Anand Rathi Wealth Ltd

NSE:ANANDRATHI

Earnings Call Analysis

Strong Financial Performance and Strategic Growth Initiatives

Anand Rathi Wealth Limited reported consolidated total revenues of INR 245 crores for Q1 FY '25, a 38% increase year-on-year. Profit after tax also grew 38% to INR 73 crores. The company achieved an annualized return on equity of 42.8%. Total assets under management (AUM) surged 59% to INR 69,018 crores, with net flows increasing by 173% to INR 3,364 crores, driven by a 462% jump in equity mutual fund inflows. The firm added 52 relationship managers and maintained near-zero attrition. A revenue growth target of 20-25% is anticipated, supported by robust economic conditions and strategic reallocation of assets.

Impressive Growth in Revenues and Profit

In the first quarter of financial year 2025, Anand Rathi Wealth Limited reported consolidated total revenues of INR 245 crores, marking a significant increase of 38% compared to INR 178 crores in the same quarter last year. The profit after tax (PAT) also saw a parallel growth of 38%, rising from INR 53 crores to INR 73 crores. The consistent growth in these key financial metrics reflects the company’s strengthening position in the wealth management sector.

Significant Increase in Assets Under Management

As of June 30, 2024, the Total Assets Under Management (AUM) surged to INR 69,018 crores, which translates to a year-on-year growth of approximately 59% from INR 42,413 crores. This increase indicates not only robust client inflows but also effective asset management strategies that resonate with clients' needs.

Stellar Client Inflows and Trust in Advisory Services

The net inflows in the quarter reached INR 3,364 crores, a remarkable 173% increase from the previous year. Notably, net inflows into equity mutual funds skyrocketed by 462%, reaching INR 2,091 crores. The growth in inflows is attributed to the company's strong reputation and client trust, given that all assets are under regular plans despite industry trends favoring direct plans. This positions Anand Rathi Wealth as a reliable partner for clients seeking wealth management services.

Strong Return on Equity and Sustainable Growth Outlook

The company's annualized return on equity (ROE) for the quarter stood at an impressive 42.8%, up from 35.9% in the prior quarter. This growth aligns with the company's strategy to manage payouts effectively, maintaining a dividend policy that allows the distribution of 30% to 50% of PAT. The leadership expressed confidence in sustaining ROE levels, supported by the nature of the business which does not require extensive capital for growth.

Expansion Plans and Market Opportunities

Looking ahead, the company recognizes significant growth opportunities in the NRI segment and plans to expand operations, particularly in the Gift City, an important emerging market. The regulatory changes supporting the NRI business create a conducive environment for potential expansion, increasing the scope for wealth management services across regions.

Strategic Focus on Revenue Streams

The management is committed to achieving a balanced revenue model, targeting a 50-50 split between trail and upfront revenues over time. There is a strong emphasis on structured products alongside equity mutual funds, indicating a strategic approach that tailors offerings to meet diverse client needs. The wealth management firm aims to capture a larger market share in equity mutual funds, projecting a goal of 3-4% market share.

Investment in Human Capital and Retention Strategy

Anand Rathi Wealth has successfully maintained zero attrition among relationship managers over the past four quarters, which is a notable achievement in the competitive financial services sector. The number of active client families has grown by 19%, surpassing 10,000, demonstrating the company's effective client relationship management and employee satisfaction strategies. The addition of 52 new relationship managers reflects the ongoing commitment to enhancing client service and support.

Conclusion: Strong Position and Future Potential

With a solid foundation reflected in strong financial metrics, significant growth in AUM, and a strategic focus on expanding revenue streams and market presence, Anand Rathi Wealth Limited is well-positioned for enduring success. The sustained operational performance, along with plans for further geographical expansion and service diversification, underline the company’s potential to capitalize on the growing wealth management market in India.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Anand Rathi Wealth Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Feroze Azeez, Deputy CEO, Anand Rathi. Thank you, and over to you, sir.

[Feroze Azeez, executive]

Thank you so much, and thank you so much, everyone, for joining. Good afternoon. I thank you for joining us for the earnings call for the first quarter of the financial year 2025. I'm joined by our CFO, Mr. Rajesh Bhutara; and Head, Investor Relations, Mr. Vishal Sanghavi.

Our consolidated total revenues for Q1 FY '25 stood at about INR 245 crores compared to INR 178 crores Q1 FY '24, registered a growth of 38%. Trail revenues to INR 89 crores and grew by about 7% year-on-year. Profit after tax was INR 73 crores, registering a growth again of 38% compared to INR 53 crores same quarter last year. The PAT margin was 29.9% as compared to 29.8% for Q1 FY '24. The annualized return on equity for Q1 FY '25 stands at 42.8%. Total AUM grew by about 59% year-on-year to INR 69,018 crores as on 30th June 2024, as compared to INR 42,413 crores as on June 30 2023.

The total net flows during the Q1 FY '24-'25 grew by 173% year-on-year to INR 3,364 crores for the quarter. Net inflows in equity mutual funds jumped 462% to INR 2,091 crores, and all our assets are under regular plan, whereas the industry is witnessing increased share of direct plan. This is a testimony for the deep trust and confidence our clients place in our value proposition.

Our systematic and data-driven approach, along with the realistic understanding of client needs and risks has been instrumental in achieving these numbers. Number of active client families increased by 19% year-on-year and crossed the milestone of the 5 digits, 10,000 client families. We've crossed that number. Our client attrition rate in terms of AUM lost was 0.1% for Q1 FY '25 as compared to 0.2% last year, reflecting our client-centric approach and a strong research-backed solution.

On a net basis, we have added 52 relationship managers in the last 12 months, bringing our total count to 360. We have successfully maintained our 0 attrition of relationship managers for the straight fourth quarter, which is significantly because of the culture created in the organization and the transparency between the company and its constituents.

And you would also note that in these 4 quarters, 0 regret attrition signifies one of the first few times in the financial services industry a company of this size of relationship managers who have reported 0 regret attrition for 12 successive months. So as a part of our [indiscernible]. So I will hand this over to Vishal ji now, who is our Investor Relationships Head so that I can break the monotony. And Vishal ji, can you step in and take...

[Vishal Sanghavi, executive]

Thank you, Feroze bhai. Good afternoon, everyone. As a part of our endeavor to reward our shareholders, we successfully concluded the buyback program of INR 164.65 crores, which is excluding any charges and taxes. About Digital Wealth business, which is a B2B2C business, registered AUM growth of 48% year-on-year to INR 1,727 crores and revenue of INR 7 crores, a growth of 13% year-on-year.

OFA business, which is assets platform has 6,064 mutual fund distributors as subscribers at the end of the Q1 FY '25. OFA business reported revenue of INR 1.84 crores, which is a growth of 18% year-on-year. Indian economy is on a strong footprint with the GDP expected to grow at 7.2% for current year, making it the fastest-growing market globally.

In this backdrop, Indian markets have witnessed new all-time highs supported by strong performance of Indian companies. With this, we anticipate a noticeable increase in the number of high-net-worth individuals in the country and thus creating a huge growth potential for wealth business. With multiple growth drivers in place, we are confident that our company has a potential to grow by 20% to 25% in the long term.

Now I request our operator to start with the Q&A session.

[Operator]

[Operator Instructions] The first question is from the line of Bhavin Pande from Athena Investments.

[Bhavin Pande, analyst]

Wonderful team, congratulations on a great set of numbers. It's such incredible 6, 7 quarters of this amount of growth is amazing. Congrats on that. And first question is on account of AUM mix, we could see that the debt MF mix has come to 7% if compared to 11% last year. Could we shed some light on that?

[Feroze Azeez, executive]

Sure. Thank you, Bhavin, sir, for your positive comment on our results. And I'll take the opportunity to highlight that this is our 11th result. And you would see that all our results have been about 23%, 24% PAT growth year-on-year and the worst one was 24%. And the mean PAT growth has been 33%, and the median PAT growth of these 11 quarters has been 34%.

So thank you so much to trust us as shareholders. Now coming to your pointed question. Why is the debt proportion lower? There are 2 reasons for it. Because debt as an instrument for long-term money because we only try and get that money in, which is intergenerational wealth. More often than not, HNIs have intergenerational wealth. We do a very strong gatekeeping in terms of what assets we onboard to manage. So you would see very small debt proportions anyways because I'm looking at in 15-, 20-, 30-year kind of moneys.

If there's somebody who has short-term moneys, we are rippled as a wealth manager from it, is why you would see anyways Anand Rathi Wealth having smaller proportions in debt because in 10-year money, debt has very low relevance. Second point is the proportions -- the differentials, the relative change between 11% and 7% is reasonably attributed towards the fact that there's mark-to-market more in equity and structured products. And we have been reasonably positive on equity markets from August 2020, and we were the only few wealth managers would have been positive for long-term money, still sensitizing clients of 10%, 12% corrections twice a year, which is the norm of the equity market.

So mark-to-market differentials is one reason why structured products have come down to 24% and debt mutual funds has come down to 7% from 11%. I hope that answers. And we are not very bullish on debt. Even if interest rates going down, the long end of the yield curve is not elevated. So we have the flat yield curve of Indian context is reasonably sustainable. And we don't see that debt will make too much capital appreciation, either, even if repo rates were to be brought down because the long end of the yield curve is still at 7%, spread between 10-year G-Sec and the repo rate is just about 0.5%.

So on the contrary to the Street's belief that there's a lot of capital gain to be made in debt, but we think that people have not lost money, is why we don't expect to make them on the debt side even if they go long end of the yield curve. Does it answer, sir?

[Bhavin Pande, analyst]

Yes. Perfect. It was pretty much concise. Secondly, Feroze, we could see AUM and clients per RM increasing. We have added 28 RMs in this quarter, and I think 52 on a Y-o-Y basis. But in this wealth business, it's specifically known that turnaround time and sort of gestation period for RMs is high and your OpEx goes up initially. So what do you think lead to this sort of productivity gains from RMs basis?

[Feroze Azeez, executive]

Bhavin sir, there is a lot of factors. We think a little dramatically different when it comes to number of RM counts, productivity, all that we've had rights around, but a different thought process. So one is productivity increase is on account of we don't lose RMs, right? So the number of RMs who finished 5 years increases. So the average tenure of my RM group or my colleagues goes up. You would not see -- it's not -- it's seldom found that 4 quarters, no RM attrition. RM is what everybody bids for.

My competitors who bid for my RMs, would want to give them twice the salary, but they won't leave. So productivity increase only happens if you don't have a leaking bucket at a client side or an RM side. So that's one thing, which is the snowball effect.

Of course, initially, you don't see that productivity increase. As with times, the lower attrition or nil attrition adds up significantly in a hockey stick kind of a recovery in terms of productivity, right? Point one. Point two, what happens is when you're a listed company, the credibility in the client's mind itself is higher, right? So there is a flywheel effect.

If you are listed, you get business. If you get business, your company does well. So the flywheel effect in a business of trust is the second. As now you've been listed for 2.5 years as a company. For clients, a prospect you meet, it is relatively simpler because the brand building happens because of the listing status and vice versa. So that's second. So you're seeing that effect kick in.

Third is that we are using mathematics significantly more over the last 3 years to convince somebody. We are finding so many portfolios with different complex products, but the IRRs at 10%, 11% for the last 15 years. It is surprising the extent of complexity with lower IRR. So if you mathematically establish that you are operating at significantly more complexity to get a 11% IRR, I can -- in the industry, you will find hundreds of portfolios, if not thousands and lakhs, where you would see complex products.

But if you take the transaction-wise IRR on an Excel sheet, you would see them some 10% or 11% or 12. So people are expecting uncomplicated lot more when you use mathematics. So that's why our net flows have gone up because mathematics most people can't deny.

And on English, people have -- people can debate till the cows come home, but mathematics has more pointed solutions. So the mix and transmission using mathematics is something which we learned about 2.5 years back, and that is actually adding up so.

[Bhavin Pande, analyst]

Sure. wonderful, Feroze. And just 1 last question is you mentioned mathematics and all the metrics we have. I think a few con calls back, we had mentioned that for the structured product to do well, you would require higher of interest rates and certain levels of wall? And my apologies if I'm incorrect in the technicals. So if you could just shed some light on that? .

[Feroze Azeez, executive]

Wow certainly that you remember this. I'm so happy and thank you that you wanted to understand my business trait there, which is great. So structured product requires high interest rates, at least the structured products we're currently designed. You would see that we don't innovate every quarter.

So you've got INR 3,360 crores without launching any NFO, without selling anything new, same mundane conversation gets you INR 3,300 crores, then you have a business at autopilot. So for structured products of the current design, which we've been doing for the last 10, 12 years, require higher interest rates. Higher interest rates, by which I mean those double-digit interest rates. But sister company, Anand Rathi Global Finance, has one of the lowest borrowing rates, but you need 7%, 8% kind of interest rates, which I think is sustainable.

Like you rightly pointed out, you need a certain degree of volatility. So the implied volatility of NIFTY, in fact, has shot up marginally, especially because of the election period. But I think realizing a volatility of 16, 17 on a daily standard deviation is another mandate.

So if both these ingredients are not there in the next 10 years, 5 years, then you design the structure product exactly the opposite. So designing of structured products is like we simulate on different economic variables. What will be the product we'll launch is already pre-decided. If 10 years later, if interest rates are at 4% and the wall realized is 10%, I would be buying calls in the product rather than selling puts to express the bullishness.

So to answer your pointed question, these are the absolute 2 ingredients needed for the current design of the 2 products, which we primarily do for the last 10 years and done 1,000 time and time each, both of these. If things were to change and if I get exactly opposite economic variables, like lower walls on NIFTY and lower interest rates, then you can actually become a buyer of the call because your forward rates will be lower. And your walls will be lower, so calls will become inexpensive.

So the product will have a call spread as a design, sorry, it gets a little technical. But yes, I'm sure you've picked it up if you have picked up the last call's content as well, sir.

[Operator]

[Operator Instructions] The next question is from the line of Lalit Deo from Equirus Securities.

[Lalit Deo, analyst]

Congratulations on a good set of numbers. So sir, like firstly, just a data keeping question. Like during the quarter, like what was the primary MLD structured product issuance and the secondary issuances also?

[Feroze Azeez, executive]

Sure, I can give you those numbers, but I'll have to rely on my financial colleagues, Rajesh sir and Vishal sahab. Can you give the precise number, Vishal bhai?

[Vishal Sanghavi, executive]

Yes. Finally, for the quarter 1 FY '25, primary gross issuances was INR 1,735 crores.

[Lalit Deo, analyst]

And secondary issuances?

[Vishal Sanghavi, executive]

Secondary was near INR 400 crores.

[Lalit Deo, analyst]

And like in the last quarter, we mentioned that like we will be doing this portfolio allocation -- reallocation of the clients where we would want to change the AUM mix from like 60% currently, let's say, to about 50%, 55%. But now again, with these strong markets, currently, our overall AUM mix has been again tilting towards the mutual fund. So how are we looking ahead for the next full year, sir, in terms of the AUM mix?

[Feroze Azeez, executive]

Yes. Like you rightly identified, and I'm glad you again remember the fact that I told that we will reallocate assets. And every year, we generally bring our new model portfolio of mutual funds, which had some changes, which is called zero-based bottom up, if I had cash in my bank amount. So mutual fund allocations have some minor changes.

During the process of the minor change, we will also do the change between the asset allocation between structured products and equity mutual funds. So what can you expect? You can expect that the movement of equity mutual funds to structured products over the next 9 months, it's going to be one of the key areas of focus because it's always good to strategically reallocate between a plan A and a plan B, which is how we position both these products against each other because the standard deviation of a structured product is significantly lower than equity mutual funds.

So to answer your pointed question, you will see these proportions again tend to change and there will be a reallocation done. So you could see 28%, 30% by the end of the year again.

And I'm sure people would -- and a lot of you as analysts and the industry colleagues who have asked that we have very low maturities this year. And in spite of that, you will see a very consistent growth is what was the claim. And I think the first quarter is a reasonable barometer for that concern to be as we age.

[Lalit Deo, analyst]

And sir, just lastly on this mutual fund. So like this quarter, we have seen a good growth on the equity mutual fund AUM. But in terms of the revenues, that is still not reflecting. So this would be broadly on account of the period end in Digital? So could you give us more color on how the average AUM is shaping up in the mutual funds?

[Feroze Azeez, executive]

I think there has been an 80% -- 70% increase in the revenue, trail revenue.

[Lalit Deo, analyst]

Yes. But on sequential basis, I think the growth was lower, right, on that...

[Feroze Azeez, executive]

I think, see, don't ever -- all I'm saying is numbers are numbers. If you have to understand my business, you have to go beyond numbers. Point one, we are running a business which manages people's hard earned money. So quarter on quarter, seeing my numbers is not right according to me.

Of course, I can only submit to the group, but the group will do what they have to do. But if I were you, I would never see this business on a quarter-on-quarter basis. If you're managing -- if I was selling iPhones or some phones, I'm okay to be measured on a quarter-on-quarter basis. Here, it is hard earned monies of people. So I don't see quarter-on-quarter, I request you not to do so. Point one.

Point one, what on a trail revenue basis, we have -- there are 2 indications I want to reiterate from my previous calls. We have told you that we want to get to a 50-50 kind of mix between trail and upfront, and that's our endeavor. And we -- when we put a -- not a commitment, put an indication in the public domain, we do our best to meet that. Otherwise, we don't feel easy. So point one, what you can expect on this is a 50-50 ratio over a period of time, at least a honest full attempt of that. That's one thing which I would want to speak on the trail.

Now coming to equity mutual funds. Equity mutual funds, I think everybody should take note. What is -- everybody always told me there's a risk of direct, regular, passive active. You would see a 460% growth in our equity net flows. And I don't give direct as an option to even 1 client if he offers us INR 2,000 crores to manage. We said, no, I will not do. I will not sell myself cheap. I will add value and earn my 1%.

In spite of that, you see 460% growth in equity mutual fund. How did that happen, right? And if you see the last full financial year, equity mutual funds, the net flow into equity mutual funds in the full year that -- and it's a saddening number for me, that the fact that if you remove the SIP purchase, the next flow was negative in equity mutual funds last year, okay? It is not that there is a huge influx of money from HNIs into mutual fund. Mutual funds are being direct towards more complex instruments.

So to answer your pointed question, revenue will set in. The revenue is a trail revenue. Average assets -- average per day asset is also something which is so volatile because markets keep moving up and down. But I'm reiterating the fact that our aspiration, because we've put it on the table, it's now our effort is behind getting to 50:50 sooner than later. And I've also told that we will get to 3%, 4% of equity mutual fund market share in India.

And that is the effort, and we shall do our best with the grace of God to make it happen.

[Operator]

The next question is from the line of Vikram from Prodigy Investment Management.

[Unknown Analyst]

So I had a question regarding the AUM allocation. So you said that your goal is to increase the portfolio allocation of structured products, right? You also said that your long-term aspiration is to increase trail revenues to 50% total revenue or get a 50-50 split between trail and upfront.

So from what I understand, this would entail increasing the allocation towards mutual funds. So I was just curious how it's possible to increase the share of trail revenues while simultaneously increasing the allocation towards structured products.

[Feroze Azeez, executive]

It is possible because the proportion of structured products and equity mutual fund is also -- is largely dependent on current assets, which you own, INR 69,000 crores, or which are assets under management. Trail revenue is also going to be driven by the net flows.

Now if INR 3,300 crores, INR 3,000 crores of net flows happen, INR 2,100 crores has gone into equity. So the proportion is close to about 65% of the total net flow went into equity mutual fund. Are you with me, sir? So that's point one.

Point two, these proportions of [ 24, 7 ] and 54 on these 3 product classes are also subject to mark-to-market. If you have to understand our business, it's a very, very simple business because we don't bring assets, which we don't earn 1% on. So if I collect INR 1,000 crores per month, give or take, what will be my total assets is what you have to try and project, and the revenue is going to be 1.2%. That is going to be 30% of that revenue.

This is how a business we look at. So to change the proportion it is basically to make sure that the clients have reallocated and sold some mutual funds at market peaks, if at all. That's the signs of selling high and buying low. So that's why this proportion could change. But the net flow is also another variable and mark-to-market is another variable. So it is certainly possible to get to 50-50 over a period of time, not surgically, though, like you rightly pointed.

[Unknown Analyst]

Okay. And so my second question was I wanted some more clarity on what are all the factors that affect blended yield. So portfolio allocation is one, but what affects yields in mutual funds and structured products individually? I want to understand why yields have gone up over the last few years? And what are the possible factors that can be upward or downward for you going forward?

[Feroze Azeez, executive]

Yields, which you see as a proportion of the total AUM, like INR 69,000 crores, is not the only barometer. Because if I have an yield divided by June 30 AUM, that's not -- that's only 1 day's assessment. So coming to what is the yield dependent on, the primary products equity mutual fund, we earn about 1.1% post-GST in structured products. If you work backwards and calculate the yield I made on all matured structured products, you will see 1.16%, 1.17% is the yield we earned on matured products.

So the yield of both these primary products are very close to each other. On that, we make about 38 to 40 bps on that funds. On other assets, we make little. That's the raw material. So this is the yield composition of different asset classes -- our product classes, which are there in the AUM. What does this yield depend on? The yield depends on the size of a fund in the mutual fund and structured products, you are generally starting at 1.15 to 1.2 yield. Yield is always calculated per annum on market values, average market value. So to answer your question, the yield pressures, to my mind, are very unlikely, 5, 7 bps, 8 bps here or there, can keep swinging. But that's our guess. And our yields have been retained for the last 5, 6 years.

[Operator]

The next question is from the line of [indiscernible] from Davis Cloud Advisory.

[Unknown Analyst]

So congratulations on a great result. So I had a question -- like the company's ROE has increased from 35.9% in last quarter to 42.8%. So what are the specific factors that contributed to this significant improvement? And do you think this level is sustainable?

[Feroze Azeez, executive]

Yes. So when you're making a PAT, which is growing, and if you're giving your dividends away, if you're doing a buyback and stuff, as a matter of practice, our dividend policy permits us to give away the PAT we've made of 30% to 50%. Since your results don't shoot up so much because it's a cash-generating business, and we don't want to hold up money because we don't intend to splurge money on buying businesses or buying relationship managers at same prices, same competition. You've given away. The denominator is kept in check, and that's one reason.

The PAT growth and the denominator in check, the numerator increasing and the denominator not increasing, it's why the ROE is higher, to be mathematically correct. Second, are these levels sustainable? Yes, I believe, definitely, they're sustainable because you don't need capital as much. It's not a plant and machinery kind of a business. ROEs are possible to sustain at these levels or higher.

[Unknown Analyst]

Okay. And are there any plans currently the company to expand internationally beyond the Dubai office?

[Feroze Azeez, executive]

Yes, we are looking at the opportunity in the Gift City, which I think is a very, very transparent and a good opportunity, especially in the last few days back also SEBI made some changes in the LRS limits to IFSC. So point one is, yes, the -- not from location standpoint, the NRI business could be a very different ball game over the next 5, 10 years, and that's a huge opportunity for a wealth management outfit like ours for sure, which is India centric and the kind of India popularity globally.

Can I go meet some fund managers, which I do every June, for the last 6, 7 years, the kind of decibel for India has gone up dramatically. So to answer your pointed question, we have not part of it geographically. From an opportunity standpoint, NRI business, we are going to be focusing on it because the landscape and the kind of scale this can be built to is very different with the inclusion of Gift City and the new very, very direct and liberal regulatory framework.

[Unknown Analyst]

Okay. And lastly, I wanted to know like are there any initiatives being taken to further improve the revenue per client and AUM per RM metrics?

[Feroze Azeez, executive]

Sorry, I couldn't hear you. If you could go again, sorry.

[Unknown Analyst]

So are there any initiatives being taken to further improve the revenue per client and AUM per RM metrics?

[Feroze Azeez, executive]

Revenue per client and revenue. So are there initiatives? Everything we do is for both these. So if I wake up in the morning, that's the initiative to do this precisely. But we don't see it as client, revenue per client. We don't like to see it like that. We don't even like to state it like that. Because it is assets, if I can manage 70%, 80% or 90% of one's asset, as time grows, our clients give us more wallet because they realize that this is not lift service. So client's wallet is something we want to capture, not revenue, revenue is an outcome. His money, we take immense pride when a 10 years' old client becomes a sole advisory client in spite of competition wanting to distract him with discounts on mutual funds, with the most complex products. If our large client puts all his 100% of his money with us, that's how we look at it, not revenue per client.

Of course, there could be a larger wallet resulting in larger revenue, but it's a perspective difference, glass half full and half empty, right? But yes, both are positive in effect. Larger wallets implies larger revenues. So revenue is the calls, asset in effect, which results in that calls. But we see the asset -- we don't see the asset, we see the calls. That's it.

Productivity per RM, that is an actual progression. So we try and manage 50 clients per person, I'm also a relationship manager. The most important thing, which I always try and highlight, is all of us are relationship managers. So we are able to understand what is happening today. I was not a relationship manager 10 years, and then I teach somebody today, it's not contemporary. So coming to the point of whether RM productivity will go up? Yes, because 50 clients is what an RM capacity is to manage with 1 or 2 account managers who are apprentice attached to them. So a group of 3 people or 2 people manage 50 clients.

If the client -- if the RM becomes big and if RM wants to improve efficiency, he gives away his smaller clients to his apprentice, makes them relationship managers. So like when I promoted my account manager, I give away some small clients to her, and then she starts her life as a relationship manager. So it's a win-win-win.

What are small clients for me, become bread and butter for her. So client gets even better service, so the vicious cycle continues. Not a vicious cycle, is a more negative commentation, but the cycle of help continue. So coming back to your question, can RM productivity go up with the same 50 clients? The answer is yes, because he gives away his deadweight. My deadweight is wings for her when she starts her life. So that's how RM productivity -- so there's no saturation. So if an RM gets to 50 clients with INR 1,000 crores of assets, he can still go to INR 2,000 crores of assets with the same -- with different 50 clients. I don't know whether I answered your question, but I attempted to.

[Operator]

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

[Dipanjan Ghosh, analyst]

So a few questions from my side. First, if you can give some color on the flows that come into your business between existing clients versus new clients that we acquire. And how has the trend been, let's say, over the past 12 to 18 months compared to, let's say, years prior to that or across different cycles when markets are good versus market were, let's say, tepid. So how does the old existing money to new existing money really change still market cycles? Just wanted to get some color on that.

Second, on your client acquisition strategy. If you can shed some color on what will be your incremental client acquisition strategy in terms of -- obviously, the competitive landscape tends to be shaping up quite aggressively. Most players are ramping up their engine, be it the foreign ones or even the domestic ones, some of them plan to scale up. So how do you really kind of want to position yourself? So I wanted to get some color on that.

Lastly, 2 data-keeping questions. If you can give your total employee base for the quarter and maybe March '24. And I missed the data on MLD issuance, if you can kindly repeat that, that will be great.

[Feroze Azeez, executive]

That's a lot of questions. I'll try to remember them. So point one, what was your first question? Sorry, go again, please. I remember the last one...

[Dipanjan Ghosh, analyst]

Yes. First was on the old to new money...

[Feroze Azeez, executive]

See, old to new money, the -- if INR 3,300-odd crores came in, the clients who were not on the system on 1st of April, what proportions did those clients out of the INR 3,300 crores of net flow, how much did they get? You have to take this number with tolerance, and Vishal ji can give you a precise number. About 20%, 25% is from new clients. Because we don't force a client to start big. If the client has INR 10 crores, he is my prospect. If he has INR 4 crores, I don't want to go to him because I'll only earn INR 4 lakhs a year, and then I can't give him ethical advise, I have to sell him insurance policies or some very [ obscene ] upfront [indiscernible].

So coming back to the point, 20% to 25% comes from new clients who didn't exist in that quarter beginning. That's the proportion, okay? And because we tell the client, if you have INR 10 crores, you start with INR 1 crore, I don't have a problem. You start with INR 1 crore, if I live up to what I'm talking, you will give me more assets anyway because it's going to be in your interest.

Because in the wealth management industry, you can pick up so many portfolios of triple-digit crores and measure by its Sharpe ratio, which wealth management industry doesn't measure; 0.3, 0.2, 0.1, Some people have negative Sharpe ratios also, and they have INR 50 crores invested. So you just have to calculate the Sharpe ratio and show for them for the next last 5 years, and then it may -- so coming back, the 20%, 25% comes from new clients and 70%, 75% of net flows or 80% of net flows come from existing clients, who were new for the last quarter maybe. Because we don't force people to start big. Like so many wealth management outlets have a rule saying that if you have INR 5 crores you start with, then I onboard you. So that I think -- we think that -- yes.

[Dipanjan Ghosh, analyst]

Sorry, if I can just follow up. So does this -- I mean, has this ratio changed in your experience? I mean, you have been in the industry for so long. So does this ratio remain similar -- across market cycles or equity market cycles?

[Feroze Azeez, executive]

For a wealth management outlet like ours, it has remained largely static. If I was a broker, it would be very different. Because I'm not going to the new guys who got money and they want to start. I'm going to a guy who's got invested with somebody else and he has a complex life. I'm simplifying his life, right? Do you understand the business?

So if you look at the median age, you should see this NSE data, which just was released. I should just tell you that's very interesting data, I'm sure. When you're looking at the age, the age bracket in the DMAT accounts has come down. The median has come down significantly. Now you have close to about -- 1 second -- I will tell you this. I'm just bringing your attention to this data.

If I was a broker, it would be very useful information, [Foreign Language] very -- the ratio would change. Less than 30 years of age, the number of broking accounts has moved up in the last 6 years from 22.9% to 40.1%. So younger people are starting business. So my proportion of new client ratios have remained same. In broking, that will change, I would like to assume because the younger guys are coming in because it's a full product.

[Dipanjan Ghosh, analyst]

Sir, my second question was on the client acquisition strategy. Obviously, you've been ramping up your RM engine, as in apprentice is getting promoted and so on. But in terms of new client acquisition, that is also going very strong. So what's the strategy out there because competitiveness will increase in this industry is what I would expect over the next 5 years?

[Feroze Azeez, executive]

Yes. So see, if you look at it, if you see because our total 360 clients -- 360 RMs, have 50 capacity, that is 18,000 clients. That's my capacity with the current plant and machinery. Okay. And I have a capacity of 7,000 more, with the same people, same colleagues of mine can handle 7,000 more families. If you forget that I have to acquire, I have to do branding, I have to do advertisements, I have to just go to these 10,000 guys and say, can I meet 5 people in your society? Can I do an event for 10 people? Those we call homogeneous groups who will be addressed.

So that's how it's been our acquisition strategy rather than picking up the phone and disturbing people at odd hours selling ourselves is one way of doing it. We are trying to reduce that proportion and go to a satisfied client. And now that there are so many clients above 5 years, and they know that risk-adjusted return mathematically is great with Anand Rathi Wealth. We go and tell them, sir, if you go refer a restaurant or a movie to your friends, don't you think if something helped you in wealth management, should you not refer it to the best friend? And I think clients are being far more positive today with some credibility behind us now.

So that's the client acquisition strategy. And I think when you tell the client, sir, I don't want to make cold calls to random people. Can you just support and give me 5 names or organize a small little tea party or a high tea for your friends, and I can come and talk. People are more welcoming than they used to about 5 years back.

[Dipanjan Ghosh, analyst]

Sir, it would be fair to assume that basically the network refers through your existing client machinery is the biggest sort of lead generation tool for you?

[Feroze Azeez, executive]

Yes. Absolutely. And I think every financial services firm would have this aspiration, word of mouth, right? But if I told him that I made you 14% with 0.6 beta on NIFTY. Now do I deserve a reference after 10 years of delivering you 2% alpha with your 0.6 beta on NIFTY, on your overall debt equity, then the client mathematically is forced to you references, not because I want to go and sell an insurance policy. .

[Dipanjan Ghosh, analyst]

Sure. Sir, lastly, 2 data-keeping questions on the employee number for the quarter end March '24 and also the MLD data which you mentioned earlier?

[Feroze Azeez, executive]

Yes. Vishal ji...

[Vishal Sanghavi, executive]

Yes, sure. So total employ account is 1,093 as of June and -- June 30, 2024. And our total gross inflows for the structured product and the non-principal structured product is INR 1,735 crores.

[Dipanjan Ghosh, analyst]

Can I get the employee number for the last quarter, March quarter?

[Vishal Sanghavi, executive]

March, 1,016 .

[Operator]

The next question is from the line of Chinmay Nema from Prescient Capital.

[Chinmay Nema, analyst]

Just some general questions around tech infrastructure. Could you talk about your strategy with respect to tech from a medium to long-term perspective? How are tech in terms of onboarding and client monitoring differs from the industry? And moreover, some general sense around what can be done with tech in this business in terms of client productivity? And to what extent this business is always going to be a high-touch business? Some general sense around tech in this business.

[Feroze Azeez, executive]

Sir, I missed your name. So sorry.

[Chinmay Nema, analyst]

My name is Chinmay.

[Feroze Azeez, executive]

Chinmay. Thank you, Chinmay. Sorry, my mistake. Yes. So how we see tech is, tech in this business can only augment an RM, not replace an RM. That's our thought process or whatever is our understanding, it's not wishful thinking. Because this requires -- client requires handholding during bad days.

In good days, you can click a button and buy. But itself is on the worst days, there is no RM. So we see technology as augmenting the RM, making him more powerful rather than replacing him. That's one very important thing, which we very passionately feel with the experience, and client behavior, understanding client behavior, that's point one. Point two, the technology in this business. Anybody who uses technology just for reporting and onboarding, I would say it will be ironical, but the most important technological benefit Anand Rathi is reaping because 60%, 65% of our meetings still date are now on technology platforms.

Before COVID, all the 100% of the meetings were physically done with clients. Now the clients I manage, I have not visited their office for maybe 12 months, but done very efficient meetings 12x in the last 12 months. So RM productivity goes up significantly if you force the system to use technology to deliver advice on Zooms and Teams and stuff, but quite a few times clients push back and say, I want a physical meeting. So we have been very clear, we will at least have 2/3 of the meetings on Zoom and Teams unlike most of the wealth management outlets have gone to physical in HNI business.

So I think that -- if some call system can retain it, I think that will make it very powerful. And most of the numbers you see now have a large impact of the use of technology or the forceful use of technology, not going back to the physical mode of delivering advice. So that is -- and of course, technology in terms of generating advice, which is not used so much. We've been testing a lot of models using several mathematical formulae which are there. There are 5 finance formulae which have won Nobel Prize, we're using technology to try and simulate those to get better risk-adjusted returns.

[Operator]

[Operator Instructions] The next question is from the line of [ Sanadhya ], an individual investor.

[Unknown Attendee]

First of all, great set of numbers. So I just wanted to understand how do we see the revenue potential going forward in terms of the AUM? So will it totally be dependent on how does the market performs and how much we can grow the AUM? Or are we looking for other opportunities in other sectors other than this...

[Feroze Azeez, executive]

Like I have told in the previous calls, we are trying to build our financial services business, which is reasonably market agnostic. Okay. For you to check this claim, out of the 11 quarters where we have published results, you have to look at the worst 3 quarters from a market sentiment standpoint and then see the corresponding result of our business.

You would see stupendous growth when markets touch 15,300 and 15,400 twice or thrice in the last 2 years, which was the FY '22 quarter, FY '22 last quarter and FY '23 second quarter or first quarter, then Ukraine war had happened. So the point I'm trying to make is you would consistent revenue growth during bad market sentiments. That's the aspiration. So far, the God has been kind, we've been able to deliver that. Most people will take this with a pinch of salt, but be it as it may, so that's point one.

Point two, our business model, like I always explained, it is reasonably simple. If I have INR 69,000 crores today, there is a growth embedded in it. If I deliver good return as a company for my client, then 10%, 12% growth comes God's gift with virtue of time. These 3 other variables, which is new RMs, new clients, existing RMs can manage 8,000, 7,000 more clients. That's my second lever of growth. The third lever of growth is existing clients giving me new money.

With these 3 levers of growth, plus the 10%, 12%, which is the growth in assets with the virtue of time and effort. If these 4 engines are put together, 20%, 25% growth is part, of course, for the last next 10, 15 years consistently. We are one of the few companies which have given a median growth of 33% for the 11 quarters.

So when we look at other revenue streams, the answer is no. If my client needs more product in his portfolio because of his risk-adjusted return, if he we want to improve the [indiscernible] alpha, if I want to improve the Sharpe ratio, if I need a PMS or AIF or whatever it be, if it helps my client meet a better objective, then is when new revenue line will be added, not because shareholders want new revenue lines or the company wants new revenue.

[Unknown Attendee]

Fair. Yes. Okay. So just to add on 1 question here. So do we see runway for new client additions within the range of INR 5 crores to INR 50 crores? Or do we see shifting it to different range, like, say, INR 10 crores to 100 crores now looking at how markets are performing in the pipeline, how do we see the base shifting with years?

[Feroze Azeez, executive]

Absolutely, sir. That's a very, very important and a good question, sir. Our segment has been INR 5 crores to INR 50 crores. When we onboard a client, we check whether he has total wealth of INR 5 crores to INR 50 crores, okay? That's first step.

So if he start with INR 1 crore, but if you have INR 20 crores, great, you get him on board. That's the first step. Now with time, if you do well for the client, most of our clients, now we had 280 clients, who have finished 10 years. And they had large monies then also. They automatically will go above INR 50 crores. But if you don't -- if you don't give me 1 penny and if the money compounds at 15%, in 6 years, a INR 10 crore client becomes more than INR 50 crores.

So we have been trying, and we've also launched something called the Anand Rathi Platinum client base, which is growing rapidly because our existing clients are giving us more wallet. So to answer your pointed question, will we still stick to the segment of INR 5 crores to INR 50 crores? The answer is a big yes. For the last 17 years, it has been consistently the same on the INR 5 crores to INR 50 crores.

Okay, way back from 1st April 2007, when Rakesh Rawal, who is the current CEO and who was the CEO then, has decided to keep that segment. So we'll always have that as a segment. But we have to also being a wealth management output, passionate about client returns. We have to learn the art of managing the adjacent higher segments. The adjacent higher segment is INR 50 crore plus because if the INR 20 crores guy gets to INR 20 crores, I need to be able to do justice to that guy so that he can eternally stay with me and doesn't have to look outside. So does that answer, sir?

[Unknown Attendee]

Yes, that's what I had looking. So we are doing efforts to maintain the level that the new clients or the existing clients will grow up to that level. We are maintaining that. Yes.

[Feroze Azeez, executive]

Yes, absolutely. We have significantly larger clients than INR 50 crores also. One client of mine who I manage, has INR 800 crores, INR 1,000 crores also with us.

[Unknown Attendee]

That's great. Yes. Just a last question, it's a bookkeeping one. So you have INR 8 crores as other income this quarter and INR 13 crores in the last quarter. What is the source of income? And is it on a continuous basis we should see?

[Feroze Azeez, executive]

Vishal ji, can you -- because I don't have these numbers on my screen. Rajesh ji, other income?

[Vishal Sanghavi, executive]

Yes. Can you ask your question once again -- yes. Can you repeat the question, please?

[Unknown Attendee]

Yes, yes, yes. So we have INR 8 crores in other income in this quarter and it was INR 13 crores in the last quarter. What source of income is this? And do we see this as a continuous basis?

[Vishal Sanghavi, executive]

Yes, I just give you that one, 1 second. So the interest income is INR 6.87 crores. And the small amount is the gain on sale of investments.

[Operator]

The next follow-up question is from the line of Bhavin Pande from Athena Investments.

[Bhavin Pande, analyst]

Just on account of corporate actions after the dividend in the bypass, could we expect some sort of split of bonus on cards?

[Feroze Azeez, executive]

Bhavin, sir, yes, we will surely consider like our -- in our AGM also somebody asked our Chairman, and rightly said that we will corporate action because we like to reward our shareholders. I can't say more than this. But, yes, I think it is going to be considered by the Board.

[Operator]

The next question is from the line of [ Rohan ] from Tiger Assets.

[Unknown Analyst]

I would like to know how is the wealth distribution scenario in the country? How is the top...

[Operator]

Sir, your voice is breaking.

[Unknown Analyst]

Am I audible?

[Operator]

Sir, can you come in a better reception area, please?

[Unknown Analyst]

Is it better now?

[Operator]

Yes, a little better.

[Unknown Analyst]

Yes. I would like to know about the wealth distribution scenario in the country? How the top of the pyramid is growing? And how would that be in the next 10 years? Yes.

[Feroze Azeez, executive]

Yes. So in our opinion, the number of HNIs can very easily compound at 15%, 17% over the next 10 years, number of HNIs. And the wealth effect with the current HNIs, which is about 8 lakh, 9 lakh families, is also stupendously growing.

So point one, I personally think that this number can quadruple in a decade, 8 lakh families can very easily become 32 lakh families, which are HNI, which is our segment, INR 5 crores to INR 50 crores or INR 8 crores above. So HNI is defined as that family which has more than $1 million other than the home they live in.

So that could easily quadruple in a decade in India. Second, the current 8 families' wealth can also compound at 20%, 25%. Because if they are well placed to grow 12%, 13% of the -- current wealth at 12%, 13%, they're adding at least 7%, 8% to their wealth with their savings. The savings rate of an HNI has gone up dramatically, in our opinion. So that's our experience.

When we captured the savings potential of our current HNIs in a group of about 350, 400, which I saw the data of, their savings potential grew at least 5%, 7% of their current net worth.

[Unknown Analyst]

Okay. Yes. And I would know like, how is the year and the bottom of the pyramid growing and how their wealth would contribute to equity markets in coming years?

[Feroze Azeez, executive]

See, there is a paradigm shift in the thought process of Indian favor today. So to answer your pointed question, sorry, there was some little disturbance in the network. So if you look at the wealth of Indian HNI, there is a paradigm shift in how we're seeing assets. The receptiveness of equity has gone up dramatically, point one. Point two, there is the newer generation or the next generation, whenever there is an inheritance or a transmission of wealth from one generation to another, which you see in your client families, the next generation's affinity towards physical assets is dramatically down. So I personally think this INR 21,000 crores SIP number, which I had predicted about 5 years back, but this can be by March '25, it will be INR 25,000 crores, that seems to be on the cards. That's point one.

Point two, the kind of influx the Indian capital market is going to see from domestic money, I wouldn't be surprised if that grows significantly. Today, it's almost like a proportion of 50-50. The FII ownership could come down dramatically with -- [Foreign Language] individuals' participation.

Currently, out of the INR 800 lakh crores of savings, INR 800 lakh crores of savings as per RBI data of Indian households, 51%, 52% is in financial assets. And only about 6.7% is in equity or direct equity and equity mutual funds, only 6.7% is there. That number should become 15%, which implies a great influx over months and years to come.

So out of the INR 800 lakh crores, today, only about INR 52 lakh crores is there in equity, both individual ownership of stocks and equity mutual fund ownership...

[Operator]

The next follow-up question is from the line of Bhavin Pande from Athena Investments.

[Bhavin Pande, analyst]

So of course, the first question was on the bonus or any of the corporate actions that could be on cards. And secondly -- in this year's annual report, I think in the AGM, there is snippet on ring-fencings of portfolio and intergenerational transfer of wealth, which, again, is an extension of wealth creation, which would come about the plan to make money and the call to be taken in terms of how the wealth is going, which again, is gone by taxes and government policies. So if you could just shed some light on the, of course, economies of that business and the market that exists, it would be of great help.

[Feroze Azeez, executive]

I couldn't understand that too much. Bhavin sir, you're speaking about transmission of wealth?

[Bhavin Pande, analyst]

Yes, yes. First question, of course, on the bonus issue. I'm sorry to sort of making you repeat that. And secondly, the ring-fencing of portfolio and intergenerational wealth transfer as a service that we offer to our clients, right? .

[Feroze Azeez, executive]

Correct. Yes. So yes. So let me -- so like I already told, that I think bonus or splits could be seriously considered by our Board. That's the only thing I can say. We did a buyback efficiently, finished that -- yes, that board has to consider. But I think it will be considered on the merit basis. That's point one. Point two, coming to your question of ring-fencing of portfolios. See most of HNIs have external potential liability on their personal wealth for some unforeseen events. So that ring-fencing is very critical. And that, I think we've been propagating for the last 14, 15 years ever since 2009, '10.

So that business, we don't charge money for unlike most lawyers and wealth management outfits charge, but we don't charge for that because we think that that's a collateral minimum service you will give a client because we want his interest to be protected and his liabilities to be protected. So that's one.

The estate planning, we have done about 6,000 wills for families. We have tried to comprehensively make the learnings we have had in the last decade and try and extrapolate those learnings. Because India is a very complex game in terms of transmission of wealth. Some places probably it is needed, some places probably it is not needed. The laws as per religion are different, as per geographies are different and as per asset is different. So it's a 3-dimensional matrix to solve. So wealth management outfit like ours takes all the learnings it has had and makes a checklist of 10, 12 items, which each of us, in fact, all of us on the call are mortal beings and we have a finite life. We try and do that for free as well because client's interest is paramount.

So we don't charge for these services because that itself becomes a deterrent for a person to do it. We use to charge way back a decade back. And then we realized when you charge people for this service, they think you're wanting to do it just because you want the fee rather than the -- so we said we will not be charging. So this is that collateral service you give without being charged. So will this keep happening? Yes, it happens. And we push it extensively in spite of it not impacting the revenues whatsoever directly. But the client's affection towards us expressed in the form of his wallet is very, very strong.

[Operator]

As there are no further questions, I will now hand the conference back to Mr. Feroze Azeez for closing comments.

[Feroze Azeez, executive]

So thank you so much, everyone, to patiently sit through 1 hour and 6 minutes of the call. Point two, I think if you have any further questions, please feel free to get in touch with Mr. Vishal Sanghavi, who is our Head Investor Relations, and we would love to answer them. And thank you. Have a wonderful week, [indiscernible] week, and thank you so much.

[Operator]

On behalf of Anand Rathi Wealth Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.