Aditya Birla Sun Life Amc Ltd

NSE:ABSLAMC

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Aditya Birla Sun Life AMC Limited Q4 FY '22 Earnings Conference Call.

We have with us today from the management Mr. A. Balasubramanian, Managing Director and CEO; Mr. Parag Joglekar, Chief Financial Officer; and Mr. Prakash Bhogale, Head Investor Relations. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. A. Balasubramanian for his opening remarks. Thank you, and over to you, sir.

[A. Balasubramanian, executive]

Yes. Thank you, operator. Thanks for the introduction. Good evening to everyone for attending this investor's call. I hope you all had the opportunity to go through the earnings presentation, which is available on the stock exchange as well as on our website.

Let me first begin with the economic outlook and mutual industry update. For FY 2022, as you all know, turned out to be [indiscernible] image last year with the growth rebounding from 2020 pandemic lows and world-level policymakers have been adopting policies that support growth, but with the rising prices, we expect to see some kind of tightening of policies then.

The geopolitical factors and the development is also now determining the global supply chain and commodity prices in general, leading to an inflation. And inflation NDA too much like the rest of the world has been on a rise, but has largely remained within the RBI tolerance band.

Higher inflation has been due to high commodity prices and global supply disruptions due to geopolitical crisis. So far, we have seen and accommodative stance with RBI on account of higher preferences for growth, but with increasing pressure due to higher prices, we may see a change in preference from growth inflation and high inflation [indiscernible] RBI, a sharp increase in bond yields in developed market and large borrowing program have caused interest rates in India to rise moderately.

And also the exports and imports both jump sharply in FY '22 as is known because of high oil prices, demand for gold and strong global growth apparel both imports and exports. As a result of that, India's state deficits rose from $103 billion in FY 2021 to almost $200 billion in FY 2022. And the current account deficit as a result of that also widened to 1.5% from [ 5.9% ].

And going forward, oil prices in our own beliefs will be the most important variable for the new economy and the same impact on India's growth inflation as well as the balance of [indiscernible] dynamics.

In terms of impact on economic growth, given the duration and the impact of the geopolitical conflict is highly unpredictable, you can see it on papers [indiscernible] growth forecast in FY 2023 is a negative shock does not get excluded on the pie chart.

On the market front, the valuations have corrected, but remain close to long-term average. The heightened geopolitical conflict has also led to an elevated FIIs outflow from India, but the same has been offset by strong domestic institutional buying with the same period, which is supporting the market.

Over the next few years, India is likely to go back to its real GDP growth of pre-pandemic levels with all these 3 drivers of economic namely consumption and investments and exports [indiscernible]. Therefore, I would remain optimistic as India is coming back there are many layers by FY 2022 and beyond, and therefore attracting more and more foreign flows from into India as well as Indian mutual industries continue to grow on the higher path.

With rest of the [indiscernible] industries, during the quarter a quarterly average assets under management for the Indian mutual industry at an all-time high of INR [ 13.30 ] lakh crores as of March 31, 2022 as against INR 13.19 lakh crore as of December 31, 2022. In a sense, overall, we saw a flat market in the last quarter of the current financial year, which again on a year-on-year basis grew by over 20% from INR 13 lakh crore as of March 2021 to March 2022 about INR 38 lakh crores.

In FY 2022, the mutual industry witnessed good inflows across various its schemes. A significant proportion of these inflows have been contributed to the large of the schemes by various mutual fund across different categories.

In fact, the total money lies with the NFOs is to the extent of about INR 1.08 lakh crores. The retail participation from both [indiscernible] have remained strong during this period. As on 31 of March 2022, the total number of mutual fund investors stood at 13.1 crore versus 9.9 crores on -- or as of March 31, 2022. It is an increase of about 33% on a year-on-year basis.

As the continuous promotion of SIPs has created a significant momentum in the monthly SIP contribution. In fact, the overall monthly SIP book has been a record high of over [ 12,200, 12,300 ] crores in March 2022. Industry witnessed a strong net equity sales of INR 1,900 crores in the Q4 FY 2022 through a mix of new fund offerings as well existing funds receiving inflows.

This trend has hence consistently played out over the past few months. Within the existing equity schemes and hybrid categories and flexicap categories and multi-cap and total funds and dynamic asset allocations, these are the schemes generally we have seen net inflows coming to the mutual fund space.

Greater investor surge is also reflected in higher industry -- industrial -- in individual average AUM, which grew by 21% year-on-year and contributed 55% total monthly average AUM. The mutual fund average AUM for March 2022 from these B-30 cities were 17% of the total AUM.

The SIP registration were around 71 lakhs in the Q4 of 2022, which again gives us the confidence of the future of the goal of industry. The total number of SIPs account as of March 31, 2022, was around 5.28 crores for the industry as a whole.

Coming to the Aditya Birla Sun Life AMC performance. Our total average AUM for the quarter ending March 2022 stood at INR 3.07 lakh crores, with a yearly growth of over 9%, mainly on the back of robust contribution from the equity segment. However, a quarterly average AUM -- quarterly total AUM growth has been -- seen a dip to the marginal year-end outflows in some of our fee's income funds.

Our equity make fund AUM grew by 25% on year-on-year to INR 1.21 lakh crores for the quarter ending March 2022. Our equity mix, as it stands today, is about 41% of total assets under management is coming from equity. As is stated in the customer acquisition remains an integral part of our strategy, we added around 13 lakh new folios in the whole year FY '22. And with this, our total fully -- overall folio has increased to 79 lakhs, almost hatching 80 lakhs folios as it stands today.

Our equity performance, which again a key integral part of our customer AMC has seen a significant turnaround across all categories. In fact, our dynamic assets allocation fund and sectoral and thematic fund category, we have seen AUM growth through net inflows driven by strong performance.

To better serve our investors and give our best investment experience, we have made a few structural changes to the investment team on the equity side with the 2 coheads managing and mentoring teams of our analysts and [indiscernible], which we believe will bring high level of contribution, accountability as well as the responsibilities in terms of driving [indiscernible] investment performance, given the connect to the external world.

And recently, we held our ninth edition of our flagship investment conclave, Voyage. In fact, we have been doing this since the time -- since the last 9 years. We generally is -- where people lookup to -- look forward to this, [indiscernible] in the share event. We have received a very good response on this event which happened in the last month. The event had M&M speakers from all around the world, the driver backgrounds and experiences to share the knowledge. Our investment management team provides great insights into the economy, markets and what strategy one must follow for a good investment experience has caught up our value addition to both our investors as well as distribution partners.

As part of our scale initiatives, we are confidently working towards leveraging the potential for our existing products as far as launching new productable sites. Over the last few years, our focus has been growing our retail franchise, increase the wallet share from B-30 cities and building our SIP book size.

As part of this continues to drive, we implemented various initiatives and they are as follows: We have seen significant traction from our higher SIP that we started our consign to drive SIP along with our existing [indiscernible] SIP as a campaign. We're also creating awareness about the multiple SIP, rather multi-SIP, I can call it, future -- eases the process of investing in multiple schemes as well as acts as an effective tool for gold-based investing.

Through these efforts, our monthly SIP book has increased from INR 794 crores as of March 2021 to about INR 894 crores, just short of INR 5 crores to INR 900 crores in March 2022. We have registered around 3.24 lakh new SIPs during the quarter ending March 2022.

As a result, we now have about 32 lakh live SIPs with us as on March 2022. Through our [ VRM ] model, which is nothing but virtual RM model, we have activated around 2,500 distributors across the country. In fact, our virtual RM model today are currently available to activate higher fees in our 14 languages in about 16 touch points that we have paid across the country as part of our expansion drive in activating more IFAs to work for us.

With our service to sales model, which again we introduced one of the main initiatives in the beginning of the year, we are focused on building the right skill sets for our client relation executives to engage effective with investors and facilities their investment decisions. Currently, we are around [ 130 ] dedicated personnel under this model to guide investors and address their every need in order to get our serviced relationship with the customers increased significantly and therefore, increase our mind share, which ultimately lead to increasing the market share.

Our distribution expansion initiatives called as Sumpark [indiscernible] over 5,000 distributors in the current year exclusive the people who have been, of course, getting onboarded through mutual funds as the add-on holders, and they are, of course, getting this tempanel [indiscernible] are our special initiative called single [indiscernible] format working [indiscernible] success on that, remain adding to the overall success of the AMC.

Through our investor education initiatives, which has been one of the pioneer division that we've created, we also set various programs on the bottom of MFD facilities, which again remains a continued ongoing process for us to reach more on customers, one creating awareness as well as increased mind share and market share.

We're also happy to share that our efforts have worked out very well with the contribution of retail franchise, increasing to 48% as on March 2022 compared to 43% about 5 years ago. Similarly, the contribution from vis-a-vis markets, which used to be about 14% 5 years ago, today it stands about 16% as of March 2022.

In order to increase the retail sales contribution further and bring in a sharper focus on high potential market, this year, we have divided the country into 5 zones. A special focus has been given to Mumbai and Delhi which generally we call it as a P2 in our system as a separate zone, as these markets -- both combined portal there, contribute overall about 40% of the overall retail market.

Therefore, we have brought in a special emphasis and special focus in order to have a sharper engagement in Mumbai and Delhi and therefore around a zone, and that's when actually divided into 4 zones, which again continues from a retail franchisee penetration point of view.

We also created in order to serve the large pool of growing HNIs, a separate team of people to focus on this segment. And I've been including a specialized products and services under the brand name of [indiscernible] to cater this segment of the market. Therefore, our sales team actually -- is actually made to work around these new model and structures in order to increase them, reward them, recognize the top talent. We're also creating a collaborative spread among the team for higher engagement and synergy, and therefore, can lead to an increase in overall productivity in the coming year.

With respect to alternate assets, which again have been guiding everyone that is one of the key areas of focus I will bring in, I'm happy to inform you that our passive product has been getting good results. In fact, our overall passive as a category has gone up 6x from March 2021 to March 2022 to touch almost about INR 10,000 crores, just short of about INR 13 crores with respect to our size about INR [ 9,961 ] crores is a size that we have reached as of March 2022.

Our emphasis in building our passive strategy also has gained momentum by way of launch of more products through ETFs, fund of funds and the multiple index funds. Our customer base in this category has also now grown to about 3,95,000 folios, which again reflects on the [ opposary ] of bringing in, in order to take the ETF as one of the product as alternate investment solution to the customers is also beginning to yield as a result.

Currently, our passive offering can [ battle ] into 4 categories oriented towards the fixed income, equity, hybrid and commodities. [indiscernible] significant traction and scale, we plan to launch smart beta passive products, which are competitively higher margin and can contribute to overall profitability as move forward.

As far as the offshore fund is concerned, last time, we did make a mention that we're making some changes. In fact, till the time, a gentlemen and Sarath Sathkumara, will see some global energy market money managers as our international CIO, we have been engaging with the various funds both in Singapore and other markets to launch our fund called The Greater India ESG Engagement Fund. We already launched this fund in terms of our road shows. And hopefully, this will also now see somewhat of success in the coming quarters as part of our contracts being coming from the global market.

On the PMS [indiscernible] front, at and foremost, we have a suite of products like service sector latest areas and market-linked debentures PMS and credit opportunities fund in our pipeline. While we continue to do that, even our existing PMS, we've made some new changes in our team in order to drive the PMS as asset class for next level of growth.

I mean once the current recruitment really done on these on board and we'll bring in some aggression in the PMS front as we move forward in terms of launching new products as well as product that could be profitable for us as well as the suitable for the customers.

On the real estate front, I happily share that we have completely our first close on Aditya Birla Sun Life real estate credit opportunity fund. And in fact, we closed the fund at about INR 160 crores or INR 170 crores in terms of size. And hopefully, this funds actually being taken to the overseas market. In fact, in the coming year, 2022-2023, we'll bring in more assets in the same fund as we move forward.

Now moving to the financials for the quarter. Our focus continues to remain achieving a robust asset mix of high-margin equity assets and long-term debt. We'd like to reiterate that our equity mix is an all-time high of 41% for the quarter -- for the quarter ending March 2022.

ABSL AMC, in fact, registered highest ever profit in FY 2022. During the financial year 2022, the total revenue has improved from -- improved by 17% on a year-on-year from INR 1,200 crores to about INR 1,409 crores.

Our profit after tax has increased by 28% year-on-year from INR 526 crores to about INR 672 crores in FY 2022. And we are happy to announce that the Board has also proposed INR 5.85 dividend as the final dividend for FY 2022, this the total dividend declared for the full year of about INR 11.45 per share.

For FY 2022, our overall investment book stood at INR 2,121 crores. And in fact, the PL of '21-'22 has gone quite well, both in terms of high and the right asset mix, highest ever profitability, overall improved asset mix and reasonably good momentum that we have built in the last few quarters in building our SIPs, all of them actually are going in the right direction in terms of building of this extra wealth.

However, with this, I'd like to just conclude my briefing, and now open the floor for any questions that you may have.

[Operator]

[Operator Instructions] The first question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Sir, just wanted to understand a couple of things. Firstly...

[Operator]

Sorry to interrupt you, Mr. Jain, may I request you to speak on the handset mode, your audio is not very clear.

[Prayesh Jain, analyst]

Is this better?

[Operator]

If you are on speaker, please come on the handset mode, and you proceed.

[Prayesh Jain, analyst]

Hello, is this better?

[Operator]

Yes, much clearer.

[Prayesh Jain, analyst]

Yes. Just wanted to check on one -- so in the fourth quarter, there was a sequential increase in other expenses. So was there any one-offs in third quarter which is now reflecting and has come back? That was one.

And can you, sir, I would appreciate your thoughts on further trajectory on the yields, which on the mutual fund business, with regards to how are the yields shaping up, especially if you could throw some light on the movement between the legacy assets versus the new assets? That was the [indiscernible].

[A. Balasubramanian, executive]

Sure, Prayesh. I'll ask Parag to answer this.

[Parag Joglekar, executive]

Thanks, Prayesh, for the question. So on the other expense side, so generally, our -- the trajectory is in the range of around INR 55-odd crores. So this quarter, there is slightly some expenses on the marketing activities we have done on alternate asset and digital side, which has slightly increased our cost on this end. Plus, post the opening of economy and traveling, a lot of events and a lot of traveling has been happening, which has slightly increased expenses, plus, offices are working as normal, which was not there in earlier quarters, which has taken up expenses slightly up.

But yes, more or less, it will be in the range of around INR 55-odd crore, which we have seen earlier also, there is slightly bump up in the current quarter due to the quarter -- year-end -- sorry, year ending spendings.

[A. Balasubramanian, executive]

Alternate asset?

[Parag Joglekar, executive]

Yes, some spend on alternate asset we have done on the marketing side.

[Prayesh Jain, analyst]

Okay. So this kind of run rate of INR 60 crores kind of a continuation run rate, is it sustainable?

[Parag Joglekar, executive]

So that is what our...

[A. Balasubramanian, executive]

Aim would be. Yes.

[Parag Joglekar, executive]

Yes. 55 to around range currently.

[Prayesh Jain, analyst]

Okay. Got that. Got that. And on the yields front, how do you see the yields moving ahead, especially in the light of the movement between legacy assets to newer assets?

[Parag Joglekar, executive]

So yields has a various composition, which impacts the overall yield. One is the size, how it goes up and which asset class is -- the contribution increases in the overall mix, that depends. But we are hopeful that the yields on overall mutual fund will continue to be in the range of this 41-odd basis here and there currently, which are there.

Maybe if the size really goes up, then we may see some pressure on equity yields, but we are hopeful that debt yields over the period can compensate to a certain extent.

[Prayesh Jain, analyst]

And lastly, if you look at the market share in both equity and debt, we still are not seem to be gaining any ground out there. Any thoughts as to what could be the key drivers to improve the market share in both the equity and the debt segments?

[A. Balasubramanian, executive]

Yes. See, with respect to market share, Prayesh, clearly, while we saw, I mean, in previous years falling market share, I think, one, first and foremost, the way IPs, the rate of all got reduced quite significantly in the last few quarters, last 2 quarters, that's 1.

Secondly, we have seen increase the contribution coming from the banking channel, is an organized channel, is largely sells on the base of the product being part of the approved list and so on and so forth. We are now seeing an improvement in the overall banking channel contribution, which again, I see is a sign of momentum.

And third is the -- I think the NFO-led growth versus existing fund like growth. Last year significant proportion of the flows were coming through the NFO that I mentioned in my briefing about 50% of flows came to NFOs. I see in the coming year reduced offerings of NFOs and therefore the money would move gradually to the existing funds.

We have prepared ourselves in positioning 5 year for our product, which are the flagship and respective categories and whose performance has also been quite good. And even the engagement that we have at the ground level that we are bringing in order to build the size on the existing funds, the -- each of the major categories of funds that something and should also help us in improving the overall share.

And the last, of course, is the improve the overall SIP book size is close to about INR 900 crores currently we have. And each month, we have been seeing the run rate improving, especially on the registration. I think we continue to keep this high focus, our endeavor to have close to about INR 1,000 crores class in SIP would also lead to an improvement in the overall market share improvement.

I think that's 1 single-point agenda that we have in order to build that. The team structure, I just mentioned about briefly as what you have done in terms of retail team structure. In fact, there has been done keeping in mind the sharper focus that we have to bring in those markets which matters to us, high potential.

At the same time, the team can work in a very focused manner, improving high productivity in the respective market without diluting their attention and looking at all around the place. That's something, again, we have done it in a team structure. So this sharp rise in team structure also should help us in bringing higher productivity or outcome coming from the -- each of these markets as we move forward.

In fact, I must mention the retail team have to made announcement, they're quite enthusiastic and energetic as we got the growth. And we also feel that very confident that the coming year, we'll be able to actually move towards improving the overall productivity. So these are the assumptions.

And the last year work, income side, I think year-end outflows, which normally happens as a result of that, you would have probably seen your margin has dip in the season come AUM as well, which is [indiscernible] abilities should again come back as we move forward, given the fact that we are a significant player in debt market and should also help in overall the size are getting a little better.

[Operator]

The next question is from the line of Lalit Deo from Equirus.

[Lalit Deo, analyst]

Sir, my first question is, sir, -- so we are seeing a strong growth on the ETF and [ index ] fund. Now while we understand that the -- so it's on a current lower base. So do we have like any broad mix in the mind like that we are targeting to increase like currently it sounds about 2% of the overall AUM mix. So do we have any number in the -- for ideal mix for the -- in the future? And with the increase in the ETF and index fund, do we foresee any pressure on the yields as well?

[A. Balasubramanian, executive]

See, on your first point, I think we -currently our rate, which were a number I put that as a personnel total assets under management is still very, very small, given the fact that we have now gone to about INR 9,000 crores in size, is in INR 3.5 crore size will still be a small portion of the overall assets under management. Given the fact that we don't have the luxury of getting the government-related growth in our schemes.

But at the same time, the milestone -- having now established this base, having now brought in a high level of focus on building passive as one of the separate strategy in addition to the growing our existing funds, active management funds, definitely, the rate of growth that we are looking at from this segment would definitely we'll target a higher amount, but still it will not be still a major component of the AUM and that will only keep pricing as we move forward.

That's why I will look at it rather than measuring the success as a percentage of AUM, but how we actually rate of growth is coming from the segment that's something which I look at as part of the strategy going forward. And at the same time, in terms of keeping the profitability, look for opportunities. In fact, we already filed almost about 13 or 14 applications with SEBI. Thanks to rather the regulatory framework today has not -- new funds we launched in between April and the June period on the pulling up account appliance industry as following.

I think once this is done, probably once we start getting approval, we'll launch some other funds, which is more like either account-based funds or maybe smart beta funds, which will, of course, help us in gaining a little higher marginal also on that.

As far as the margin pressures due to the rise in index funds, I don't see that becoming a trend at least for next 3, 4 years, that's my personal view. Given the fact that as the market gets widened and the probability of money managers delivering returns either in line with the index or better than index, that will always come.

And that is been the case, I don't see the margin pressure is coming on actual managed funds just because our money is actually rather the low-cost funds are being offered the market. And my own belief is the rate of growth for low-cost funds will be probably higher than the rate of growth for actual managed fund at least for some time.

As part of the whole application strategy -- under application strategy, I think index funds in all fares, should also be part of the consideration for the investors, which I think as the fund house will offer, distributors also will offer to be fair to the customers. The customers will also have a mix of actual managed funds and index fund and if we look at the total cost that he is paying rather than they're moving only towards the low-cost funds.

Therefore, I don't see margin pressure coming on the base index, even the fact the size of the fund is still become a larger, these expense also gets reduced as per the new SEBI guidelines, which got introduced about few years back. Therefore, I don't think that as a big challenge.

And the last, of course, is the direct fund expenses once the size become larger, adjusting for distributing commission, direct fund expense is still [indiscernible] attractive, the problem [indiscernible] were in need for somebody to look at for reducing further expense and go and look for index funds and therefore, putting pressure on the actual management expenses.

[Lalit Deo, analyst]

Sure, sir. And sir, like as you mentioned like we have 14 to 15 products on the -- in pipeline for on the passive front. So do we have any products in the active side? Do we have any products in the pipeline?

[A. Balasubramanian, executive]

Active side, we already have 1 fund, which, of course, filed with SEBI and waiting for approval, which is a multi-asset allocation fund, which, of course, include commodities as well as part of that, and that's something which we already have. And once the approval comes, we are actually hoping to get approval in the month of March that we thought we'll launch in the month of May. But given the current situation, probably we'll do it in June-July, the second quarter of the current financial year.

But in the meantime, it's also an opportunity which I see, I was telling my colleagues as well. And given the fact in April, May, June, NFOs would be lag, that's a good opportunity actually to revive the greater interest on existing funds, which are equally important for the industry to grow, which also, I see there's an opportunity actually to create the recall for the existing funds much bigger than what you would have seen in the last year, and therefore, improving the existing fund itself.

[Operator]

The next question is from the line of Jignesh Shial from InCred Capital.

[Jignesh Shial, analyst]

Yes. Just 3 things. One, can you give us a little bit more details about up to -- sorry, if I missed out in the opening remarks, but a little bit more broader strategy about how we are planning to do on the alterative side, and how that particular business should see a growth in the next -- a little relatively a longer horizon 2 to 3 years and how that will impact our yields? That is one.

Second, as you already said that because of the unlocking and all, other expense is somewhere around INR 55 crores and all. So the PAT it is how the reach, what you are seeing it up for the next 3 years to give a little bit broader idea on that?

And finally, any increase you're seeing on the dividend payout side, or there will be more distribution coming up on the dividend side? If you can give us some clarity on that, that would be really helpful. That is the 3 questions I have.

[A. Balasubramanian, executive]

Sure. So with respect to your -- Jignesh, on your alternate strategy, one, we said a separate vertical as we have informed in the past. This is comprising of 4 different segment of the market. one, PMS and AIF space; second is the passive strategy within ETF; and the third is little bit of passive fund also is got incurred in that; and third is the real estate fund; and fourth is the offshore.

With respect to the PMS and AIF, so I just mentioned in my opening remark that we are further strengthening our team by way of getting somebody on board who may have already finalized and mostly next quarter once he joined, I'll be able to disclose the name. And once he comes on board, we have a big plan in terms of launching both the close on AIF as well as open an AIF.

And also AIF which will have a lower cost structure at the same time profit sharing kind of model. That's something we'll stepped up our focus in offering such products to the market. Recently, we of course, have a money manager who has joined from [indiscernible] PMS division. And with this, we are strengthening our team further in order to bring in a higher level of focus on building the size in this, which ultimately, of course, currently we had a size of INR 2,000 crores.

In fact, the peak AUM that we had in PMS was about INR 5,000 crores about few years back. [indiscernible] aim to go past that number the next few years, that is on the PMS and increase the counter pin [indiscernible].

Second, with respect to the ETF strategy and passive strategy, which JJ explained earlier. With respect to the offshore, we have seen a static growth in the last few years. I don't think you can go worse than what we have seen. It can only get better.

Given the fact that we already launched the fund, which is called engagement fund, ESG engagement fund and more such focus that we're going to start bringing on the table, including winning mandates from existing customers who have got great experience dealing with us for the last 14 years, I think that probably will give us an incremental AUM and also see that opportunity coming from the offshore business, especially in offering product solution to the global investors.

In the infrastructure space, we have been already having informal engagement with one of the leading firms to help us raise money from pension funds to whom we can offer India-related product happily with [indiscernible] commodity product, which again has a higher margin coming on the space, given the fact that we have a large teams who understand current market much better that something we will do as far as the off-shore fund concerns them.

So of course, we have a very clear strategy on the ultimate fees in taking it to next level. And as we see a development happening in this space, I think we'll keep announcing it in each quarter in order to give more clarity on this space. And definitely, the intention is to have higher contribution coming on the profitability as well as on the more on AUM more on the profitability.

With respect to the other expenses, Parag, you want to say.

[Parag Joglekar, executive]

So as we -- I mentioned earlier that our other expenses will -- is around INR 55-odd crore in the last year...

[Operator]

I'm so sorry to interrupt you. Mr. Shial (sic) [ Parag ], that your audio is not very clear. I would request you to come closer to the phone and -- on the handset mode.

[Parag Joglekar, executive]

Sure. So our other expenses were in the range of around INR 55-odd crore in the last couple of quarters, and we are hopeful that it will remain in that range with some inflation impact going forward which may have. And it may be asset business going up there may be some cost, on the marketing side of those products and may come in, but we are committed to keeping our cost under control as far as possible and keeping it the growth below the growth of -- the overall growth of the AUM.

[Jignesh Shial, analyst]

So what I understand is that there is a very limited probability of now on an absolute basis cutting down this particular cost because we are already working on the optimized level. So whatever now the PAT improvement -- PAT improvements are concerned, it has to come up from the top rather than rationalization of expenses happening. That is that is what I was coming to. So that understanding is correct, right? So more diversity coming up on top, that will basically give us more flat yield, I mean improvement on the profitability?

[A. Balasubramanian, executive]

Yes. Cost-led focus will be, of course, more let's say, [indiscernible] make investment today for the [indiscernible] for assemble and building alternate business, then actually they will have some of us costs. For example, this quarter itself, we have fee costs which have come related to the alternate business where we are increasing the cost now, but it will start delivering in terms of both top line and profitability as we move forward. But those are some things which would be there. Otherwise, what your assumption is right?

[Jignesh Shial, analyst]

All right. And lastly on dividend?

[A. Balasubramanian, executive]

Yes. Coming to the last question on the dividend payout, I think anyway we have guided around 50% of our PAT would be kept aside for the purpose of distribution. And though the policy, we have given a broader guidance without giving any percentage of dividend declares that you do, but you would have already seen in the last 2 quarters, we gave an interim dividend and giving and now we are in the final dividend, which is 20% more or less, that will continue.

But as the cash balance becomes larger and we don't feel the need for that, I'm sure they're subject to the approval of the Board and shareholders and this percentage can definitely vary.

[Jignesh Shial, analyst]

But for at least for if I put it for the next 3 years kind of an horizon, we should assume it would be minimum 50% or somewhere between 50% to 60% kind of assumption would be reasonable, is my assumption correct?

[A. Balasubramanian, executive]

Exactly. Exactly.

[Jignesh Shial, analyst]

Yes. Just lastly, make sure you people have been veteran in the industry and a lot of interest rate tightening is happening and all, do you think the demand for debt fund should be relatively muted even going forward, at least in the near term and liquid will see a traction?

Obviously, equity and ETFs anyhow continue with the broader penetration and everything. But what's your view on debt and equity? Do you think that will still remain a bit of a laggard at least in the near term and liquid will be moved into the market? Just your thoughts on it?

[A. Balasubramanian, executive]

Yes. I mean, in fact, even in the last 2, 3 months, there has been a more shift towards short-tenor assets or short-duration taken companies, which I think our own belief will continue for some time until we actually see the rate hike starts happening.

I think once these rate hike cycle begins and once, they reach certain level, probably you'll be able to figure out some opportunities coming on account of -- in the season companies itself given the fact [indiscernible] is already discounting 85 to 100 basis points the rate hikes. And [indiscernible] salaried accounting the rate hike, and the real rate hike has not happened.

But as the rate hikes happens in real world and bond market already discounts the potential rate hike, probably the time will come in the next, say, maybe, let's say, third quarter or fourth quarter of this current financial year. On the 10-year bond is close to about 7.5%, we'll see opportunities for companies and investors to come in.

At the same time, even the credit fund as a credit starts picking up, and as these spread starts widening, you'll also see a revival of credit funds as we move forward. May or may not happen in the year 2022-2023, but maybe in the [indiscernible] as the spread starts widening, therefore, a fixed income is probably should start counting for a better recovery and going forward in the next 6 months to 1-year period.

And for that -- during that interim period, you may probably see a mutual response coming towards fixed income staying invested between, say, 3 months to 1-year kind of duration.

[Operator]

The next question is from the line of Dipanjan Ghosh from Kotak.

[Dipanjan Ghosh, analyst]

Just 2 or 3 questions from my side. First, going back to one of the previous questions on the passive strategy in terms of the smart beta products that you intend to launch. What will be the yields on some of these products? If you can give sense on that?

Second is in your overall gross active equity flows for the year, if you can segregate that between those that came into the direct channel and through the non-direct channel for the overall year or for the quarter?

And the third is, you have mentioned that the overall increase in folios for FY 2022 was around -- broadly around 1 million. If you can also kind of break that as to what will be the overall increase in the number of new pan accounts that would have been registered currently?

[A. Balasubramanian, executive]

Yes. See, with respect to the first question on passive asset smart beta ETF in terms of margin, I think smart beta ETF, I think we are looking at the gross level anywhere around 60 to 80 basis points kind of the gross level. On the net level, we are looking at contribution somewhere around 35 to 40 at a smart beta ETF.

I'll just give an example, we did last year, Nifty 50 equal rate index, it involves a frequent revisiting of the portfolio allocations, et cetera, we actually launched this product with the 1% expenses maximum. And that issuing commission already kept in that. And then it's contributing close to about 40 basis points to that, that's the way we've build the model.

And smart beta ETF will probably have a similar kind of model. Though at this point of time, the entire passive is coming out of relatively a 10 to 12 basis points kind of product. And with income product, which also comes in the passive category, we have been launching a target beta and index funds and big income sale. Also, I have been giving close to about 20 basis points the gross level, that's something, again, we continue to do. Maybe the volume will continue to drive our profitability from there rather than absolute margin. And that something is the broad expectation that we are building in our business plan.

With respect to the equity flows, let me just get the -- we don't have generally we disclose the number, but I can only say broadly, this year, we have seen net inflows in our equity schemes through the launch of -- to fund -- to open ended equity funds. Given our existing funds are predominantly in the existing funds like Sun Life Equity and some of our thematic funds, we have seen inflows such as Digital Little India Fund, Banking [indiscernible] Fund, even the GenNex one of the consumption-oriented fund. Generally, we have seen an enclosing phase. But this breakup Dipanjan, I would get that separately.

With respect to folio increase, of course, I mentioned about 13 lakh folio that we got added. In terms of new pan number, if I'm not wrong, it's close to about 6 lakh, right?

[Unknown Executive]

10 lakhs.

[A. Balasubramanian, executive]

10 lakhs pan number. Around 10 lakhs new pan numbers we added.

[Dipanjan Ghosh, analyst]

Sure. Just going back to the second question. I think I was more of looking not at the net inflow number for the year, but I was trying to understand, how much proportion of the gross was saving through the direct channel, if you can give some color on that?

[A. Balasubramanian, executive]

Yes. Direct channel is about 18%. Direct channel is about 18% in the overall asset mix.

[Dipanjan Ghosh, analyst]

This will be on AUM basis, right?

[A. Balasubramanian, executive]

Equity AUM basis. Yes, correct.

[Dipanjan Ghosh, analyst]

Okay. Can you also give this number on a flow basis?

[Unknown Executive]

[indiscernible] the overall is in the similar range. Dipanjan, it will be more or less in the similar range.

[Operator]

The next question is from the line of Madhukar Ladha from Elara Capital.

[Madhukar Ladha, analyst]

Yes. So my question is the staff expenses, again, in Q4, we've seen a little bit of a decline from what was trending earlier. What is playing out of here? And how do we see this line item going forward?

[Parag Joglekar, executive]

Yes. So Madhukar, on the staff expenses, basically, there is slightly two-down of the repay provision, which has resulted in slightly lower cost on the -- in the Q2 -- Q4.

[Madhukar Ladha, analyst]

Sorry, I did not understand that. Can you just repeat that?

[Parag Joglekar, executive]

So there is a slightly drop in the variable the bonus provision which we make every quarter, which has resulted in a slightly drop in the overall cost for the Q4.

[Madhukar Ladha, analyst]

Understood. And can you give what is your total variable pay for the year?

[Parag Joglekar, executive]

So we don't disclose that number. And it is part of the overall cost.

[A. Balasubramanian, executive]

Again, I think [Foreign Language] assumption only you have to make, Madhukar, which is predominantly fixed versus variable. The variable payout general is about -- roughly about 20%, 22% of the -- yes, 20% to 25% of the broad the [indiscernible] of the tunnel.

[Operator]

The next question is from the line of Bhuvnesh Garg from Investec Capital.

[Bhuvnesh Garg, analyst]

So sir, I would like to know your views on the points of differentiation for an AMCs like what are the factors that you think would drive a channel partner to sell ABSL fund particularly or for the customer to demand ABSL fund? And what -- and in that scenario, what the company is doing about it? And what kind of results you are expecting of your actions in coming years? Yes, that's my question.

[A. Balasubramanian, executive]

Yes. Thanks, Bhuvnesh for this question. See, the clear differentiation is, I think one is a long years of commitment, the tracker card that we have as the fund house are brought to the table. And second is, as a thought leader in the mutual industry to drive in the forefront, not just working only for our fund, even for the whole industry, has given us a high respect as well as high engagement ground level. That's the first and foremost thing which I would say.

Second, of course, having created a good experience, see, every fund house will go through some bid of ups and down here and there. I think delivering consistent experience with the customers not just only in investment performance, even otherwise in adding value to the distributors across the country and staying relevant from the customer point of view in the respective product category as well as -- probably as the on of the best solution provider for the investors, that remains the second point.

Third, with respect to the distribution partners. I think the number of engagement activities that we have around the years 365 days both in terms of increasing the skill set of the people as well as working with them closely, and adding more customers in every market as part of our penetration, given the fact that we have now, today I've got a [indiscernible] locations that trend continues to remain one a big area of focus in increasing our geographical footprint.

On the -- in terms of the part of our broad commitment that we have in building this business hence having more growing needs of the customers and distribution community. I think these are some of the things will remain. At the end of the day, we have a fund house, we are firm believer of high engagement, high recall for our people, product, brand and the service that we're able to provide on an ongoing basis that ultimately will increase the market share.

I think that's something which I realized over a period of time, high engagement ground level is actually must in providing service to the both the distribution community as well as the customers, which will be another big differential product, which I call it as a hard work, that hard work will have to continue to put more and more each year for the year in order to ensure that we as a fund house get our deserving market share.

[Bhuvnesh Garg, analyst]

Sir, just a follow-up question on that only. Sir, do we have any metric to track which trend engagement level? Like, for example, in daily active users in case of app so that time spent by each user on app daily basis. So some kind of metric which we can strive to gauge the change in engagement that you just mentioned?

[A. Balasubramanian, executive]

Sure. See, we've introduced on the lines of Salesforce.com, which I think internationally most of the companies uses this. And we have introduced one of the local or local saw tool, locally created tool that we have introduced, we call it [ Rymo ] is again being used by some of the large banks in the country in order to provide a greater facility to the RM in order to be not making more informed and then make it more productive in every market in which we operate in. That's something we as a fund house introduced last year.

In fact, wherever I travel and talk to my salespeople, they all love it because it gives them the greater information that they need on a day-to-day basis to be prepared in the respective market. And then know where is the gap that lies which distributor we needed to be connected, with distributor last time they connected where they need to connect more and going forward. All such information are provided in the palm itself in the mobile phone. That's something in my own belief is helping them in increase the engagement at the ground level.

In order to also give them more about MIS in a tip on their hand, and they're also helping them know the gap that exists in every market in terms of our activities and also helping them plan much better than the past, which in my own belief is continues drive towards and creating a cultural habit, creating a habit of using these as part of normal activities. And that something will help us in bringing higher productivity from every RM that operator in the country.

Basically, the idea is make every RM look inward rather than look outward and therefore, is the only worry about his market, his location, which is present and therefore, drive the respective market growth, which we haven't done, which we've done is historically in the past very well. But maybe for a brief period, yes, we had seen some slippage, which I see coming back with this introduction of new tool.

[Operator]

[Operator Instructions] The next question is from the line of Pranav Tendolkar from Rare Enterprises.

[Pranav Tendolkar, analyst]

Sir, if I calculate, I just wanted to confirm this. So outstanding SIPs our share is around 2.57% and in the new SIPs, it's 4.57%. Is that right?

[A. Balasubramanian, executive]

What's your question, again?

[Pranav Tendolkar, analyst]

So in outstanding SIPs that we have, so I think we have 31 lakh -- say, 31.7 lakh SIPs outstanding. And in that, we have 2.5% market share out of total 6 outselling in the market. And in the new SIPs, we have 4.5 market share, 4.5%. Is that right? Because new SIPs we have around, I think, 324,000 as compared to, say, 7 million in the industry. So is that right, that calculation?

[A. Balasubramanian, executive]

I'll ask Prakash to answer this one.

[Prakash Bhogale, executive]

Pranav, this 5.28 crores is the industry numbers, and we have around 31 lakhs, so you can work on the market share.

[Pranav Tendolkar, analyst]

Correct. And in the same way I can compare the new SIPs also, right?

[Prakash Bhogale, executive]

In the new registration data we get it on the MP also. So from there also you can get the market share for new registration.

[Pranav Tendolkar, analyst]

Correct. Sir, so you have included that in our presentation, sir? Yes. So in fact -- so that actually concludes that your market share in the new SIPs is much higher as compared to your previous performance. Is that right?

[Prakash Bhogale, executive]

Yes.

[Pranav Tendolkar, analyst]

It's right? Right.

[A. Balasubramanian, executive]

Yes. Exactly. [indiscernible] aim, I think the -- historically, we have built our SIPs. Each month, there has to be higher growth coming in. So every segment that you operate, we go on look at what we need to do. If you have to drive our team with high profit [indiscernible] and also encourage them actually to sell more SIPs a long-term sustainable asset, that's something we keep doing it. I think what you said is exactly on the same line in which we have been building.

[Pranav Tendolkar, analyst]

Right, right. Sir, also out of our AUM, how much of our AUM stands in first 2 quartiles, can we give us a color in that? And do we track this number?

[A. Balasubramanian, executive]

Yes, yes. See, I can give you. Though, we don't generally disclose it, but I can give you [Foreign Language] how does it work. See, we -- see, most of the funds, in fact, in the equity space almost 75% of these funds in the equity space have delivered Q-on-Q performance with respect to the -- a comparable schemes in the respective categories. In the case of fixed income, 100% of the funds have in the Q1, Q2.

The way we do is each category, we look at peer group in the respective categories and then we map it. So therefore, the 1-year basis, it will be about 70% roughly. On a 2-year basis, it will be roughly about 65%. On a 3-year basis also, it will be now close to about 65%. And we have seen a continuous improvement in the last 1.5 years in all our equity funds performance.

Again, as we have seen in many times in the circular market -- cycle in the market. And this last 1.5 years, our improvement significantly that we have shown on a short-term performance, also now start reflecting long-term performance. At the same time, of course, if I'm better, better than others, somebody else are right. There are many people actually also done extremely well on the base of that performance during the period '19-'20. They have seen a significant dip in that performance as well.

So I think that's something it goes on cycle. But as a fund house, we want to focus more on consistently rather than the performance either in the short term or in the medium term.

[Pranav Tendolkar, analyst]

Right, sir. Sir, also, can you just give me some color on beyond 30 monthly average AUM, I think you have around INR 460 billion for this quarter. How much of this is equity and debt, like color, if you can give? Is this beyond 30 equity-focused market?

[Parag Joglekar, executive]

It's 75% equity.

[Operator]

[Operator Instructions] The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Just wanted to check on slightly longer-term outlook for overall equity yield. So we and -- or we can see overall a net yield. So we have seen in the last couple of years between FY '20, '21, '22 a sharp fall in the yields, where there have been multiple reasons for it. But do you see the intensity of this reduction in equity eases to reduce going ahead? And how do we see the moving ahead, especially in the equity category?

[Parag Joglekar, executive]

Yes. Yes. So Prayesh, as you also know the larger the size will be the lower the [ TER ], so -- and a little bit the new flows, which come in the scheme currently may come at a slightly higher expenses underwriting costs compared to the stock. But it totally depends on which scheme it comes, which category it comes because some of our -- the brokerage after a certain period keep on dropping as the year passed, like the first year may be NFO expenses, NFO has initial higher cost of underwriting. But over the period, it will keep on dropping and which will help us all in reducing the cost of underwriting and improving the yield.

So it's difficult to project, but the principle remains same that sharing will be in the region of around 60-odd percent, and we'll keep on how the market or the size goes up, it will have a slightly drop in the [ TER ].

[Operator]

The next question is from the line of Pranav Tendolkar from Rare Enterprises.

[Pranav Tendolkar, analyst]

Sir, one of the thing that is the part of customer experience is obviously return, but that's not the end of it. So I would just like you to spend some time on the factors other than the returns of customer experience that you are focusing on -- all -- all tracking?

[A. Balasubramanian, executive]

Yes. Thanks, Pranav. And of course, the way even our position is being asset management company, investment is at the heart of the business and that goes without saying. And also the risk management that as a fund house as we start building size, our managing business with high governance standards and also the risk that we need to keep in mind associated with both the delivering and consistent performance and portfolio respond up here, as well as giving the operational benefit that we have to give.

I think the other area is actually the -- one of the thing that we keep doing is a constant communication engagement with the existing customers as well on a quarter-on-quarter basis and adding value to them, one, on the basis of there is opportunities that one could see in the market more as part of the learning initiatives, the investor education initiative, as I mentioned about, is one of the highest. We are in the #1 fund in the country. We're presently ranked as the best among all the mutual fund players in the country. That's something we have now brought in the high emphasis the last 7, 8 years.

Second is the -- on service initiatives, we have a team called 12x12 project we call it. Within a few hours of any query that come from the customers need to get resolved within a matter of 12 hours and that's a mandate that we've been giving to the entire customer service team as part of the speed to the market initiatives.

There are many such small initiatives in our own belief is will help us in differentiating ourselves as a fund house who could be -- who could have a higher mind share of the customer in addition to the experience they get on putting the money in the investment.

At the end of the day, we believe in adding value to the customers. We don't making the customers aware about the value-added product that we have, value-added service we have, but most of the services are meant for creating ease of doing business for the customers. But many times, investors don't use these value-added service and value-added product to find a solution or maybe ease of transaction for their needs that's something creating awareness about them and make customers the utility value go off significantly on this exercise is something remains one of the core area of focus in addition to focus only on the investment-led growth.

I hope it answers your question, Pranav.

[Operator]

Sir, we lost his line, unfortunately.

[A. Balasubramanian, executive]

Sure, sure.

[Operator]

As there no further questions from the participants, I now hand the conference over to Mr. A. Balasubramanian, MD and CEO, for closing comments.

[A. Balasubramanian, executive]

Yes. Thank you very much, and ladies and gentlemen, for logging in today. And with this, we conclude our Q4 FY '22 earnings call. Do feel free to reach out to us through our IR Head, Mr. Prakash Bhogale, for any queries that you may have. And I look forward to seeing you soon. Thank you.

[Operator]

Thank you. On behalf of Aditya Birla Sun Life AMC Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.