a small case in offering the back-end solution as well as ETF kind of product that we can do jointly. That's something we'll keep evaluating. Therefore, any broking platform provides the portfolio using some of this platform, I think we do evaluate that platform from a point of view of offering, ETF product, all the fintech platform that is where we want to use it.
Second, we also want to use the broking platform to promote our ETF from the point of view of giving to the customers, either from trading point of view or from investment point of view. That's something that has been a part of our agenda to evaluate and make it quite agile, dynamic when it comes to the question of selection of product from investors' portfolio point of view. There's 2 areas I see it. I don't think it's a competition, but definitely is one of the areas where we can look at some association with some of the these platforms for us to build size.
In fact, we do have tie-up with PayTM, Kubera, ETMoney, for the purpose of building customer acquisition in this model. When it comes to question of ETF, I think the contribution is something, I would assume one has to start counting from contribution angle, after say, 1, 1.5 years, even the fact that initial push would be more to 3% visible and at the same time, it is made available in the platform for people to buy. Therefore, we actually made some investment assumptions, either in the form of expenses to ensure that ETF gain some bit of traction.
So that's why we are building it. So the real contribution coming from the segment as it signs as I explained to you before, on the index funds and the debt index fund, we started off with low expenses, increased expenses as the site started getting accepted, the sites are coming in, targeting acceptance on the investors from even HNIs. We felt that maybe these margins can improve. So that is a model in which we'll build as far as the passive concerns.
Mr. Garg, does that answer all your questions?
Yes.
We have the next question from the line of Swarnabha Mukherjee from B&K Securities.
Most of my questions have been answered. A couple of bookkeeping kind of questions. First of all, the SIP AUM, if you could share, I think you had shared earlier but I missed that, if you could share that number at the end of Q1. Second is on the tax rate, how to think about it, it was a tad bit higher this quarter. What would be the reason and how do we see it going ahead for the rest of the period? And thirdly, in terms of other expense, given that this quarter, there was no NFO and there was less marketing spend detail possibly and going forward, would variable costs then come back into the cost structure, if you could [indiscernible]
Swarnabha, SIP AUM is 46,000 for the Q1.
Okay.
And on the [indiscernible] question, which you have asked on the tax side is mainly due to the deferred tax reversal on the loss, the impact of the other income on the losses, which has happened in the current quarter. We are hopeful that it will come back to the same rate which we have been impacting for last couple of years over the rest of the year. And on the other expenses side, other expenses, if you look at it compared to last year, it's slightly higher, whereas in quarter-on-quarter, it is more or less flattish.
The other expenses have mainly gone up due to a lot of activities, which have started happening post opening of the economy post COVID which has increased the traveling expenses, which has increased event expenses plus we had some events during this quarter on our investment voyage, which we used to do 2 years back before the COVID, which we have done in the current quarter, which has some expenses around that. And there are some impact on this rupee-dollar having impact on some of the foreign exchange expenses, which has a slight impact on that. So those are the main reason for expenses slightly going up compared to last year.
Okay. So you expect that rate to sustain slightly elevated into [indiscernible].
So this will be more of a BAU because if you see for a couple of quarters, the range is in the similar expense range.
Okay, sir. And a follow-up again on tax side. So the deferred tax credit that you have given had ideally kind of reduced your tax rate on a headline basis. So I kind of do not factor in that the tax will be somewhere close to 33%, possibly tax rate is at close to 25%, right?
Over the year, it will come back to the similar rate, that is what our expectation is.
We have the next question from the line of [ Dhruvish Pujara ] from Mirabilis Investments.
So just a couple of questions. So on the INR 2,200 crores of investment book, what percentage would be investors in our in-house funds and out of the total, what would be in the equity?
So on the overall investment, whatever mutual fund investment which we do, we do in our old funds only. And there are some exposure to some of the debt investments, which we have done earlier. And equity will be in the range of around 11% to 12%.
Got it. So, yes, okay. And I wanted to understand like when we invest in our own funds, like how does the, so the expense as in the expense ratio, which we earn on the prop book. How does that get accounted? Does it flow through the revenue or we don't charge how does it [indiscernible]?
On our own investment, we can't charge the fees.
Okay. We don't charge. So there's no question of flowing through the revenue, right? Got it. And when I look at the TER, so let's say on a, let's say, a scheme is worth INR 1,000 crores out of that, let's say, INR 100 crores is invested by our own prop book. So how does the TER calculation? Does that factor in that? Or how does it work? So -- would it bring down the TER because we are not charging on the INR 100 crores, that is the question.
So the fees will get reversed to that extent.
Got it. Okay. And I wanted to understand how does the investment decision making works on the prop book so like do we have a committee or the investment team takes care of it or like who are the people who are involved in the committee. So if you can give some thoughts on that. And how do we like determine the equity and debt mix in that?
Basically, we have a team of people, internal people comprising of investments, both in equity and fixed income and allocation fund. Of course, we do have allocation fund, which again, they're clearly driven by the committee approach, and where the CFO ought to be there. And we have a constant review and holding period and how much is asset [indiscernible] regulatory requirement and how much we can go beyond that and how much should be in the fixed and fixed income investment, keeping in mind the safety and so on and so forth. So that committee drives that division that we have proper policy, internal policy that we have.
Ladies and gentlemen, that was the last question. Due to time constraints, we will now close the question queue. I would like to hand the conference over to Mr. A. Balasubramanian, Managing Director and Chief Executive Officer for closing comments. Please go ahead.
Thank you, and thanks all of you, and thanks very much for turning in. And with this, we conclude our Q&A part on the earnings call. Do feel free to reach out to our IR, Prakash Bhogale for any queries that if at all you may have. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of Aditya Birla Sun Life Asset Management Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.