Computer Age Management Services Ltd

NSE:CAMS

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, good day, And welcome to the Computer Age Management Services Q3 and 9M FY '23 Conference Call, organized by Orient Capital. [Operator Instructions] Please note that this conference is being recorded. We request all the participants to kindly refer to the safe harbor statement in the earnings presentation. I now hand the conference over to Mr. Anuj Kumar, Managing Director, CAMS. Thank you, and over to you, sir.

[Anuj Kumar, executive]

Hi. Good morning, everyone, and thank you, Michelle. I hope all of you are able to hear me clearly. I appreciate all of you taking the time out to join our earnings call. As you may have seen in the results, we've had a satisfying quarter. And I have a number of things to share with you significantly in terms of operating highlights. As we continue to work in a business environment which had a set of challenges to deal with. I think the overall outlook for the quarter in terms of business results has been very satisfactory.

I will run you through a structured presentation. Starting off, just in terms of our mutual fund business. You would have seen that we announced 2 new wins -- 2 new logo wins. These are always an important part of our overall endeavor to maintain share and relevance in the marketplace. Helios Capital, which is entering the mutual fund market through a new license has chosen to join the CAMS platform. This decision came in the month of November. And then Navi Mutual Fund, which was an existing mutual fund. But under the new management after the takeover of an existing fund has also chosen to select CAMS as their provider. So that's the good news on the new logo win on the mutual fund side.

Overall, on the core business metrics, our AUM scaled a lifetime high of INR 27.8 trillion, just short of INR 28 lakh crore. The scale on the back of what I would call steady growth in equity AUM, which is, of course, the most relevant best price and profitable part of our business mix. That grew 6.1% quarter-on-quarter. And we will speak a lot more about mutual fund business as we move along.

On the alternatives business, we saw another very strong quarter. We grew revenue and sales over 20% during the quarter. And our digital onboarding platform, which is CAMS WealthServ continued to see sustained interest and a slew of wins in the marketplace. It has now crossed as of end of December over 60 signups. And we continue to see a lot of interest and momentum in the marketplace as we brought in our sales point of outreach.

On the eInsurance side, where all of you have been following the media and following the announcements -- regulatory announcements in terms of demat regime coming up and a mandatory KYC requirement for all kinds of insurance. I would like to call out 2 things while that topic is progressing and we all continue to watch specific regulatory announcements, what we saw happen in the quarter was that in anticipation of regime of compulsivity demat consumers voluntarily choose to join up this regime. So you will see -- and all of this is on a small base, and we normally don't call out very stark comparison numbers. But this is a stark comparison number.

Our eInsurance accounts, the new ones, at -- close to 5 lakh almost doubled quarter-on-quarter. And similarly, our e-Policies during the quarter crossed 5 lakh and this also almost doubled quarter-on-quarter. So 3Q over 2Q was a significant growth, all on the small base, of course, but a very, very positive consumer-driven outcome in terms of consumers watching an announcement and then aligning their own behavior to take advantage of the very convenient regime that is about to come into the world of insurance.

All the CAMS WealthServ side, which is our account aggregator business. I think we continue to report positive news in terms of going live with several FIPs and FIUs and continuing to win business. One of the things on the highlights I would like to call out is that CAMS has now pioneered the usage of account aggregator data for bank account validation, as you know. Or any format of payment across industries, whether it is insurance, mutual fund, NBFCs, banks. So far, INR 1 penny drop or a penny drop through IMPS has been considered a very convenient tool. This the first time we are trying out account aggregator data to validate bank account. It's a nice beginning as a first experiment or usage of this use case, and we will continue to share with you as we scale this.

We've also been the first one to go live on the account aggregator platform with pension data as an NPS CRA as an FIP. Insurance companies, who we know have started integration with the AA ecosystem, the mutual funds are beginning. So that as the story completes will [indiscernible] of almost all kinds of financial services sectoral entities joining the account aggregator platform.

On the overall innovation and technology side, again, a very strong quarter, 2 highlights that I'll share with you, which you perhaps read about on our website and other media news. One is that CAMS won the Cloud Innovator of the Year award from NASSCOM. This was particularly in reference to putting out fully on cloud NPS CRA platform. And like we've said to you in the past, we were the first ones, and this was then acknowledged quite well by a very large body like NASSCOM.

And then just deepening the trend of technology-led innovation, technology-led experimentation, tinkering, whatever you want to use. We've gone live now with our fintech innovation lab with IIT Madras. Amongst the IITs for all of you who've been tracking, IIT Madras has perhaps got a place of pride in terms of doing industry collaborations and generally having interfaces with a very, very strong with industry.

So as part of our overall CSR initiative, we've gone live with this lab. And we will have interesting things to report as we move forward and engage the brightest brains in the country, both from the faculty side, students and other participants in bringing out services, conveniences, utilities and perhaps products, which will start influencing the lives of people that we want to influence.

On the NPS side, we continue to retain the #2 position, and you know that it is still not 1 year since we launched, just short of 10%, so about 9.2% market share. What's also happened is that we are now seeing subscriber addition, not just through eNPS, which is something that I just spoke about. But our POP retail linkages, where a point of presence has retail traffic on their website and that traffic starts registering with CAMS CRA. That process began sometime in December. We are seeing a build-out of volumes. Consumer side continues to remain over 90%. So quite happy with the progress in all of these new initiatives that we've been sharing with you all through 2022, and I know all of you have been curious about when they become, I would say, heavy in terms of subscriber interest, the B2B interest and ultimately revenues.

Moving on, just in terms of growth in overall AUM, which you know is basic core operating matric on which everything changes in our industry. Despite the times that we are living in, where you know that there have been a set of macroeconomic factors all through FY '22, nothing much changed in the quarter we're talking about. We've lived through those challenges. Also, we've lived through an interest rate regime that continues to scale interest rates to almost levels, which are not very precedented in the recent past.

Given that backdrop, which has not been very easy, I think our overall AUM growth has been satisfactory. We are now reporting a lifetime high of INR 27.8 trillion. And like I said, this has largely been riding on a smart equity AuM growth, both year-on-year and quarter-on-quarter, if you see the numbers, you see almost an 18% plus year-on-year as a percent growth number over the past quarter. Equity AuM at the end of the quarter was just shy of INR 13 lakh crores at 12.9.

Also, I think that a significant metric is, and I know all of you are watching inflows, our equity net inflow share has gone to 63.7%. Of course, we continue to watch this closely as this number builds out. And I think basic bedrock is to building itself on is the monthly SIP collection, but I'll just come to that.

But I think overall, at the foundational level, despite what we are seeing structurally, I would say these are very positive trends to look at.

Similarly, new SIP registrations. You know that a large part or a notable part of the industrial participation now commences with SIP. So a number of INR 37 lakh and INR 37 lakh plus has actually grown a little from first quarter to second and second to third, INR 37 lakh to almost INR 38.3 lakh. I think that holding number growing about 2% every quarter has been a very good to -- at about INR 38.3 lakh That is the newest SIP registration.

Net of attrition, et cetera, new live SIPs grew over INR 12 lakh.

All right? So apologies team, maybe there was a blip in the line. I will just commence back where I left, we were talking about SIP registration, so holding between first, second and third quarters at a number above 37 lakh, growing about 2% from 1Q to 2 and 2 to 3. Net of attrition and net of falloff, live SIPs grew by about 12 lakh in the October to December period. But I think a very strong, steady metric is INR 7,800 crores per month of SIP collections during the quarter. And this, as you've seen in our case, has continued to go up. Obviously, there are no certainties, but continues to go up by an average of INR 50 crore to INR 200 crore a month. And I think that's almost formed a bedrock of the equity net sales in the industry. This number grew by almost 6%, slightly ahead of industry growth.

Transaction volumes grew, you can see in the chart, again, a good measure of customer engagement. And I think when you see new fund offerings, and we're going to talk about 2 segments of new fund offerings. In equities, we had a 70% share of collections, in that we had an 86% share. So the 2 categories which really matter, I think both from a new fund offering and SIP collection and share of equity net inflow. Those have been very steady metrics, leading to where the AUM has been.

And I think, like I said, given the backdrop of the times, it's all holding more forward. We spoke about -- we spoke about the new initiatives. On MF Central, I think the trend of consumer participation and consumer satisfaction that line is holding very steady. The apps have now crossed a daily log-in of 10,000. Of course, this number, our aspiration is to scale it significantly several x times where it is. But at 10,000, it shows a good index of consumer participation.

And then when you see in terms of other value, which is not just consumers coming to the app, but consumers going into any other app or website and being able to access this information, MF Central has now got live APIs, absolutely live APIs where you can pick up your combined account statement. This includes all your mutual fund data. It all means all -- it gets to live API-based data from the depositories. It -- only MF data by the way, not the stock data, but that comes in both for your ETF holdings and MF holdings. And of course, everything that is on the order across the first of its kind.

And then as that goes live and as we continue to scale it, there is more happening on the financial information. Financial traction side and the non-commercial transaction side where we are making distributor-based APIs live now. And that will then broad base the usage of this utility to direct consumers, to consumers who come to the app and website directly. And to all consumers who may be using any other partner app or website, but we'll be using the data [ CAS ] and then the transactability through the financial transaction and nonfinancial transaction APIs.

In terms of market share then, 68.3% market share, like we said, largely riding on a 6% quarter-on-quarter growth in SIP collections, 23% plus year-on-year. Overall AUM at INR 27.8 trillion grew for -- about 4.3% year-on-year, 2.9% quarter-on-quarter. And similarly equity AuM, you would have seen continued to grow well, 18.8% year-on-year, 6.1% quarter-on-quarter.

Other metrics, you've seen the transaction volumes. The SIP book has grown 25% annually, like I said, very strong foundational metrics. SIP book stands at very close to INR 3.4 crores to INR 34 million. We processed 97-plus million SIP transactions live consumer folios, investor folios close to INR 5.6 crores now grew 13% year-on-year. And unique investor service are a little over INR 24.5 billion, some are INR 2.45 crores, again, grew 14% year-on-year.

On the alternatives business, like I spoke when we were talking about the headlines, the AIF business grew 20% year-on-year in the third quarter, almost 17 new AIF and PMS mandates won, so more than 1 per week during the quarter, just holding on the trend that we have faced or that we have experienced in the -- across -- almost the entire year, calendar '22. 60 fans have signed up for AIF and PMS digital onboarding accounts well served.

On [indiscernible], we continue to make inroads with large ticket wins from our key clients. And then on the Gift City, we are now scaling operations, and we are present in the Gift City operating with 7 kind of plants. On the account aggregator, overall -- total 55 account aggregator in TSP wins, large, medium, small, all kinds, 20 in the third quarter. I spoke about the customer account verification that CAMS is pioneering across the industry through account aggregator data. And we plan to scale this and make it a lot more popular. We've been to all the major metros engaging with consumers, B2B connects of all kinds in terms of holding events to popularize the AA concept across various use cases, including wealth management. And overall, over 18 banks and one life insurance company are live as financial information provider.

On the pension side, like we said, we are the first to go live on the account aggregate platform with pension data. The IRDA entities are now initiating the integration journey. And then high volume, cash flow-based lending use cases using GST data are now beginning to become popular. And then we are building out capabilities and utilities to pay all of that to market.

On the CRA side, you would have seen the various numbers that we put out. I think the significant thing is over a 9% share in eNPS, continuing to hold the #2 position in the industry, commenced our entire journey on POP retail customer acquisitions, who have taken 7 POPs live, and are beginning to get traffic from them starting in the month of December.

And then I think from an innovation and transformation perspective, industry-first features of CAMS CRA using, [ CMIC ] data to onboard pension customers. And then UPI-based back account verification, these are things which are being noticed by the industry, including the regulatory circles and are actually being recommended to our peers for them to implement just like CAMS has implemented.

On the CAMSPay side, just from a product and market perspective, UPI AutoPay feature is now live with 7 clients, very popular, including for mutual fund purchases. We've gone live with Insta SIP, where a same-day SIP can be started by making a one-time investment and then setting up an AutoPay kind of mechanism for the same day.

And similarly, we've continued to scale various business features, including Insta eNACH and giving out a business app to a B2B consumers. For merchants and their customers to experience a completely frictionless journey in the dealings of CAMSPay.

Next. On the CAMSRep side, we've spoken about 2 things in the last quarter. One is KYC to become mandatory for purchase of any kind of insurance. That has now gone live, and we are working with partners and clients in order to be a large participant in that space. And then I think from a numbers perspective -- from a consuming numbers perspective, I've spoken about a 2x growth from 2x to 3x in the number of eInsurance accounts that were opened and in the number of e-Policies which have gotten into those eInsurance accounts.

Like I said, [ stock ] very nice growth numbers coming off a small base. But a good measure of what consumers can do by themselves even before there is a regulatory framework as consumers open these accounts and pull their policies themselves. We now have over 4 million eInsurance accounts, 5 million-plus policies.

On our AI-infused initiative to pay back unclaimed insurance amounts to consumers, we are now doing this for several insurance companies. started with a base of INR 750 crore of unclaimed amount and then manage to spot the right claimants for about INR 135 crores in paying the money. So I think that product is now going quite well and will continue scaling in popularity because finding the claimants of unclaimed money is I think continues to remain a priority for insurance companies. It is a priority for all kinds of financial entities, just to make sure that it's transparent with respect to this operation.

So that product feature has gone very well. I will pause here and then hand over to my colleague, Ramcharan, to take you through our financial numbers, after which we'll be ready for Q&A.

[Sesha Ramcharan, executive]

Thank you, Anuj. So I will take the next 5 minutes to go through the financial numbers for the quarter. The revenue for the quarter, we ended at INR 243.57 crores. This was up 2.5% year-on-year and 0.5% quarter-on-quarter. As you know, the component of the revenue, there are 3 components. One is the asset-based revenue. One is the non-asset-based revenue and the non-MF revenue.

During the quarter on a year-on-year basis for the same quarter, our AUM equity grew 4.3 percentage. We ended the quarter with INR 27.83 lakh crores as opposed to we had INR 26.99 lakh crores in the same quarter last year. So that was a 4.3% up on AUM. The asset-based fee also tracks the same number. It was up 4.5% year-on-year, and we ended at INR 187.5 crores of asset-based revenue. The second component, the non-asset-based revenue. We saw a dip year-on-year, a sharp dip of 8.8%. This dip was mainly driven by the drop in transaction revenue during the quarter and a lesser NFO revenue during the quarter. The earlier years, there were a lot of slow of launches that happened from NFO perspective. And there was some amount of depletion from miscellaneous application revenue.

So on a year-on-year basis, there was a sharp dip in the non-asset based revenue, but the asset based revenue tracked the growth in assets. From a non-MF revenue, on a year-on-year basis, we grew 4.2%. Driven again, it was mentioning about the smart growth that we are seeing in the alternate space, the [ AF ] space. So driven largely by the traction we are seeing on the outright investment fund sign-ups as well as revenue. We grew a non-MF revenue by 4.2% year-on-year. There was some amount of increase because of higher transactions processed by our payment platform, CAMSPay.

However, there was some decrease because of the KRA -- new KRA coming on to the system. So KRA revenue was lesser than the earlier quarter. So on an overall basis, the summary is that asset-based revenue year-on-year tracked the growth in assets at 4.5%. The non-asset-based revenue grew -- depleted in 8.8% driven largely by transaction revenue, NFO revenue. And the non-MF revenue increased year-on-year basis, 4.2%, driven by alternate investments and payment businesses. But on a quarter-on-quarter basis, the revenue increase was 0.5%, out of which the asset-based revenue grew 1.4 percentage.

The assets growth during this period was around 2.9 percentage. So there was a reduction from the overall asset growth to asset fee growth into what we see in the current quarter, which leads to the question on yields, which I will touch upon later. And on a non-asset-based revenue, it was almost flat, just 1% quarter-on-quarter down, again, driven by a reduction in the transaction revenue that kind of largely drove the response reduction in the non-asset based revenue quarter-on-quarter.

The non-MF revenue did not grow. It actually degrew by 3.9% quarter-on-quarter. This was largely driven by some reduction that we saw on the payments businesses. During the quarter; however, we see some sort of increase in revenue that is coming to us from the payment business in the fourth quarter. But overall, the non-MF revenue decreased by almost 4%, driven largely by reduction in the payments businesses and some amount of KRA business.

From a yield perspective, we have already -- we consistently have guided that given the telescopic pricing and the -- sometimes the price discussion that happens with the customers. There always -- there will be a lag between the asset growth and the asset fee growth. Our long-term, medium-term trend has been between 75 -- around 75 to 80 percentage of the asset growth will translate as asset fee growth.

Over the year and over the 9-month period, although we have seen stable yields, largely driven by the fact that although there has been some price depletion. This has been compensated by the favorable mix ratio that we got because the equity mix has recovered smartly. It is around 46.4% for the quarter. So the -- any price depletion that happens because of the reasons I mentioned has been largely compensated on a year-on-year as well as a 9-month basis by the mix -- or on a quarter-on-quarter basis, the equity component growth was less pronounced. It was 45% to 46%, is the growth that we saw.

And as we had mentioned last time, this year has also been the year that there are 11 to 12 of our contracts of the 17 customers came up for renewal and due to various reasons, including COVID and various other reasons they got bunched together in a single year for renewal. We're happy to say that all the contracts have been renewed and overwhelming majority of those have been rolled over with no price increases. 1 or 2 contracts which were long term, which came off renewal over 5 years. There is some amount of production that's happened.

So all these, together with the mix impact is contributing to what you see a stable yields on a year-on-year basis. However, on a quarter-on-quarter basis, we have seen the yield drop by 0.03 bps. That's the commentary on the yield I wanted to leave you with.

We'll just move on to the profitability index and the metrics. As we had consistently guided, what we are aiming for is the EBITDA margin of 40% plus. And in the current -- and we have seen over the course of the year, the EBITDA margin has kept inching up, right?

We had a first quarter EBITDA margin of 41.4%. The second quarter was 43.3% and the third quarter is up further to 44.5 percentage. So we ended the quarter with an EBITDA of INR 108.32 crores. On a year-on-year basis, this is actually up in terms of -- it is down in terms of 4.4%. But we have seen an increase in margin profile in the course of the year as we progress from one quarter to another. We would like to remind you that this number also includes the entire expenses we are eating on the new initiatives, like the account aggregator, like the TSP business, like the MF Central business that we are launching and the increased expenses that we are incurring from an overall cloud perspective for various initiatives that we are running.

So the investments in the new business during the quarter has not been slowed down. They continue to be incurred in terms of technology, in terms of platforms, in terms of licenses.

As we have consistently guided, we feel that the revenue from these operations would start yielding results from the first quarter of next year. Til then, this is an investment phase we continue to incur. And we have much slowed down the investments for any reason in the last few quarters. Given all those things, we feel that the margin is a credible number of 44.5 percentage for the current quarter.

The PAT -- the PBT for the quarter is INR 97.94 crores, that is 39.1%. And the PAT is INR 73.72 crores, which is 29.4 percentage, again 2.2% up quarter-on-quarter, but 4% down year-on-year. We ended the quarter with a cash and cash equivalent of INR 479 crores of cash in our balance sheet in terms of liquid funds, deposits and balances and the return of net worth was close to 40 percentage. The Board was pleased to declare an interim dividend of INR 10.5 per share in its board meeting yesterday, which has since been notified.

So all in all, the quarter has been characterized by muted growth from an asset-based revenue perspective, not much of a growth from non-mutual fund perspective. However, due to the additional investments that we are continuing to do in the various initiatives that were taken, including MF Central account aggregator, TSP, CRA, et cetera, which we feel will bear fruit in the coming year. We were still able to maintain margins at a healthy 44-plus percentage.

So with this, I kind of hand over the call back to Michelle, you can open it up for questions.

[Operator]

[Operator Instructions] We have the first question from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

So the question I was asking, I mean, the [indiscernible] really tied up with the mutual fund. And the other revenues are picking up. So now as, I mean, you are getting more clarity on the other revenue schemes.

So can we have sort of the medium term -- I say, next financial year and year after that, some sort of revenue mix expectation assuming that, I mean, the mutual fund sort of [indiscernible] growth. So from this MF versus non-MF revenue mix is going to pan out, that's number one. Second, if you can help us understand a -- eventually the revenue model, if there is any [indiscernible]? So these are my 2 questions.

[Anuj Kumar, executive]

No, sure. So let me take that. I think you've heard us say in the past that we want to diversify revenue outside of mutual funds. And scale it from our current levels of 10%, let's say, 20% of company revenues. There are 3 or 4 businesses that we need to work on, on scale. And they all have, I would say, significant promise. The alternatives business is to an extent delivering that promise right now because it is scaling beyond company growth rates and to an extent beyond mutual fund growth rate. So that's a good trend to be at.

Insurance, our expectation is -- once this announcement gets implemented. And if you see deepening of the trends that we've just shown you, insurance repository could be in that space for the next few years. And then account aggregators could go that way, again, like we keep saying that it is still perhaps slightly early days. But we are focused on these 3 businesses to scale beyond company growth rates and produce the diversification. Anything else that we may do on the inorganic side should only add to the overall trend. Is adding many more new products going to be the answer? The answer is no. In terms of how much we can invest on go-to-market and product build. And how much can we consume the teams in these pursuits. I think we have the right balance. Of course, the payments business is also there and the payments business has scaled like 50% of the output comes from the mutual fund industry and the rest is diversified.

So we think we have a fair mix of products, and we will continue sharing with you as the scale-up happens over this year and the coming years, but it's our absolute focus to grow these alternative businesses on non-mutual fund businesses faster than company revenue growth rate.

On MF Central, you know that this is more constructed and designed like a consumer utility, and we've been building it all through '21 when we launched it towards the end of the year. We nurtured it to the current size and shape all of '22, and we'll continue scaling it. Of course, right now, we are not expecting that revenues will even equal costs, they will not. That may take another 4 to 5 quarters, 6 quarters to happen. But once we get to that point, I think it will be a good point where it becomes a self-sustaining property maybe at the end of this year. That is an aspiration. Is that going to be a completely profit-focused, revenue-focused entity. The answer is no. It's more built like a public utility to just add a significant layer of convenience for the mutual fund investors, and I think philosophically, that's the way we continue to look at it.

[Operator]

The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Just a few questions. Sir, firstly, could you throw some light on there's a lot of media talk again of SEBI kind of looking at -- relooking at the expenses of the [ TER ] for the industry and kind of talking about consuming the brokerages and other element, GST element also into the TER. So effectively, the ease for the AMCs will decline and possibly some part of it will be passed on to you. So in the revision of the contract that you all have done, is there any clause where in which kind of allows the AMC to renegotiate immediately, say, the announcement comes, say, in the next 3 to 6 months?

[Anuj Kumar, executive]

So Prayesh, you are right. There is this live topic, and it has the components that you refer to, which means other components of the TER, what is outside the ceiling. There are various components outside. There are some components like transaction charges and for certain kind of cities, if you get consumers from there, their incentives. So all of that is -- it's public news, is under examination. What will happen time will tell. We are watching it as closely as you are.

Again, the only point I would like to underscore is that from a scope delivery perspective, we as RTAs have continued to expand the scope every year. We do more and more things. And I think that's evident to the mutual fund industry that we are doing more and more things for them. Is there any clause as a specific answer in our contracts that they can come and renegotiate, et cetera? Of course, there is nothing like that. We are watching the space. We will see what the outcome is. And if anybody wants to start a dialogue, obviously, we know that we have to defend our overall value position and we have to define our charging, which we have done successfully in the past, as you are aware. But to answer your question, there is no specific clause like that.

[Prayesh Jain, analyst]

Okay. Great. Coming to the second question is actually on the margins. Now you also mentioning that in spite of the investments that you are making in the new businesses, the margins are healthy at 44%, and really commendable job for doing that. My question is more on -- from 1Q FY '24 where possibly some of these businesses start speeding up. Do you think that you will gain -- you'll start moving your EBITDA margins move towards, say, 46%, 48% in that zone. Or do you think that you would retain some part of the profitability and invest in some other businesses and maintain the EBITDA margins at the current level. How should we start thinking our EBITDA margins for next year onwards.

[Anuj Kumar, executive]

so Prayesh, I'll take that question. See, just as a quantification, I think you got the delta right, which is that we spend almost 1.5% to 2% per -- on the revenue in these new investments, which currently do not have a significant top line or a material top line. See, the way we look at it is, and we will have to keep providing for the expenses from a wage inflation perspective, from a security perspective.

Our software expenses, if you see the operating expenses for the current quarter, the bulk of the increase is because of the additional investments we're making on cloud, on platforms, on security, on various licenses, cutting-edge technologies on databases, tools, et cetera. So we do not see from our perspective that those investments would stop or decelerate in the next year.

Yes, there will be a welcome addition to the revenue in terms of the new initiatives. Again, the ramp-up would not be dramatic over 1 quarter. We expect that the ramp-up will be gradual over the next year. Having said that, from a margin perspective, I think we are comfortable with the margins and the guidance that we are giving on the close to 43% to 44%. In fact, early 40s will be a good margin for us to aspire for. We will continue to make the investments on people, technology, et cetera.

So while the revenue from the top line will continue or will kind of help us. The investments will not slow down. So I don't think we should expect that dramatic increase in the margin profile from next year. What it will do is free up more resources for us to keep investing in the other initiatives that we have in mind. So the margins will continue to be a range bound is our thinking.

[Prayesh Jain, analyst]

Okay. And another question is on the insurance repository business. Now you spoke about the settlement of claims, which were not earlier settled kind of that you -- so is that kind of an activity chargeable? And so my question is more broadly as to what are the charges -- what are the services that you are currently charging for? And what are the incremental services that can come through? And currently, what is the size of the industry? And what do you expect the industry type to be, say, when the actual norms get implemented?

[Anuj Kumar, executive]

Okay. So I'll again answer the question in 2 parts. One is our insurance current revenue has got 2 parts. One is the outsourcing business, which is the labor business where we work on various customer systems from a policy servicing perspective, from a persistency perspective. But the focus and the growth will be on the second part, which we are talking about, which is the insurance repository business. The repository, the current charging model is that we get paid for policy conversion, which is the policy that's converted into demat electronics, we get paid by the insurance company.

Secondly, we get paid an annual maintenance charge, which is for maintaining that policy in our electric platform. Thirdly, we get paid for the transaction revenue. The transaction revenue currently is limited because the scope of the IR as it exists today is limited to maintaining the master data and the policies. The plan is actually very deep. We plan to do various things and the initiatives have already started and getting implemented.

In terms of enriching the platform to be here, policy servicing and insured servicing kind of a platform where we are building in various facets, including like the statements, the surrender value computation in terms of other servicing requests, probably even claim processing. So these are recent transactions and policy servicing which will kind of give us additional transaction revenue going forward. This is the enhancement that's happening as we speak, which would probably take a quarter or 2 for it to get fully into revenue. But this is our scope. In terms of IR, specifically on policy conversion, I think all of us are aware of the numbers. In terms of the policy that are live and not dematted, people are talking about a INR 45 crore to INR 50 crore policies that could potentially get dematted, including those with LIC if the regulation comes through. Now that's a big gift.

So we don't know what shape and form the regulation will take place. It is going through its own in terms of discussion papers and nodes and committees, in terms of this pan out readiness, specifically in terms of infrastructure. IRDA is closely on the job and monitoring all IR, and we are also one of the committees which kind of goes through this. So we'll have to wait for how it times out. But if and when it comes, in the course of the next year, we would expect that this will create a big market for policy conversion as well as the platform that we are building for policy servicing.

So one new development that's happened is from January 1, the KYC has become mandatory. So that we will start getting action on that in a quarter or 2 from now, even the motor insurance policies would require a KYC, which were so longer not mandated. So there's a lot of happening in that system. We will take probably a quarter for all these things to settle down, but everything is trending towards the positive direction in terms of incremental revenue.

[Sesha Ramcharan, executive]

So Prayesh, I'll just add to this. Just think of it in 2 dimensions. One thing that when a mandatory demat regime comes, the INR 2 crore or under INR 2 crore policies in demat can scale to INR 50 crores. And that's a significant multiple in terms of scaling of an industry, will that go through a bit of price shifts, et cetera, any industry would. But net of price shifts, it will get a revenue scale of several x times could be 10 to 20x. That's point number one.

Point number two, just look at the way you deal with mutual funds versus the way you deal with insurance. You don't deal in the same way. Mutual funds have allowed you to I mean there are aggregate of platforms, think of my CAMS, so think of MF Central, where you can do everything in one place irrespective of who has sold you the insurance and who has manufactured it. You can do things in one place. That format is right now not available.

The eInsurance account will [indiscernible] that format. It's a significant consumer convenience, which will lead to, I mean, large scale changes in consumer behaviors because consumers know that behavior in other industries, why will they not use it here. The question to ask is, will all that become a commercial activity? Will it be paid for? Will it help revenue scale, et cetera? But I think those are the 2 broad themes I'll encourage you to think about and based on how it process out.

[Operator]

[Operator Instructions] We have the next question from the line of Sanketh Godha from Spark Capital.

[Sanketh Godha, analyst]

Again, the question is on insurance repository. So in the mutual fund industry, if MF chooses [indiscernible] 100% business given to the single party unit. So are you seeing the similar trends happening in the insurance space? So for example, if [indiscernible] LIC has chosen to open all the insurance accounts or e-Policies whether it will be one insurance repository or they will socialize it or giving it to more insurance depository. So just wanted to know how it is going to play out? And second, you touched up on the pricing, but just wanted to understand how the pricing according to you will change from the current level whether you see a steep correction from kind of what you're charging or you will see a marginal correction, but it could be a meaningful number on the top line?

[Anuj Kumar, executive]

I'll take this question. So from our understanding and what is prevalent from a market perspective is that there is no monopoly or one insurance company going to one [ EAA. ] Primary choice is with the insured person to kind of where he wants to link his account with. Failing which I think the insurance companies would kind of allocated. What we are seeing is that we don't see many cases where they work only with one insurance repository, it is definitely more than one. So we don't see this RPA kind of a one-on-one relationship from an insurance repository to insurance company. So it's more kind of more printout among multiple EAA. Obviously, the primary -- it could be the choice of the insured also to pick the EAA provider to whom he wants his account settled.

From a pricing perspective, we are now is probably high single digits in terms of what we do for a policy conversion. It is only natural that for a given volume where we do 5 to 6 lakh policies in a quarter, though it's multiple crores, only be natural that you'll expect a sharp depletion in the policy cost. It will not be marginal as in 5% or something that. We expect it to be sharp, especially given that we'll have to wait and see what happens to the biggest insurers, how they are going to join this market, what is going to be the architecture for them.

But we would be -- we would not be surprised if the decline is sharp, and it's not just marginal 5% here and there. That's our expectation. But having said that, what this number will be, it's entirely demand and supply dynamics and the -- who is going to kind of opt for what EIR accounts. So that we'll have to wait and see. We don't know the exact indication for that.

Probably a quarter or 2 from now when there is more regulatory certainty on this in terms of the shape of the guidelines. As you know, they have been upgraded from guidelines to a regulation perspective. That is the aim of the IRDA. So all those things get published over the next 3 months. We will have a better clarity on what's going to happen. But it's really natural to expect that there will be a rate depletion.

[Sanketh Godha, analyst]

Got it. But just from the market share point of view, the insurance repository, today we enjoy around [ 25% ] market share being shared as a repository. But as you rightly said it is 2% of the entire policy dematerialized. So I just wanted to understand that this number you expect to stay there, even for the entire unit -- when it becomes for the entire universe -- or you think there could be a natural depletion in this market share in a bigger price?

[Anuj Kumar, executive]

So see, I know there are 4 providers as of now who are doing these services and two, actually have similar market shares of 35-plus percentage, which is one more provider. Of the four, one is not very active at least the last quarter and one is kind of a lesser market player.

Now obviously our endeavor will be to retain and if possibly increase our market share on this and all our efforts are going towards that. If we are kind of diligent on that and do our work properly, we do not see why our market share should decrease. Obviously, we're working to maintaining and increasing our market share. So yes, obviously, it's going to be a hard part market, so we need to kind of work towards that. But I think all our attempts are being made to ensure that we either retain or increase our market share.

[Sanketh Godha, analyst]

Got it. And the last one on the -- again, on the insurance repository, as you rightly said that from first January, all the noninsurance policies or all the policies, the KYC has been made mandatory. So I just wanted to understand the trend whether it has been outsourced to insurance repository or insurance company for promoter [indiscernible] preferring to do it in-house rather than outsourcing to the you people. So how is the trend today? And how do you think you will convince -- if it is in-house, how you think you will convince the companies to [indiscernible] insurance repository?

[Anuj Kumar, executive]

We have some volume proposition. It will be tied up to your [ AA ] account opening, et cetera. So there are some strategies that we have talked about. It's very, very early stages, Sanketh. So we are -- we will see the trends emerging, especially at the time of maturity, this will actually pick up, right? So it's just being introduced. We have a proposition from a eKYC perspective, KYC purposes, which we feel is very strong, coupled with the [ EA ] account opening. We are going to the market with that. I think a quarter down the line, I'll be able to answer your question with exact details on what market is doing because I think everybody is on a figuring out basis now. So we will have to wait for a quarter for clarity to emerge..

[Sanketh Godha, analyst]

Got it. And last one, I see -- just wanted to understand [indiscernible] in entire game. So LIC thinking to do it in house either the e-Policies or they are open to -- also to the repository industry.

[Anuj Kumar, executive]

We have no concrete information on that. As I said, we'll have to wait for clarity to emerge from a regulatory perspective, what the shape of the guidelines is going to be, regulation is going to be and how they're going to react. So I think it's premature to speculate on that, and we have no concrete information on that.

[Operator]

The next question is from the line of Ajox Frederick from Sundaram Mutual Fund.

[Ajox Frederick, analyst]

Sir, my question again is a continuation of the earlier participant. So, the insurance repository revenue currently, what is that for us?

[Anuj Kumar, executive]

So we have insurance repositories, the overall including outsourcing, we don't give a full filter. But I will tell, insurance repositories, if you do a 6 lakh policies, you know what their approximate realization will be.

On an overall basis, the insurance vertical for us is around INR 4 crores to INR 4.5 crores quarter is the revenue.

[Ajox Frederick, analyst]

Okay. Okay. And this can go off to 10x, assuming that we maintain market share and a majority of the policies [indiscernible]. So that's the direction [indiscernible].

[Anuj Kumar, executive]

So let me just clarify, this is the insurance vertical. So out of it, that is outsourcing as well as the repository revenue. Repository revenue will be -- for the quarter will be around less than INR 1 crore. So that's the component of this. In terms of growing 10x, again, this is -- obviously, we are looking at a positive uptick to this revenue, how dramatic that is going to be, we'll have to wait and watch, but we are very positive that this is going to be reason for us to show an increase in revenue definitely in this vertical, given we are well positioned, we have 35-plus percentage market share. We've been in this place for 7 years. We have the IT backbone ready. We have the IT infra ready, we have the connects with the customers and insurers ready. So we are very hopeful that this will be a huge uptick in our revenue, but everything is dependent on how the regulations pan out in terms of compulsory demat.

[Ajox Frederick, analyst]

Got it. That is very helpful. The other question again is, sir, on the TER cuts. So I mean, how about this last time when TER cuts, did the [ AMG's ] approach you immediately after the regulation came in or you did have the existing contracts going on for some time. So how did it happen last time?

[Anuj Kumar, executive]

The last time when this happened in 2018, '19, you may have seen that a number of leading AMCs made a public statement that they believe they will reset the larger components of cost largely connected to sales and distribution. In that year, if you see historically, any impact that we took was very, very small on overall price.

So we did see -- I won't say we didn't see the pressure. But we didn't see any unreasonable pressure of people asking us to scale down prices. Also, like we've said, if you just compare the larger components of cost in this industry, especially sales and distribution, which is perhaps I won't say an exact number, but approximately number 8 to 10x as big as RTA costs. The ability of us on RTA to scale down prices is obviously very limited. But to answer your question, the impact wasn't severe or unreasonable. It was what we expected and did not lead to any significant number in price cuts.

[Ajox Frederick, analyst]

Got it, sir. Just to reiterate. As of now, we -- whatever we signed with the larger AMC that holds true for the next couple of years, certainly, right...

[Anuj Kumar, executive]

That correct.

[Operator]

[Operator Instructions] The next question is from the line of Abhijeet Sakhare from Kotak Securities.

[Abhijeet Sakhare, analyst]

I have a 2-part question on OpEx. Firstly, you mentioned investments will continue into new businesses going ahead. Is it possible to quantify at what stage we are in terms of investing in these businesses in terms of, let's say, getting them ready for future growth.

[Anuj Kumar, executive]

Okay. So what we have mentioned is that the -- okay, I'll sit down in the various businesses. So investments are predominantly into [ AACSB ], the CRA business, the MF Central and insurance repository getting it ready for the next uptick that we are seeing broadly on these businesses. The [ AATSP ], we have seen green shoots in terms of sign-ups and all those things. We expect that the revenue will be a gradual ramp up starting from first of -- first quarter of next year where they should start contributing a material amount to the top line.

We have seen a lot of finance. But obviously, this is the time it's happening so in terms of linkages, in terms of technology testing, security guidelines, et cetera. And obviously, ecosystem will also have to be ready. Now we have seen the mutual funds have to sign up to this. We have seen the pensions getting live on this. We expect that from the first quarter of next year, the revenues will gradually start picking up. In terms of CRA, you have seen the eNPS has become live, and we have seen traction on that. But the POP, which is the -- which is again a very big revenue source for us, has become live only from this quarter.

So again, the revenue will start going to be a slow burn in terms of revenue. So again, you'll see a gradual ramp up. The investment in insurance, I think we spoke about in earlier questions. It's kind of we are making proactive investments in the platform to make it right for investors, to make ready for insured servicing as well as policy servicing.

Again, this depends on the regulatory guidance. If the regulations get favorable and passed over the period of next year, we see a big uptick on the revenue. So while the contribution to the current P&L is absolutely not material. We expect that starting from first quarter of next year. All these businesses, some of which is already live, right? It's only a question of customer acquisition and scale. MF Central also falls in the same category, will start giving us revenue from first of April next quarter in a gradual ramp-up phase. I think from an investment perspective, we have seen the -- this quarter, next quarter, it will be when the gap between the expense and the income on these verticals will be the maximum and then they'll start narrowing down from the quarter offset.

[Abhijeet Sakhare, analyst]

Sorry, my question was also more on the OpEx side because there seems to be like some visibility that you have that you need to continue to invest in these businesses. So I was kind of wanting to understand where we are in that stage of investment cycle in terms of building these businesses. The revenue obviously will take its own time, that is subject to how the market also evolves.

[Anuj Kumar, executive]

So from an OpEx perspective, I think we have reached a stage where stability of expenses will happen. As we told you, we spent around INR 3 crores a quarter on these expenses predominantly on cloud and various other, on these platform and technology engineers. We spend around INR 3 crores a quarter on these initiatives. This is actual expense taken to the P&L. See, from a expense perspective, we don't see there will be a lot of optimization that will happen. So that could be a small drop, a small increase, but this is kind of steady state before we continue to invest in these technology resources. The platform is not a one-step go-to-market. There's going to be continuing enhancement that's going to happen feedback that's going to come from the market and enhancements will have to do from a security technology perspective. So I would not expect a huge drop in the OpEx we do on these platforms. It will be more kind of a revenue pickup that we will get.

[Abhijeet Sakhare, analyst]

Got it. That's helpful. And last quick one. On the non-controlling interest trend, there was a marginal loss. So which is that entity that's relating that loss?

[Anuj Kumar, executive]

So if you remember in April of last year, we acquired an entity called Fintuple Technologies in the alternative investment space. So that's the kind of a marginal loss for the quarter. Again, we are in the ramp-up stage. We are a start-up in the ramp-up stage, a very good order book visibility. This is going as per plan. We knew that the first year is going to be kind of investment for their platform. So going forward, given their order book, we are confident that in the next quarter, it will not be negative. But again, from an overall perspective, it was a small immaterial amount at the loss.

[Abhijeet Sakhare, analyst]

Got it. And sorry, just checking this -- cross-selling this -- the increase of the depreciation line, is this a reflection of what the investments have happened. There's no change in accounting policy, right?

[Anuj Kumar, executive]

Absolutely not. No change in accounting policy. If you see we had a record CapEx done over the last 2 years, INR 65 crores and INR 70 crores and all those things. So given the 3-year depreciation, you will actually see a certain depreciation, which we have seen in the last few quarters, and we've seen the quarter also. There's no change in the depreciation policy.

[Operator]

The next question is from the line of Ansuman Deb.

[Ansuman Deb, analyst]

You briefly mentioned about the yield cuts that happened for some select accounts and largely you are able to pass through the new registrations or new renewals would be the right word. So if you could just give us some description on the like-to-like yield cuts, which have happened in the MF accounts.

[Anuj Kumar, executive]

So Ansuman, we will not get into specific customer contracts, but suffice to say that a large part of it got rolled over. There were a few contracts which came up for renewal after a 5-year period and things like a very, very long-term period. And in the period that if they had shown and they have shown significant, significant growth. There was some amount of fee that was -- price depletion that happened. But again, nothing that we would thing will alter our assumption or guidance saying that the growth of AUM fee to AUM will stay within the rate that we have indicated, which is 75% more -- 70% or more. This is -- as I said, in an exceptional year, we had 11 -- 12 contracts come up for renewal over the 17 customer side. So this is not something that may happen on every year basis given that they are renewed for different periods. The overwhelming majority, we did roll over. In terms of quantification, we would not like to get into specific individual customer contracts, but this is the broad guidance that I can say.

[Operator]

The next question is from the line of Sahej Mittal from HDFC Securities.

[Sahej Mittal, analyst]

Just one question on the insurance repository business. So what is our incremental market share on the new flow of motor insurance policy? And is there a right to win for CAMS in this business given that everyone is turning more and more competitive for this business. So if there's a new insurance policy coming up, then for them to choose CAMS over someone else, is there a right to win or this is largely a commoditized business?

[Anuj Kumar, executive]

Just so that you understand, think of today's consumer tendency to participate in EIA is largely for live, okay. Motor insurance coming into this hasn't become a trend yet. It will take some time for that to become a trend. Overall, you would have seen that we have overall -- this is market share in eInsurance account has crept up from 36% to 37%. So I can give you broad share number. I think motor insurance will take some time for consumer tendency to pass these insurance accounts. That's not a very pronounced trend yet. Does that answer...

[Sahej Mittal, analyst]

Do we have a right to win...

[Anuj Kumar, executive]

So the right to win comes like this. I mean, think of it this way and think of the architecture of the industry that you will have one eInsurance account. So let's say you opened it with CAMS. All the insurance that you buy, you will then park it in this eInsurance account, you will not be able to hold to. If you're unhappy, you can shut this and go somewhere else. So therefore, the primary metric, which will -- the demand gen, therefore, has to be done at an eInsurance account level.

The faster you open the eInsurance accounts and bigger your market share, the more will be our policy market share, and that perhaps gives you a right to win. Now is there any other right to win which means that do you have an exclusive contract with a manufacturer or with a seller like we said earlier, very, very difficult for that to do, and we don't expect the architecture of the industry, will ever go that way because the choice is still -- I mean, if you were to try one of the websites and open an account while buying insurance, you will see the choices left to the individual.

So it is more an individual mandated choice. And when that choice is taking place, normally, everybody is offering all the four. So that's how it works. A tied model where a manufacturer will just go with one guy with one eInsurance company, one ramp and that will scale market share is an unlikely scenario to emerge.

[Sahej Mittal, analyst]

Right. So I mean this would be happening then someone's buying an online policy, right? When an agent is selling an off-line policy, so what is the default insurance repository if the customer does not do anything then? Is there any default repository which the region choses? Or how is it? And is there an option wherein a manufacturer is only working with maybe 2 repositories and not all the four?

[Anuj Kumar, executive]

That is entirely possible. That is possible that a manufacturer may be working with only 2 and not the 4. Like we said in the industry, when you look at shares, you will find that 2 of the players, including us, have been hyperactive. One, of course, has been very quiet and the other is less active. So it is possible. There are examples of manufacturers working only with 2 EI accounts. There is 2 repositories.

There is no default repository. It is not that if the consumer doesn't make a choice or the consumer says, put me where you want, unlikely to happen. There is no single repository, which has kind of defaulted as a choice. So think of it as a competitive industry. I mean if you're trying to imagine how this industry will emerge, think of it as less of a land grab industry. We're not expecting it will grow into that pattern where large manufacturers aligned to a single rep and then they push all the consumers there, and that gives rise to share, can happen but unlikely to happen. It will remain more democratic. The consumer will make a choice. He will hold one insurance account and then he will drag his policies into that account. That is the architecture which will emerge.

[Sahej Mittal, analyst]

And maybe one follow-up. So given that there are talks that the LIC would be opening their own repository. So would there be a conflict of interest if they start to manage maybe some other insurance companies' policies as well in their repository, would there be a conflict of interest and will be allowed only to manage their own insurance policy? How should we look at it?

[Anuj Kumar, executive]

So I would not make a comment on what will happen. We will see what happens. But think of it yourselves, just lay out the principles. I, as a consumer, may be consuming insurance policies of 4 different companies. And if one of them starts a repository, in your case, you're illustrating LIC, think of my insurance account existing there. all the competitive data, all the purchase trends, whether I'm paying my premium, nominees, everything will be visible to one guy. And that obviously creates what you just said. It will create a potential conflict and it will create an uneven playing field. So I'll comment on whether this is going to happen or not going to happen, but your question is right. It will not create a level field to play out.

[Operator]

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Ramcharan, Chief Financial Officer, for closing comments. Over to you, sir.

[Sesha Ramcharan, executive]

Thank you. I thank all the participants for their continued interest in the company, and please feel free to reach out to any [indiscernible] or Orient Capital in case you have any questions or follow-ons. And thanks once again for your participation and look forward to speaking to you soon.

[Operator]

Thank you, sir. On behalf of Computer Age Management Services, that concludes this conference. Thank you for joining us, and you may now disconnect your line.