UTI Asset Management Company Ltd

NSE:UTIAMC

Earnings Call Analysis

Strong Financial Performance with Growth Across Segments

UTI Asset Management demonstrated robust growth in fiscal year 2024. Consolidated net profit surged 75% year-on-year to INR 766 crores with revenue from operations up by 37%. The company's Assets Under Management (AUM) increased by 19% to INR 18.48 lakh crore. Key segments, such as the domestic mutual fund business, saw a 22% rise, reaching INR 2.91 lakh crores. For the next fiscal year, UTI plans to continue its growth trajectory by launching new funds and expanding its international presence, despite some pressures in equity inflows and operational expenses.

Promising Financial Growth in FY '24

For the financial year ending March 2024, UTI Asset Management Company reported a remarkable performance with consolidated profits rising by 75% year-on-year to INR 766 crores and consolidated revenue increasing by 37% to INR 1,737 crores. The core profit after tax (PAT) for the period also grew by 8% to INR 345 crores. These figures reflect UTI's robust operational execution and its ability to capture market opportunities despite macroeconomic challenges.

Strong Q4 Results and Future Viability

In the fourth quarter alone, UTI's consolidated net profit soared to INR 163 crores, a substantial 90% increase from the previous year. Revenue for the quarter stood at INR 416 crores, up 38% year-on-year. The substantial increase in profitability and revenue demonstrates the company's operational effectiveness and ability to adapt to market demands, positioning UTI well for sustained future growth.

Sector Growth and AUM Expansion

During FY '24, the total Assets Under Management (AUM) of UTI grew by 19%, reaching a total of INR 18.48 lakh crores. The domestic mutual fund segment alone saw a 22% increase in AUM to INR 2.91 lakh crores. This growth indicates increased investor confidence, driven by strong capital market performance and UTI's expanding product offerings, including the recent launch of the UTI Balanced Advantage Fund and targeted marketing efforts aimed at smaller cities.

Strategic Focus on International Markets

UTI is actively pursuing international growth, having secured appropriate licenses to operate in Europe and planning to launch operations in the USA soon. UTI International reported an AUM of INR 27,645 crores, which is an increase of 27.4% year-on-year. This expansion highlights UTI’s strategy to diversify its revenue streams and capitalize on global investor interest.

Maintaining Competitive Yield and Fees

The management stated that yield improvement in the equity and hybrid fund categories has stabilized at an increase of 5 basis points, primarily due to changes in commission structures and better fee management. The overall blended yield was mentioned to start from a normalized benchmark of around 34 basis points for FY '25. This consistent yield management enhances UTI's ability to generate revenue while keeping investor costs in check.

Proactive Approach to SIP and Retail Inflows

UTI witnessed an increase in Systematic Investment Plan (SIP) inflows, totaling INR 6,767 crores for FY '24, a 5% year-over-year growth. This consistent increase in retail participation reflects UTI's successful marketing strategies, enhanced digital presence, and targeted outreach efforts. The average SIP ticket size has been reported at INR 3,164, indicating growing appetite among investors for systematic investments.

Plans for Product Diversification and Innovation

The company has revealed plans to launch new financial products, including a multi-cap fund and thematic funds, catering to evolving market trends and investor preferences. Such initiatives, alongside UTI's focus on ESG and digital asset management, are expected to attract a broader investor base and drive AUM growth in the coming years.

Robust Cash Flow Management

Management provided insights that the consolidated tax for the fourth quarter was INR 96 crores, representing a 68% increase year-on-year. This indicates effective fiscal management and a growing tax base in line with profitability enhancements. For FY '25, the tax rate is anticipated to be in the range of 22% to 23%, further emphasizing UTI's strong financial health.

Commitment to Dividends

Looking ahead, UTI has maintained a dividend payout policy to distribute a minimum of 50% of its profits to shareholders. For the current financial year, the payout ratio has been around 66%, showcasing the company's commitment to returning value to its investors.

Navigating Economic Headwinds

Despite facing challenges from global economic uncertainties and changing monetary policies, UTI has maintained operational strength and resilience. The management underscores a proactive approach to adjusting strategies in response to market changes, ensuring long-term viability and growth.

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the UTI Asset Management Company Limited Q4 and FY '24 Earnings Conference Call. From the management, we have with us Mr. Imtaiyazur Rahman, Managing Director and Chief Executive Officer; Mr. Vinay Lakhotia, Chief Financial Officer and Head Corporate Strategy; Mr. Surojit Saha, Group Financial Adviser; and Mr. Sandeep Samsi, Head, Investor Relations, Marketing and Corporate Communications. We also have Investor Relations team from Adfactors PR.

[Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties are on the disclaimer slide of the investor presentation that has been shared earlier.

I will now hand the conference over to Mr. Imtaiyazur Rahman, MD and CEO, for opening remarks. Thank you, and over to you, sir.

[Imtaiyazur Rahman, executive]

Thank you very much. Good morning, and welcome to our earnings call for the fourth quarter and financial year ending 31st March 2024. We appreciate your presence today as we discuss our operational and financial achievements. .

You may have read our press release and investor presentation, which are available on our website and the website of the stock exchanges. The financial year 2024 has indeed been a stellar year for the capital market and for the investor community.

The year brought in numerous opportunities following the phase of normalization in financial year 2023. Throughout the year, we have witnessed a resilience stellar growth driven by robust positive sentiments towards consumer demand and substantial capital expenditure. Despite tight monetary conditions and a challenging geopolitical landscape, India has maintained its position as one of the fastest-growing economies, building upon the momentum gain in the previous fiscal year.

The latest South Asia development update by the World Bank, released in April 2024 projects India's growth to reach an impressive 7.5% in financial year 2024. This optimal is supported by the stellar Q3 GDP growth at 8.4%. Other noteworthy developments there, the increase in India's weightage in the MSCI Global Index to 18.2%, more than double what it was 3 years ago and the inclusion of India, India's bond, the JPMorgan EM Bond Index, which is expected to take effect by the end of June in the current financial year.

In the mutual fund industry, we have observed a significant evolution in recent years. The equity market, financial year 2024 has been instrumental in attracting net inflows of approximately INR 3.54 lakh crores, pushing asset under management to a commendable INR 53.4 lakh crore as of March 31, 2024.

This said, of about 35% from the last year has created substantial wealth creation opportunities for retail investors and has led to a notable increase in their count. According to the latest data from IMC, as per the March 2024, IMC report, more than 60% of our assets that about INR 33.3 lakh crores based on average unit are held by individual investors.

Going by the composition, around 84% of the individual investor assets, including HNI, our health and equity-oriented. Friend, If we speak about the geographical opportunity for mutual funds, only 18% AUM are coming from beyond 30 cities. Another interesting point is that the share of women investors in AUM was close to 23% until February of 2024. This is an opportune time to bring in substantial investors from these cities into the mainstream financial ecosystem, while reinforcing mutual fund industries significance in the country's economic structure.

As UTI, we are well positioned to harness the momentum from both that we think is leveraging the changing investor behavior and improving financial literacies. UTI has been expanding its footprint into new locations across India, particularly in Tier 2 and key towns. Our in beyond 30 cities, it remains a steep fund, accounting are close to 21% of our AUM with a total folio accounts of 40.87 lakhs, which is 33% of our total folios. This sector can attributed to our consistent efforts in these towns for onboarding of new investors and firstly, long-term relationship with them.

During the year, UTI opened 29 new branches in the Tier 2 and key cities. and we will continue to expand our presence in a smaller town during the current fiscal as well by using the digital infrastructure. Our savings focus has been on enhancing supervisory efficiency within the sales function, introducing innovative sales model and roles and expanding our product offering for distributors and for distribution a key counters. We have our engagement with our distribution partner. And during the year, our fund management and product team traveled across the country and conducted 106 meetings of these 43 cities, we are in the top 10 cities.

We have also reached out the potential investors conducting a program across Bharat to raise awareness about mutual fund industry to the first-time investors and benefits of investing through SIP in the mutual fund.

As a part of this commitment, on financial literacy, we partnered with Dainik Jagran to conduct investors' awareness program at our 40 Tier 1, Tier 2 and 3 cities. Our mega IFC event in Varanasi in December 2023, garnered significant retail participation. We will continue to use our teams to create investors awareness.

Our new and revamped website cutting to investors and distributions and distributors offer enhanced accessibility and functionality. All digital assets of UTI Mutual Funds are now consolidated under our digital platform UTI Heart, indicating our commitment to providing a delightful experience across all touch points. Leveraging on the digital network, we have hosted online with our fund managers on the debt and equity market outlook.

We have undertaken encumbrances innovation of our corporate office services, focusing on ease of comfort and accelerate to create an appealing working environment on our -- for our stakeholders. Over the last year, we have extended our focus on sustainability and responsible investing and ESG has been deeply vetted in our investment processes and operations.

We have developed sector-specific ESG framework and are continuously building capabilities for value-driven investors. Continuing our commitment towards environment conservations, we have implemented cutting-edge processes, such as biometric KYC and a go-green option for select it after sell services.

During the year, we launched UTI Balanced Advantage Fund in the month of July. The fund has an AUM of INR 2,750 crores as of 31st March 2024. This product launch has helped us complete our offering in the hybrid category of fund. Also, we now have 5 products under the smart beta category with total AUM of more than INR 5,500 crores. These smart beta products have helped addressing the growing demand of the in the market.

Additionally, we have launched our 2 differentiated products, namely 5 years and 10 years G6 ETF during the year for the institutional investors. While the AUM of these funds is small, we now have 2 products in the upcoming categories.

On the group level, we are delighted to share with you that UTI International obtained license from the French regulators for business operations in European region to our Paris office. This will give us ongoing presence in Continental Europe and create significant business opportunities in this market.

Our Retirement Solutions business had obtained a point of presence licensed from PFRDA and NOC from SEBI. The PFRDA licenses allow UTI RSL to reach our new pension fund investors and engaged the services of partners to grow the business.

For our AIF business, we have received SEBI approval for starting operation in big city in Gujurat. This will enable foreign investors to invest in our domestic AIF funds, UTI MF and UTI Investment America Limited has been registered with the Securities Exchange Commission U.S.A., and we are planning to start operation in the U.S.A. The total AUM for UTI Group has increased by 19% to INR 18.48 lakh crore as of 31st March 2024 compared to INR 15.96 lakh crores during the previous financial year.

The domestic mutual fund business has witnessed a commendable 22% growth reaching to INR 2.91 lakh crores against INR 2.39 lakh crores last year. For further impact in the UTI Mutual Fund performance and other operational update for Q4 and financial year 2024. I now invite my colleague, Sandeep Samsi, Head of Investor Relations, Marketing Corporate Communications to provide with more details. Over to you, Sandeep.

[Sandeep Samsi, executive]

Thank you, sir. I'll first take you through UTI's performance during the fourth quarter and financial year ended 31st March 2024. UTI Mutual Funds performance. UTI was able to capture a market share of 6.84% of the gross sales of the industry during this quarter and market share of 7.79% of the gross sales for the financial year 2024. Our equity quarterly AUM for the quarter ended March 2024, stood at INR 84,777 crores, pricing by 20% as compared to the quarter ended March 2023. Quarterly average AUM for index and ETFs stood at INR 11,448 crores, up by 39% in the fourth quarter, commensurate with growth in the overall passive investment. ETFs and investment net inflows stood at INR 11,682 crores. UTI added INR 1.92 lakh folio taking up the number of live folio to 1.24 crore as on 31st March 2024. AUM witnessed growth of 42.95% over the corresponding quarter of the last year, reaching to INR 3,747 crores as on March 2024. The receipt inflows for the fourth quarter stood at INR 1,772 crores. The gross inflows for UTI Mutual Fund witnessed a year-on-year growth of 5%, with an average SIP ticket size of being INR 3,164 for March 2024. For the full year, the SIP improved by INR 6,767 crores, higher by 5% compared to INR 2,463 crores in FY '23. .

On UTI Financial -- UTI's financial on consolidated basis. During the fourth quarter, the company posted a consolidated net profit of INR 163 crores higher by 90% year-on-year and down by 12% quarter-on-quarter, while our consolidated revenue from operations for the fourth quarter stood at INR 416 crores, up by 38% Y-o-Y year-on-year. Consolidated tax for the fourth quarter is INR 96 crores, up by 68% year-on-year and 22% quarter-on-quarter.

For the full year, the consolidated profit was INR 766 crores, higher by 75% year-on-year, and consolidated revenue from operations was INR 1,737 crores, up by 37% year-on-year. For the full year, the consolidated core PAT was INR 345 crores, up by 8% year-on-year, and the core revenue from the same period is INR 1,182 crores, which is up by 5% year-on-year. On a stand-alone basis, the back of UTIMC Limited for the quarter 4 quarter FY '24 is INR 151 crores, reflecting a growth of 54% year-on-year and 1% quarter-on-quarter and for quarter 4 of FY '24 is INR 91 crores, up by 7% year-on-year and 40% quarter-on-quarter. The PAT of UTI MF Limited for FY '24 is INR 601 crores, higher by 41% year-on-year. PAT of UTIMC Limited for FY '24 is INR 293 crores, up by 6% year-on-year.

Our 100% owned subsidiary UTI Retirement Solutions Limited has recorded a growth of 25.74% year-on-year in, reaching INR 3.03 lakh crores in quarter 4 FY '24 and currently manages 35.8% of the NPS Industries AUM. The PAT of UTI UK Retirement Solutions for the full year is INR 54 crores, an increase 15% year-on-year basis. UTI International, UTI International, which represents international business interest has an AUM of INR 27,645 crores as of 31st March 2024, up by 27.4% year-on-year.

Our international clients are across more than 35 countries. These are primarily institutions, pensions, insurance, banks and asset managers. One of our flagship funds, the India Dynamic Equity Fund domiciled in Ireland has an AUM of USD 951.77 million. UTI International as J. Safra Sarasin Responsible India Fund and ESG compliant India fund has an AUM of USD 74.66 million. UTI India Innovation Fund launched last year has an AUM of USD 41.33 million.

On UTI Alternative Private Limited, UTI Alternatives Private Limited has a total AUM of INR 1,974 crores. It has a well-defined ESG policy and strategy in place. It currently manages the following active debt fund. UTI Structured Debt Opportunities fund, which is called as UTI SDOF I, for which we have received an SEBI approval in August 20, 2017, and which closed in May 2019, it has an AUM of INR 132 crores.

Currently, the fund is an exit mode. UTI SDOF II has an AUM of INR 519 crores, and the fund is currently in investing stage. We have received -- we had received the SEBI approval for this in February of '21. UTI Multiopportunities Fund I has an AUM of INR 760 crores. Currently, the fund is in investing stage. And SDOF III for which we have received a SEBI approval in April 2022 has an AUM of INR 433 crores. The fund is currently fundraising as well as investing stage. UTI's Real Estate Opportunities Fund I is currently in the fundraising and investing with commitment of INR 127 crores. It is also pertaining to note that UTI got the co-investment portfolio managers, that is the CPM license in August of 2022. We have received SEBI approval for 2 more funds, UTI Credit of and UTI Asset Reconstruction Opportunities Fund, which we'll be launching at the upgrade time.

On the digital front, we have launched a new and revamped website for our investors and distributors. And with this, we have completed the revamp of all our assets, be it our website, mobile app, contact centers for both investors and distributors, accompanied with multiple new features and seamless journey, we have now introduced robot advisory capabilities that cover goal planning and management, innovative calculators, risk analysis, et cetera.

We have also launched 3-in-1 self-service digital process riding on Adhar, DigiLocker and eSign and have also extended the same for biometric-based KYC through UTI Mutual Funds offices. We now have a scalable and robust architectural design to cater to nearly 0.6 million transactions per day riding on micro service architecture.

To ensure the enterprise assets are accessed securely through a trusted network and device, we have successfully rolled out the virtual desktop infrastructure. I would now require the Managing Director and CEO for his concluding remarks.

[Imtaiyazur Rahman, executive]

We will go for Q&A now. .

[Operator]

[Operator Instructions] The first question comes from the line of Swarnabha Mukherjee from B&K Securites.

[Swarnabha Mukherjee, analyst]

2, 3 questions from my side. First one on the yields in the stand-alone business. So there is an expansion of yields that we see. So just wanted to understand what would be the levers of the sale? Is it only because of a higher mix of equity? Or is there anything else to read it there? So that would be the first question, sir. Second is on the SIP flows, so the run rate has improved in the current quarter. So how are you seeing that as we have moved into the first quarter of FY '25? And just wanted to understand from your side, how the flow share would be across the distribution direct vis-à-vis other intermediated channels and what are the engagements that we might be having these prices? And thirdly, on the expenses part, sir, if you could highlight what led to the increase in the sequential quarter-on-quarter increase in the employee benefit expense? And also, if there could be any additional expense from the tariff office side in the competitive entity. And also on the expenses front, the other expenses have remained fairly steady over the years. So any comment ....

[Vinay Lakhotia, executive]

Yes, Swarnabha, so I'll take the question on the yield as well as the index expense side, and Sandeep will take care on the SIPs and the marketplace. So on the yield, there have been a yield improvement across all categories of the fund apart from equity and hybrid. We are seeing improvement in your cash and arbitration basis point. In the income fund also around a 1.5 basis point yield improvement is there. On the equity and hybrid fund, the yield improvement is close to around 5 basis points, primarily because of 2 factors. First of all, normally, we estimate the commissions and which is our understanding of the business utilization, the actual payout to be more or less. As you're aware, that team expenses cannot be charged to AMC. So is there any underestimate or overestimate of commission, the differential is adjusted in the management fee. So there have been some increase in the management fee on account of core estimation of commission. Secondly, as you are aware, the 30 approval commission was being stopped by SEBI in February 2023. .

So whatever the business we mobilized in until February '23, the commission was required to be paid for additional trail commission, since the approval has stopped for those businesses, that impacted our yield in the first 3 quarters for equity and hybrid fund and the third quarter since we are required to pay any commission at the 1-year period has already over. So that has also improved our all under the equity and the hybrid category of the fund.

Coming to the expenses, the employee cost, there have been an increase of both on a sequential quarter as well as a year-on-year basis. It's primarily because of 2 factors. The onetime expenses, the increase on account of gratuity where because of actuarial valuation, the increase of close to around INR 5.5 crores. Although the insurance cost has marginally gone up by INR 2.5 crores during this particular quarter.

Apart from that, there have been an increase in employee expenses at UTI International and Mr. Rahman rightly pointed out, we are expanding a business in the international fund, both in European market as well as in the North American market. Because of that, we have been. So in UTI International, there have been a slight increase in the employee expenses of close to around INR 3 crores. The other expenses are almost flat, and we believe that this run rate should continue going forward as well.

[Swarnabha Mukherjee, analyst]

Right, sir. Sir, good follow-up on the yield part, I wanted to just ask that as we mentioned, this quarter, we are seeing impact of some overestimation of commission possibly in the 3 years, right? Is that my understanding correct? So then from 1Q, how should we look at it? We go back to the earlier range as it was?

[Vinay Lakhotia, executive]

We are continuing with the same rate. So almost around 76 basis points yield is there on it and. So we start the year with the same rate only.

[Swarnabha Mukherjee, analyst]

Okay. And for the other categories, the increases that we did, we should take that going ahead?

[Vinay Lakhotia, executive]

Yes. YESOP, yes, yes. .

[Sandeep Samsi, executive]

Swarnabha, on the SIP inflows, as you mentioned that we have seen improved inflows, and we are taking a number of steps to further improve our inflows in this category. One is the kind of effort that we are taking with our distribution partners across the country, even more so in the smaller cities where we are seeing significant traction for our fund.

Also, we are also trying to do is try to pitch new products, like we have different products which we have launched the Balanced Advantage Fund, which we had launched last year. And we are also targeting the new generation investors who look at more of these index funds.

So that also has helped us to get -- improve our SIPs. So these are the steps that we are taking, and we will continue further to take these steps. On the direct versus the distribution piece, like it has been in the last previous quarter, the equity and hybrid, which is the right parameter to look at it because the distribution plays an important tool in the distribution of equity and hybrid. That ratio remains similar. 5% is direct 60% to 70% comes from the MLP.

[Swarnabha Mukherjee, analyst]

And sir...

[Imtaiyazur Rahman, executive]

We are extremely focused to enhance our engagement with our distributors. We are -- we have a very deep relationship with the banks or the channel or distributions. We are further enhancing our relationship with top 1,000 distributors across the under the country. Yes. So far as Paris office is concerned, we are not expecting any further expenses to be incurred.

[Swarnabha Mukherjee, analyst]

Understood, sir. Just one clarification, sir the distribution that you mentioned, that is for the flow. Would that be a correct assumption?

[Sandeep Samsi, executive]

For the AUM, but for the flows also, it is very similar.

[Operator]

The next question is from the line of Mohit Mangal from BOB Capital. Sir. The current participant has left the queue. We'll move on to the next question, which is from the line of Lalit Deo from Equirus Securities.

[Lalit Deo, analyst]

First question, like as you mentioned on the yield can you reveal the numbers on the cash and arbitrage and as you mentioned on the debt what are the yields and how much expense improved?

[Vinay Lakhotia, executive]

So cash and arbitrage, which has improved from 9 to 11 basis points and the fixed income from 21 to around 22 basis points.

[Lalit Deo, analyst]

Sure sir. And sir like on the flow side, like -- so while we are taking steps to increase our flows across channels. But the side, on the equity side, we are still seeing some pressure on the reduction side. So could you highlight like what were the gross sales during the quarter in the equity area -- in the equity and hybrid categories?

[Vinay Lakhotia, executive]

So gross sales for FY '20?

[Lalit Deo, analyst]

This quarter.

[Vinay Lakhotia, executive]

Do you want the quarter or FY '24?

[Lalit Deo, analyst]

Quarter.

[Vinay Lakhotia, executive]

Quarter was close to -- our and hybrid fund was INR 281 crores.

[Lalit Deo, analyst]

And so lastly, on the product pipeline, like we have been looking to nonpersonnel product, which any new products which we are looking to launch FY '25?

[Sandeep Samsi, executive]

Sir, we are planning to launch a multi-cap fund during the year, and we are also looking to further innovate on the passively managed space as well as on the thematic funds. So we have, of course, continuous efforts to launch new products as and when the market cycles and timing is right, we will launch new products.

[Operator]

We'll take the next question from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Sir, just firstly, on the yield front, the improvement on the equity and hybrid category, you said it was 5 basis points. I'm correct that on a sequential basis? .

[Imtaiyazur Rahman, executive]

Yes.

[Prayesh Jain, analyst]

So out of that, how much part of that would have come from the B30 because that would have benefited have been only for 1 month, right?

[Vinay Lakhotia, executive]

No, no, no. in that particular yield impacted our margins for 3 quarters. So now since the payout is also not there and accrual is not there. It's a continuous effort of but not possible to give a breakup of how much is because of the commission saving and how much is on account of B30.

[Prayesh Jain, analyst]

Okay. Because until February, you would have paid the commission and it's from March that the commission would not have paid, and that's the reason I was coming from that point that whether the rates that you have mentioned are the exit rates that improved -- so the 5 basis points is on an end-to-end basis or is on an average basis?

[Vinay Lakhotia, executive]

It's an end-to-end.

[Prayesh Jain, analyst]

So this can sustain basically. .

[Vinay Lakhotia, executive]

Yes.

[Prayesh Jain, analyst]

Okay. Got that. Got it. And secondly, sir, there is an improvement in the yield is on the international side as well, right? I mean so facility of the same, could you just help us understand the same?

[Vinay Lakhotia, executive]

Yes, International business, we are investing heavily and in the process of launching few of the fund as well. So we believe that we have international business that yield should actually improve. This is an area we are investing heavily. So we are promoting 2 new products over there, India Innovation Fund as well as a Private Credit Fund. Both these fund has a slightly better margin. So we do improve that the overall revenue as well as the margin number should improve in UTI international as well going forward.

[Prayesh Jain, analyst]

Sir, we've seen very high volatility in this yield internationally. Like, for example, Q4 FY '23, it was 0.57%, it continuously declined until 3Q and now we've seen some improvement. So what was the reason for this continuous decline in now recovery? Is the mix changing? Or what is driving this improvement in yields after 4 quarters of decline?

[Vinay Lakhotia, executive]

There was a slight asset mix changes as well. So during the September quarter, we have witnessed some of the redemption in our flagship funds, which are the category and significant import has come into a fixed income fund. So that kind -- that brought volatility into the yield number. But we are setting very heavily on the equity category of the fund. And going forward, we believe that overall margin number should improve.

[Prayesh Jain, analyst]

Okay. Okay. Okay. And sir, from a standpoint, how should we look at employee expenses for next year?

[Vinay Lakhotia, executive]

So very similar to whatever the growth rate has been there for the current year. Maybe on a stand-alone basis, the increase would be around 2% to 3%. on a consolidated basis, the increase could be slightly higher because we are investing in all 3 lines of business. International, I have already spoken to UTI team also, we are strengthening our team since we are launching 2 or 3 new fund over there. And for UTI RSL we are also expanding our team for growing our private pension business as well as POP business. So on a consolidated basis, the number could be 100, 150 basis points higher than the stand-alone number.

[Prayesh Jain, analyst]

Okay. And last question on the tax rate. Could you guide for FY '25? What would be the tax rate?

[Vinay Lakhotia, executive]

It should be in the range of 22% to 23%.

[Operator]

[Operator Instructions] The next question is from the line of Mohit Mangal from BOB Capital.

[Mohit Mangal, analyst]

Am I audible?

[Kunal Thanvi, analyst]

Yes.

[Operator]

yes, sir, you're audible.

[Mohit Mangal, analyst]

Yes, sir, 2, 3 questions. First, on the dividend, I think you have given a special dividend. So going forward, should we expect the same 55% to 60% dividend payout ratio?

[Imtaiyazur Rahman, executive]

Dividends of our dividend is concerned, this is Rahman. We have a policy that we always pay minimum 50% dividend to our investors. Last year, we have paid down around 66%. So this year, 66% or 67%, we have maintained for the current financial year, and we have given an additional dividend, and we made 100% of our profit we have distributed to our investors. .

[Mohit Mangal, analyst]

All right, sir. Sir, next is in terms of the flow. So I think in the -- I mean, apart from the equity we saw liquid also seeing net outflows in the quarter. So what are the major reasons for that?

[Imtaiyazur Rahman, executive]

Equity fund basically, at the end of the quarter, most of the banks, they basically go for the exit and therefore, there was an outflow. And again, it comes back on the first or second day of the next financial year. It's a quarter-on-quarter problem, which all entrees.

[Mohit Mangal, analyst]

All right. Understood. Yes. So in terms of the , I think we could like -- I mean, INR 1.24-odd crores. So I think any strategy over there if you could increase the life folios, I mean, if any particular strategy. So I think we were around 12.2-odd million last quarter and now we are around 12.4-odd million. So that's basically kind of a stable from the last 2 quarters. Are there any particular strategy if we can increase the life folio, I mean, that would be helpful.

[Sandeep Samsi, executive]

We have to increase our life folio as we mentioned that we have invested in our digital assets. We have also invested in our partnerships, as Mr. Rahman mentioned that we are deepening our relationship with the top 1,000 mutual fund distributors across the country. .

And we are trying to increase our presence of both digitally as well as physically on the ground. So through the SIP flows through the partnerships, we are looking to increase the number of folios that we have. Currently, we have 1.24 crore folio, and we are confident that we'll be able to add more number of SIP portfolios as well as normal in our accounts.

[Operator]

We'll take the next question from the line of Abhijit Sakhare from Kotak Securities.

[Abhijeet Sakhare, analyst]

First question was a clarification on the balance sheet. So what we interest was that there is a movement between September and March from property, plant and equipments to investment property. So if you could just explain that, please?

[Vinay Lakhotia, executive]

So we are owning UTI hour, we have leased out INR 3 crores to NIS. And as the accounting standard, if any of the property is leased out, that needs to be reclassified from building to investment properties. So just a reclassification of assets, the overall property remains the same.

[Abhijeet Sakhare, analyst]

Understood. And sir, second question, going back to yields. If you could just help us like sequentially, what has been the movement in overall equity and hybrid funds. The 5 basis points, is that like quarter end to quarter -- quarter start to quarter end is that the movement?

[Vinay Lakhotia, executive]

Yes, yes. 5 basis point is a movement on a sequential quarter basis.

[Abhijeet Sakhare, analyst]

Understood. And last one is that on the flows, like the general slowdown or outflows, could you just give some color on whether it's like 1 or 2 large funds, which is driving it and whether the rest of the smaller funds are actually seeing some level of inflows or this behavior is more or less spread across all the top 5, 6 funds, something on that will be very helpful.

[Sandeep Samsi, executive]

Yes. So Abhijeet, you see we have good performance, both in our hybrid fund as well as income funds. Also in our passive funds, we have the tracking area, which is the lowest in the industry, and this has helped us to build the traction. In our equity funds, some of our largest teams had a quality growth bias and we are confident about their ability to perform over a full market cycle. Our value-oriented strategies have shown good performance, and we are able to capitalize on the performance in terms of market share for these funds.

We have also fine-tuned our go-to-market strategy for the overall equity funds. As you would know that we have a strong position in beyond 30 cities and we remain for growing our share in these cities. As I already mentioned, we have also revamped our digital assets, and we are getting good traction on these digital assets.

And again, we have plans to launch funds across in the multi-cap fund as well as on the passively managed space as well as thematic funds. So these are all the efforts that we are taking for improving the performance and market share of equity funds.

[Operator]

[Operator Instructions] The next question is from the line of Dipanjan Ghosh from Citi Group.

[Dipanjan Ghosh, analyst]

So firstly, a data keeping question. If you can sell out the ESOP expense for the quarter and year for the stand-alone and consol entity.

Second, more on your equity outflows that you have seen during the quarter and year. If you can give some color on if there is a dominance of any particular channel, particular geography, B30 or customer type, like you're seeing relatively more outflow, some color on the quality of the outflows and also on the fresh gross sales that you are seeing in the equity and hybrid category?

And lastly, if I look at your other expense number given that you'll be launching up 1/3 of one next year, be it multi-cap or on the passive side or also on the thematic side. How should one think of MFO-related expenses in your other expense going into FY '25-'26? Those are my questions.

[Vinay Lakhotia, executive]

So ESOP, I will provide you the full year number. On the AMC, the ESOP cost was around INR 13.14 crores, at a consolidated level is around INR 16.8 crores. And for the next year, as of now, if we don't issue any further ESOP, the next year cost will be INR 4.5 crores on the AMC and roughly around INR 5 crores at a consol level.

As far as MFO is concerned, in terms of thematic or an index fund, we don't foresee much of the expenses on the MFO side because those will be soft launches. The multi-cap fund as and when we launched, there could be some amount of onetime advertisement expenses being charged, but we are cognizant of the cost, and that number will not be that sizable.

[Dipanjan Ghosh, analyst]

Sir, on the quality...

[Sandeep Samsi, executive]

Close, we had seen some redemptions from the banks and the national distributors, but equally in our other products, which are doing well. We are seeing inflows coming from the same channel. So net-net, it is similar.

[Dipanjan Ghosh, analyst]

Right. Sir, just if I can squeeze in one question on the yield part, and this is more of a clarification. If I understand correctly, there was some overestimation of commissions and when the actual -- actual cash flows were compared with estimations, you reported a yield improvement.

So theoretically speaking, I mean, when you start from April 1 or when you look at first quarter of FY '25, it should be on a normalized basis on the correct estimation basis. So should 35 bps or whatever blended yield that you have kind of booked in the stand-alone business for fourth quarter. Is that the right benchmark to start off it?

[Sandeep Samsi, executive]

Yes, the 34 basis point is the right benchmark. And this yield estimation and comparison is being done on a quarterly basis itself. So -- but we need to be cognizant of the fact that no yield expenses can be charged to AMC. So normally, it has to be on a consecrative basis with any upside is there, gets adjusted in quarter 4. But 34 basis points is the right number to start at the beginning of the financial year.

[Operator]

[Operator Instructions] The next question is from the line of Pratham Shah from TD Exports.

[Unknown Analyst]

I had a question regarding the stake sale of PNB, Bank of Baroda and SBI There were some reports that they wanted to sell their stake. So is there any progress on that?

[Imtaiyazur Rahman, executive]

No, we don't know anything about it. We can't offer any comments on this piece. This is their matter. And we, as a management, we have no role to play in this.

[Operator]

The next one is from the line of Ajay Jain from Makrand Invest.

[Unknown Analyst]

Wonderful figure, sir, congratulations on that. While going through to our investor presentation, Sheet #38 that is consolidated statement of profit and loss. SIr, can you please throw some light on net gain on fair value changes because in FY '23, it was INR 99 crores, and FY '24, it is INR 500 crores.

I presume it has something to do with the market valuations of shares or the investments that you made, but can you please let us know because the figure is a huge difference. Going forward, what do you feel of the same? My second question is on sale of services. We have 5% growth right from FY '23 INR 1,131 crores to INR 1,182 crores. Going forward, what do you feel of this?

[Viraj Kacharia, analyst]

So I take a portion on the net gain on fair value changes. So as you are aware, in the investor presentation itself, we have mentioned we have a total consolidated investment of around INR 3,833 crores. Out of that, almost around INR 737 crore is invested into hybrid category funds of UTI, INR 709 crores into equity category and around INR 557 crores is invested into equity yield on UTI International. These are equity-oriented scheme. And as you are aware, the market during the last financial year have given a return in excess of around 29%.

I'm paying for the mid-teen. So because of that, there have been a mark-to-market appreciation, which has significantly increased the fair value changes number. On the management fees, the 5% growth is there, and we are hopeful that with the growth in the AUM, especially on the equity and hybrid category, we should be witnessing a positive growth in the management fees as well during the next financial year of...

[Unknown Analyst]

Do you feel it would be greater than the current 5% growth?

[Imtaiyazur Rahman, executive]

Yes, we believe in that. Yes, we are quite confident.

[Unknown Analyst]

And as I understand, the second fair value changes is basically the market improvement in the investments, equity investments which we've done. Sir, just what you feel of going forward in this particular assignment because this is the major income which we are earning and makes a lot of changes to the profit and loss account. So your views on it going forward, sir.

[Imtaiyazur Rahman, executive]

We can't give any forward-looking views on the market depreciation. We will give you a quarter-on-quarter details when it comes. Please wait for some more quarters.

[Operator]

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

[Imtaiyazur Rahman, executive]

Thank you very much for joining this call. I wish all of you a great financial year, a nice weekend. Thank you so much. Thanks, Sandeep, Vinay, Surojit for granting you. Thank you.

[Sandeep Samsi, executive]

Thank you, everyone.

[Operator]

Thank you, members of the management. Ladies and gentlemen, thank you for joining the call in case of any inquiries, feel free to contact connect with Investor Relations team. Once again, thank you for joining us. You may now disconnect your lines. Thank you.