Ladies and gentlemen, good day, welcome to the Anand Rathi Wealth Limited Q4 and FY 2023 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Feroze Azeez, Deputy CFO, Anand Rathi Wealth Limited. Thank you, over to you, sir. Thank you so much, Madam. Good afternoon. Thank you everyone for joining the earnings conference call for the quarter and year ended 31st March 2023. Along with me, I have Mr. Rakesh Rawal, the CEO, Mr. Jugal Mantri, the Group CFO, Mr. Rajesh Bhutara, the CFO, Mr. Chethan Shenoy, Director and Head Product and Research, Mr. Vishal Sanghavi, Head IR, and SGA, our investor relations advisors. Amidst geopolitical tensions, higher inflation, and higher interest rate environment, we have delivered a strong performance across all our business verticals. In FY 2023, our revenue grew by 31% to INR 558 crores. The profit after tax grew by 33% to INR 169 crores. Our holistic approach has also aided us in achieving a strong AUM growth of 18% year-on-year and reached a number of INR 38,993 crores. During the last year, we've added 1,270 client families, a new record at ARWL. This clearly demonstrates the trust and confidence our clients have in our services. Our total client families as on 31st March 2023 stood at 8,352. On the relationship manager side, we have added 22 RMs on a net basis for the full year. Over the years, Anand Rathi Wealth Limited has believed in providing uncomplicated, holistic, standardized solutions to our clients that have helped us consistently deliver robust performance at Anand Rathi Wealth. For our flagship business, the private wealth vertical, AUM grew at 18% year-on-year. Despite the challenging environment, we have delivered strong performance across verticals. Our net flows for FY 2023 stood at INR 4,896 crores, a growth of 78%, and the net flows of Q4 FY 2023 stood at INR 1,180 crores, growth of 40% from the same period last year. This speaks of value which we have added to our clients. This growth also reflects the effectiveness of developing uncomplicated wealth solutions for our clients, as well as our competency of our team. Our digital wealth vertical is a fintech extension of the company's proposition for the mass affluent segment. Also registered a growth in the AUM of 23% year-on-year to INR 1,151 crores, while the number of clients grew by 9% year-on-year to end at 4,240. Now I request Chetan Chinoy to take us through the Omni business update. Chetan, can you take us through? Thank you, Firoz. Thank you, sir. OFA business is a strategic extension for capturing wealth management landscape to service retail clients through mutual fund distributors by using our technology platform. As on 31st March 2023, OFA has 5,677 mutual fund distributors associated and has assets under administration on this platform of INR 92,174 crores. The board of directors have declared a final dividend of INR 7 per equity share of face value of INR 5 each of the company. That is 140% of face value. Total dividend for financial year 2023 stood at INR 12 per equity share. This includes interim dividend of INR 5 per equity share paid in October 2022. In the last one year post-listing, the company has outperformed its own expectations. We anticipate our long-term commitment to offer the most efficient wealth solutions to our clientele will enable us to achieve 20%-25% growth in the years ahead. Thank you. Now I request, Jugal Mantri-ji, our Group CFO, to take you all through the financial performance of the company. Good afternoon. Thank you, Feroze भाई, and Chethan. Friends, despite short-term volatility, the mid- and long-term outlook for the Indian equity market seems highly promising. We have delivered strong financial performance across all three verticals. Our consolidated revenue for the quarter ended 31st March 2023 stood at INR 147 crores as against INR 115 crores in Q4 FY 2022, registering a growth of 28% YOY, while revenue for financial year 2023 stood at INR 558 crores as compared to INR 425 crores in FY 2022, registering a growth of 31% YOY. Our pro-profit before tax for the quarter stood at INR 59 crores, registering a growth of 35% YOY. Profit before tax for FY 2023 stood at INR 228 crores, registering a growth of 36% year-on-year. Profit before tax margin stood at 40.4% in Q4 FY 2023 and 40.8% in FY 2023. Our profit after tax for the quarter stood at a healthy INR 43 crores, registering a growth of 23% YOY as compared to INR 35 crores in Q4 FY 2022. Profit after tax for FY 2023 registered a growth of 33% YOY and stood at INR 169 crores. Our PAT margin stood at 29.1% in Q4 FY 2023 and 30.2% in FY 2023. Earning per share for Q4 FY 2023 stood at INR 10.3 per share, and for FY 2023 it stood at INR 40.5 per share. Out of EPS of INR 40.5 per share for FY 2023, the company has proposed to pay 30% as total dividend, that is INR 12 per share. Coming to the private wealth vertical for FY 2023, our flagship private wealth vertical's revenue grew by 31% year-on-year, which stood at INR 538 crores, while trail revenue grew by 23% YOY, which stood at INR 182 crores. Profit before tax for FY 2023 stood at INR 226 crores, registering a growth of 36% YOY, while profit before tax margin stood at 42.1%. Profit after tax for FY 2023 stood at INR 168 crores, registering a growth of 34% year-on-year, while profit after tax margin stood at 31.3%. Return on equity of our flagship private wealth vertical as on 31st March 2023 stood at a healthy 38%. With this, we will now open the floor for question and answer. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Lalit Deo from Equirus Securities. Please go ahead. Yeah. Hi, good afternoon, sir. Thanks for the opportunity. Sir, the first question was on the revenue side. Like, within the revenue, we see that the revenue has been driven from the distribution of our MLD products. Just wanted to know, like, during the quarter, like, what kind of a growth is, issuance rate did you do in this quarter? Like both primary as well as secondary on the MLD side. Lalit, before I hand over to Jugalji to give the precise numbers. Since the market in the last quarter, for example, started on first January from INR 18,100- INR 17,300, since the markets have been flat for the full year, is why you may want to say that the revenues have come from the MLD distribution. If you look at it, our net mobilization on the equity mutual fund side, which is what will give us the trail revenues, was INR 900 crores in equity mutual funds, approximately. In the full year, we collected INR 2,400, INR 2,500 crores in equity mutual funds, whereas the industry lost INR 15,000 crores other than the SIP collections. Our net mobilization share in the trail generating business has been significantly more focused than the MLD distribution. Since the markets have been subdued, the revenues seem to be more skewed towards MLD business. My gross mobilizations and net mobilizations have been extremely skewed towards the trail generating business, so as to fulfill the commitment or an indicated commitment over the next few years to have 50/50 as the ratio between upfront and trail. Jugal Ji if I can request you to give some more color to this. Yes. Yes, Mr. Lalit. In Q4 FY 2023, the gross issuance of non-principal protected structured product was INR 1,000 crore compared to INR 984 crore in Q3 FY 2023. If you look at the net number, in fact the redemptions were more because of the maturities. The net number was minus INR 407 crore in non-principal protected structured product for Q4 FY 2023. For the mutual fund, equity mutual fund, the net mobilization was INR 1,004 crore. For debt mutual fund it was INR 213 crore and other products, INR 370 crore. Overall for all the products, the net mobilization was INR 1,180 crore in Q4 FY 2023. Awesome. sir, this, like as you mentioned, this INR 1,000 crore, this includes both primary issuance as well as the secondary issuance or this is just the primary issuance? No, this is INR 1,000 crores is primary. The secondary number is INR 287 crores. Sure, sure. Sir, the second question was on the during the quarter there have been several regulations which have been announced basically the taxation on MLD part. The second one was on the taxation on the debt mutual funds as well. With all these regulations coming up coming into the quarter, how has been the customer behavior towards these products and what are the initial signs that we are reading from the market right now? Yes. Well it's, there are quite a few questions intertwined into one. One is client behavior. See tax change. Regulatory changes which are there for the quarter. First is client behavior has been very, very positive towards Anand Rathi Wealth because we predicted this. Clearly predicted this on pieces of paper and sent notes saying that this tax advantage for principal protected MLDs will cease to exist. Not even may cease to exist, we had said will cease to exist in the next few budgets. That really helped clients not buy even a single principal protected 10% taxation MLD. The problem was, MLDs, a few of those MLDs which got listed because of their principal protected nature were being taxed at 10%. Whereas all the other debt instruments were being taxed at 20%. We never issued any principal protected debt like MLDs. All our MLDs, INR 1,200 which matured, INR 1,700 which are expected to mature, INR 1,600 which are expected to mature, all of them are equity-like, non-principal protected equity-like. Clients could see the merit of for us, for the years we have counseled them not to go for tax advantage as a prime purpose of an instrument's purchase. That helped. Client behavior has become far more positive and we are no more having to answer the same mundane question we've been answering for years, why we don't do listed, rated, principal protected MLDs. Now that question has suddenly vaporized, which was the most commonly asked impediment during a sale. Comes tax efficiency. Again, debt funds have come into the gamut of Section 50AA. They've come under the gamut and again, it again reiterates our stance that if you're taking the risk there's no problem. 35%+ equity allocations in any fund will not be covered under 50AA. That doesn't change too much because our strategy on the debt side, because our clients are intergenerational wealth. We have collected a homogeneous group of clients is why we have 8,400 clients, not 80,000 clients. We have collected homogeneous group of clients who have intergenerational wealth. Debt has a very large, very small role to play in intergenerational wealth. It's a shock absorbent for short-term volatility. We have very small amounts in debt and where we have a low cost, no credit risk, no interest rate risk strategy, so that doesn't get impacted. Regulatory changes have not impacted Anand Rathi Wealth and there are a few more regulatory changes which have come which would have gone unnoticed. There's a PMS regulation change which has come in 2022, December 16th. That's one regulation which has come. AIF regulation which has just come two, three days back. All these don't impact us because we. And there's one more regulation which came during the year during the quarter, was the B30 commission going away. All these don't impact us because we have not used any upfront commissions of AIFs or PMSs or the B30 provisions to build a revenue stream. Does it answer well it, right? Yeah. Yes, sir. Sure, Sure, sir. Actually last question was that like, since like as you mentioned that the global markets have become a little uncertain and like, so like, so in the equity schemes which we generally share with our list of investors, so like have we changed any kind of a strategy over there or like, we have a policy of like, only giving out like 11 equity schemes. Have we made any changes in those schemes? Yes, we have made some changes in the scheme. We do this exercise, a very thorough exercise between Jan, Feb and March every year to see the validity of the schemes we recommend. There are 380 active schemes, out of which we had 11 schemes only. Our purpose of buying an equity scheme is to make sure on an aggregate 11 scheme level, we are able to beat NIFTY by 2%-3% or NSE five hundred by 2%-3%. So it requires immense amount of vigilance. Yes, there are some changes. Now we've launched our new model portfolio which has 14 schemes instead of 11 schemes. We have increased the number of schemes because we analyzed client portfolios transaction-wise, external portfolios which are with competitors. We realized that we win over 90% of the external portfolios, there are some portfolios which beat us. They had more number of schemes. We have increased the number of schemes to 14 schemes. Sure. Thank you, sir. Thanks for the answers. Thank you for your question, sir. Thank you. We have our next question from the line of Sumit Bhatia from MK Ventures. Please go ahead. Yeah. Hi Rakesh, this is Madhu Kela here. My colleague Sumit is also along with me. First of all, congratulations in this environment. I think over the last one year, amid all this volatility, you guys have declared fantastic results. I have, you know, two, three points to make. One, in this overall tax environment, what has happened to debt mutual funds in terms of taxation? What has happened to MLD guidelines in terms of taxation? How do you see this business shaping up over the next 12 months or maybe over the next two, three-year period also? Has it lost some sheen compared to past because of slightly unattractive taxation? I'm saying asset class as a whole. Debt as an asset class, sir. Is that what you asked, Madhu sir? Yeah. MLD, basically. Sir MLD, now they've defined MLD as those which have principal protection. The answer is yes. The INR one and half lakh crore industry, which ARWL had zero share in, that will become absolutely non-lucrative for HNIs. Okay. Okay. We didn't have a share. We were always in the non-principal protected, unlisted, unrated MLDs because they give an equity-like return. Lot of MLDs were only debt with a small little clause. They were practically a bond with some outrageous clause saying that if NIFTY went to zero, I will not give you a return. Right? Those were naam ke waaste MLDs. Those will definitely have an impact. That was almost if I, if I'm right, if I, if my memory serves right, it's about INR 1 lakh, INR 135,000-INR 140,000 crore industry, sir. Sir, do you see that you gaining market share, at least that money which was going in all those MLDs, will this mean that part of that could come to companies like yours who have been selling unlisted MLDs? Yes, Madhu sir. That we are seeing because there's, because this was one thing which was competing with us. That competition has gone away. Out of our 8,400 families, by taking them through logic, we used to convince them that what we are saying is mathematical and logical. Most of our existing clients might not have too much intersection with that INR 1,35,000 crores. But there are a few, right? They might be 10%, 15% of our clients who would have had listed MLDs. They are seeking our tax advice also, sometimes. You're right, we might have some collateral benefit of that industry losing its sheen, sir. Okay. My other question is, of course, what we are hearing that, the entire, expense ratio is being, discussed, at, the regulators that it will come down meaningfully, for the AMCs, right? Whether now it will happen or not. Hello? It will happen or not. Very intently hearing you, sir. Give one minute. Whether it will happen or not happen, we don't know. Supposing, if something like what is being proposed had to happen, how will it impact our business in terms of growth, margins, everything? What is being discussed is pretty sharp. Yes, Madhu sir. There are about 6 points-7 points in the discussion paper which was floated, as per my friends in the industry are concerned. One of them which has got implemented is B30, being abolished. To answer, let me give you a context of how we look at it. We have not used any of the extra benefits, so it doesn't impact us. Why I'd like to say is one thing which was the B30 we have not used. We have not sold one NFO. In spite of knowing several as. several of our companions in the industry sold them, collected 3% in the first year as trail, we said, "No, we will not do an NFO because it doesn't make sense for the client to, in spite of having three AT old funds, buying a new fund." It didn't make sense to us. We have not used B30. We have not used NFOs. We have not used smaller schemes just to increase our AUM. The 11 scheme model portfolio last year, the average scheme size was INR 15,000 crores. In the circular which SEBI has sent to AMC and in turn to asset managers, they've said that let's have a AMC based expense ratio. Even if that gets implemented, then my trail comes down by INR 2 paisa, which I simulated. Out of my trail commission today in the equity mutual fund is 1.11%. That could come down to 1.09%. All AMCs of the same scheme having the same expense ratio was the biggest, hardest hitting item out of the seven items written in that discussion paper, sir. Sudhakar, how will it impact our future business, if these guidelines were to be implemented? One is the trail commission coming down. How will it impact the future earnings? Madhu sir, since dekhiye sir because we have a model portfolio which only earns me 1.11%, if I would have used all these provisions, I would be earning 1.4% trail. It is not in my client's interest, so I am currently in voluntarily earning lesser because I've not used any of the provisions which are there. To come back to your pointed question, Madhu sir, what will be the impact on the trail commissions in the future? I think minimalistic 2%-3% if all of them get implemented. I've not got that 20 paisa advantage is why it is not going away. There will be several distributors who used to use those advantages, they will have an impact for sure. It's an important point for a distribution fraternity because I've not used them in spite of having known of them. Is why the impact could be lesser. In fact, it will improve active funds performance, which will impact us positively because I'm the third largest distributor. Other than aggregators, other than Indian banks, I am the largest equity mutual fund distributor. It will impact me positively because performance alphas. Madhu, my last question is there any particular reason why you guys have not looked at international markets as yet, in terms of, sourcing clients or even, distributing, products for, let's say, Indian investors into international markets? Just wanted to have your perspective. To be very honest, if you do anything which is little more beyond. Because we like to have 20 people, 30 people doing research in international market, if not more. Relationships get a little dampened if you make mistakes. We try and have a kid gloves kind of an approach to our relationships. Rakesh sir would be the best poised to answer this question, sir. Rakesh sir, can I ask you? I know that's why I've been doing the talking. No, no. Madhu, basically the whole thing is objective-led. Hello? Hiji, I'm with you. Yeah. We have to get to 12%-14% in the simplest way possible. Sure. Right? If the simplest way possible means a certain proportion to Indian equities through the simplest mechanism, which is mutual funds and structured products and a little bit of debt, that becomes the, you know, least distance path, right? Anything more complicates it. If I add foreign funds or if I add foreign markets, it's complicating. It doesn't serve the purpose. Complication which does not serve the purpose, we avoid. That's been our strategy right from the beginning. That's the reason why we don't look at it. Plus, I think also Prudhoe said that anything that we do, we want to do deep research in and then take to the customers. If I were to, you know, take U.S. or to take China or any other market, I just don't want to just do a fund just for the sake of it. I want to do it if there is gonna be deep research, which means a lot of resources have to be put into it. Lot of resources putting, not serving a purpose didn't make business sense to us. That's why we didn't do it. My other part of the question, Rakesh, was, you know, obviously NRIs and the people residing abroad is also a large community for Indian markets. Yeah. I am assuming that Anand Rathi doesn't have a significant international presence. Any particular reason why we have not looked at it? No, no. See, we have, we have an office in Dubai, and we've got that now for the last six, seven years. We've got growing attraction there. What we are doing with them is that we are saying, "Hey, bifurcate your monies into two parts. The ones that you want to invest in India, and the one that you want to invest abroad." For the ones that you want to invest in India, we are masters. Instead of being jack of trade for all markets, we are master of one issue. There is, you know, there is a lot of attraction to India over the last, you know, several years. The image of India has changed. A lot of NRIs are showing interest in investing in India. For that portion of the portfolio, which is significant, we have the full value of their money. That's growing very handsomely in Dubai. You know, without having offices in the US, we have several US clients, and I know, I manage a few, whose 90% of them are in India being managed by us. We have about 10% of our book, which is NRIs. We're not ignoring NRIs. Yes, you have a point that, yes, maybe we could be a little more aggressive there. Thank you so much, and all the best. Thank you, Madhu. Thank you for joining us. Thank you. Thank you. We have our next question from the line of Samyak Shah from Sameeksha Capital. Please go ahead. Hello. Congratulations for this good set of numbers. Am I audible? Yes, Samyak. You are. Yes. There is significant amount of increase in other financial assets, as we can see from cash flow. Is it like FD, which is collateral against bank overdraft? If so, for what purpose such high amount of cash has been restricted? Vikas sir, if I can. Hello. Hello. Yes. Yes. Yeah, Mr. Samyak. See, what has happened is that if you recall in the month of February and March, the FDs interest rates have shooted up. What we have done is that we have made fixed deposits of more than 1 year in the month of February and March. As per the balance sheet classification, in case if we are holding fixed deposit in excess of one year, then it has to be shown in other financial assets, which was earlier part of cash and cash equivalent. Actually it is, there is a just movement of fixed deposit in other from cash and cash equivalent to other financial assets. Okay. Got it. My other question is that, can we get to know bifurcation of net inflows as to how much is from existing clients and how much from new clients? New families which we have added. Jugal sir, would you wanna take that one? Mr. Sameer, can you repeat the question? Yes, sure. Can I know the net inflows as to how much net inflow is from existing clients and how much is from our new clients? I think, you see, this sort of classification we don't have about the AUM mobilization from the new clients as well as old clients. Reason being that our existing clients also they keeps on, like, moving from one bucket to another bucket in case if their AUM fall below 50 lakhs, then they get excluded from my active number of clients. Still we'll work out and give it to you, Mr. Sameer. Okay. Thank you. Thank you. We have our next question from the line of Mayank Agarwal from InCred Capital. Please go ahead. Yeah. Thanks for the opportunity, and congrats for good set of numbers. My first question is on RM addition. We have added 16 RM. Now we have a 290 RM. How many of the new addition is from outside and how much is from, you know, the promotion of the AMs to the RMs? Yes. Yeah. My first question. Fine. I'll just give you the split. The net addition is 22, right, Vishalji? Yes. For the full year, the net addition is 22. Okay? You would be also happy to note that last quarter when we declared our result, our regret attrition was zero. This quarter it is 1, that is 0.35%, for this quarter. For some personal reasons, some RMs might leave, but, we've been able to maintain a very, very low regret attrition number. Regret attrition defined as a person who's got more than 40 crores of AUM. After having come to 40 crores of AUM, if somebody left us, it would be called a regret attrition, and that was only one person in the quarter. Coming back to your question, lateral hires from the industry are. 60%, 40% internal. 40% internal and, 60% external. Lateral. Lateral hires. For the last quarter, right, Vishalji? Yes. This is for previous, of credit. Okay. There will be also some, you know, client addition because of that outside hiring also, if I am right. Sorry? The 40% hiring we have done outside, they would also have bring some clients, out of the newly added clients, if I am right. Is that, we should look at or how? Yeah, yeah. There will be. See, when a client, new RM comes, he adds about 10 clients, 12 clients, 14 clients. It's not very easy to move all the clients from the erstwhile organization. It will be very difficult to bifurcate that when he joins in the first three months, four months, how many does he get. Over a period, he tries to reestablish connects with his erstwhile organization's clients. Yes. You're right. Okay. Thanks. I want your perspective on the equity inflows. The industry is witnessing, you know, kind of a neutral inflows for the last four to six months. It could be higher interest rate or, you know, the neutral performance of the market. When you expect the equity inflows to return to the market? See, see, the fact that equity inflows are not there may not be the best judgment. What happens is HNIs use different vehicles, right? Mutual fund has had very low inflows from HNIs. PMSs have had inflows, AIFs have had inflows. Now, AIF also is gonna be starting a direct alternative, direct option. Then again the mix between MF, PMS and AIF in most wealth management outputs is gonna change. Coming back to this year, the total net outflow of HNIs is INR 15,500 crores negative. If you remove the SIP collections for the full year, right? Anand Rathi's number is, till February, was INR 2,400, somewhere thereabouts. We are positive the industry is negative. To come back to your question, pointed question, Mayank, when will this become better? To my mind, it will become better because you've already gone through a one and a half year time correction. You've gone through 1,000 points of price correction. In the same period from October 2021, markets have not moved anywhere. They've added INR 900 of earnings to their books, minus the dividend of course. I think, there has to be the light at the end of the tunnel. That's point one. You would be happy to note how a wealth management outfit can influence a trend in its own set of smaller subset of 8,400 clients. You would see that the last quarter NIFTY was very bad, but our sourcing was the maximum in equity mutual funds. It is one thing to have academic faith that, market. There is It's altogether a different thing to actually do that in action. You would see that in quarters where NIFTY averages lower levels, our net mobilizations increase. That's when client performance comes. Right? So that's something which we take pride in. Like Jugal ji said, the INR 1,000 crores of our total sourcing for the last quarter came in equity mutual funds. Right. Right. Right. Thank you. That was really useful. Best of luck. Thank you. We have our next question from the line of Dipanjan Ghosh from Citi. Please go ahead. Hi. Good afternoon. Hope I'm audible. Yes, you are. Yes, Mr. Ghosh. Just a few questions from my side. First, you know, a lot of the private banks and even some of the boutique wealth managers have been guiding on expanding their presence in the 1 to 10 crore or 1 to 20 crore sort of a segment. More from, let's say, a medium-term, maybe a five-year to seven-year perspective, how do you see the competitive intensity increasing in the segment? Obviously, there is a pie expansion in terms of client penetration or new client acquisition, also there's an aspect of competition increasing from some of these players. Second, I think, from the cost perspective, also over the last few years, we have seen some improvement. If you can give some color on what sort of buffer or headroom do you see on the cost side from a medium-term perspective, where you can see some improvement out there? Also, if you can split your overall expenses between variable and fixed, be it on the employee or overall side? Lastly, one data giving question, if you can quantify the ESOP expense for the quarter and full year? Yes. That's a lot of questions, Mr. Ghosh, so I might just miss any of them. Just you can pull me back into those ones. The first one, you said about just the competitive intensity, right? Yes. Yes. The competitive intensity could is not just about the number of players in the space. It's about number of similar players in the space. What we stand for is being mathematical, not product pushing, right? We have a strategy. We do it very uncomplicated. There is no wealth management outfit which would be able to survive without doing an NFO, without doing a PMS, without doing an AIS for 10 years. We have acclimatized our clients to expect no entertainment, uncomplicated advice, not something new every quarter, right? When you look at it, the industry does direct equity. Clients may not even know their IRR, forget their alpha, right? PMSes, they do. They don't know their post-cost, post-expense alpha and IRR. Quite a few clients don't know. We want to be guiding our clients on the basis of mathematics. And all other peripheral services, right? A guy does direct regular mutual funds with us, not just to remunerate me on mutual funds. He wants to remunerate me for the trust I created, for the tax tax opinions I gave or helped him source. He wants to give me a regular scheme because I made his will. I've registered his will. I'm making codicils on his will. There are several peripheral services. For wealth management outputs to offer these services and do mathematically just a 1% equity mutual fund business, I don't see that will change too much because as of now itself, there are so many players. not the real private bankers want to start in the ultra HNI segment, but we have the INR 5 crore-50 crore segment, which Rakesh chose way back in 2007 as his preferred segment because the DNA of those people is mathematical, professional. They don't like product pushers. They like somebody who can give them professional service. we will traverse that as the industry evolves. that's that. Sure. What was your next question, Ghosh sir? Second was on the cost part, whether you see some headroom from improvement and what is the quantum, and also if you can split between variable and fixed? Yeah. Yeah. Jugal sir? Yeah. Yeah, Mr. Dipanjan. If you, if you look at the overall cost structure which we have, out of INR 100 revenue which we earn, see our PBT margin is about, say, 42.5%. Okay? Rest about 57.5%, that constitute my total cost. Out of that, if you will split it, that the operating cost, including employee cost, that is, say, about 46%-47%, and remaining 10% is other incidental cost, which is other operating, business promotion, rentals, and all these things. Even in case of employee, the split is between the revenue-generating employee as well as the product operation or non-revenue generating employee setup is, say, between 2/3 and 1/3. What we can say as far as concerned with the increase in the volume of business, that the one-third cost, we are still capacitized to handle, say, another 50% volume of what we have been doing right now. That will be a semi-variable cost. The revenue-generating employee which constitute that is directly variable cost. If we Overall, as long as we achieve, say, 42% and half to, say, 43% or 42% of the gross margin or the PBT margin, I think that is we are very close to the optimal, let's say, margin level. The further scope of improving it is limited. That will be next driven by the volume and the commensurate increase in the cost. Got it. Does this answer your question, Mr. Dipanjan? Yes, yes. Sure. If you can just quantify the ESOP expense number? That is very insignificant. I think in this quarter it was about 1.5 crore INR. That was the ESOP expenses. There is no other, there are no other ESOPs which are outstanding. In fact, that expenditure will also go away going forward. If you can just follow up on one of the points you mentioned in a previous answer. You mentioned that, you know, if the industry were to move to an company level TER from a scheme level TER, then the impact will be around 2 basis points going down to 1.09% from 1.11%. If you can give some color on how you kind of arrived at this calculation or what are the inputs that you kind of baked in. Yeah. What we did, Rohan. See every asset management company, we had nine asset management companies, 11 schemes. Okay? If every asset management company average AUM of each of the schemes became their actual TER fixation number. For example, if I take the largest AMC, the biggest scheme could be 30,000 crores, right? If all of them were pegged to 30,000 crores, what would be the actual expense chargeable on the scheme which I am selling, right? I am selling, okay, let me not give you examples of asset management companies. If I would be selling a 10,000 crore scheme in a asset management company which average AUM is 20,000 crores, will I get impacted there in that asset management company? I'll get impacted. I sell a very, very large scheme also in my 11 schemes, which you would have heard of me speaking on TV or somewhere, where you would have INR 50,000 crores, INR 40,000 crores in that scheme. In that AMC, I will not get impacted. We went AMC by AMC trying to re-peg the TER permissible as per SEBI slabs on the average and the highest scheme of that corresponding asset management company. Did the math, the drop was 3%-4%. If you made some modifications to the model portfolio, the new model portfolio said 2%-3%. That's all. Karan, when you say average AUM, basically, overall sum of AUMs divided by number of schemes, right? I mean. See, the one of the interpretation says that that's not the case. I've also simulated it to the largest scheme. If all the smaller schemes of an asset management company now get charged only on the basis of the largest scheme. There is some degree of interpretation there. Got it. May not be the right because it's not become a rule and I think, that's put at bay, in my opinion, so far. When it happens, we have to try and navigate that. I don't think. If my model portfolio was so designed to get a 1.3% trail, which I could have very easily, the average AUM of my 11 schemes is INR 15,000. Because I am a client-centric organization, I will choose a scheme not because of a INR 2,000 crores scheme could give me more commission. The average scheme size being INR 15,800 itself implies that I didn't use the smaller schemes to bring my revenues up. If I would have done that, I would have been at a 1.4% trail. Would I come back after this regulatory change to 1.1%? I could have enjoyed that 0.2%, 0.3% more for some period of time, very well knowing it will go away. I've not used that. Got it. Okay. Okay. Does it answer? No. Sure, sure it does. I think, Thanks for the clarifications and all the best. Thank you, sir, for your question. Thank you. We have our next question from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead. Hey. Hi. One question, just a broad question, on how we operate. Just some perspectives on, what's been the level of acceptance or what are your broad thoughts around, moving towards a advisory based or a fee based model, in terms of advising our client base? Fee-based model, 2013 is when advisory regulation was introduced. There are about 10 circulars which have been published after that, circulars and discussion papers. We have not had to change our business model. We have chosen distribution. We will remain distribution till advisory. All products need to be on direct. Now, after 10 years of mutual fund going on direct, two days back or three days back, you read that AIFs are also gonna have a direct option. A client portfolio has several products insurance, AIFs, PMSs, mutual funds. Only mutual fund had a direct option. PMSs didn't have a direct option. So that's why we chose a distribution model. 5 years from now, 10 years from now if all financial instruments could come on direct, is when somebody can choose to go the advisory model or the distribution model and then give unbiased advice, right? That's the reason. Anyway, the advisory licenses have been surrendered by all wealth management outfits in October 2020. This is something. Now PMS platforms get used for charging a fee. All most of our companions in the industry surrendered their advisory license. If you Googled it, you'll find it. Does it answer, sir? Yeah. Got it. Thanks a lot. Thank you. Ladies and gentlemen, due to time constraints, we request you to restrict your question to one. We have our next question from the line of Varun Pattani from quant Mutual Fund. Please go ahead. Yeah. Hi, congratulations on a great set of numbers. My question was on selection of, you know, schemes. You mentioned you have 11 schemes and you might increase a few more schemes now. What sort of criteria except apart from maybe AUM size or something else, what criteria do you look at? Because most of the industry practice is looking at historical numbers like returns or Sharpe ratios or something like that. As a customer or as a client, how do you explain it to them why you have gone for a particular mutual fund scheme? Varun, I can sometimes offline take you through the presentation from a client standpoint, but I'll just tell you in a nutshell. Firstly, we tell the client that don't evaluate each scheme independently. You have to evaluate the full portfolio. I don't take a mandate to get you the best 11 schemes. The portfolio, you will always have two, three ones. Two, three of those schemes out of the 11, 12 you choose, which will not do well. That's an expectation setting. Otherwise, the client is always gonna get into individual schemes and it'll be rest assured there will be two, three of them which will underperform, and he will miss the woods for the trees. Point 1. Point 2, how do we choose it? We ran a regression model on 104 variables to check the correlation with as a lead indicator. We identified some 11 variables which have a significant correlation between the past variable and the future performance. What are those 104 variables? It's a laundry list of them, not those conventional sharp players only. There are several other variables. We check the correlations of them, and then we use regression to put-fit the co-coefficients of those differential equations. That is the statistical method. The second is we try and get into the scheme stocks in each of those portfolios, and we use our research to find out the overall basket's future potential. Just like most analysts give a target price for a stock, a basket of stocks also we try and put rigorous effort to find out which is the portfolio which has the maximum headroom for growth and in turn price movement. That's the second. Third, we do is we try and see, we rank our fund managers. The 152 fund managers are ranked in the chronological order of their decision-making capability, which we numerically measure using a proprietary formula. I don't wanna give that all on a call. Yeah, that's these are the three steps. Then doing all this just to make sure that we are able to beat NIFTY by 2%-3%. Nine and a half years we have run a model portfolio. Ever since direct came, we said we will have to generate alpha and create our relevance. That's when we will be able to sustain a regular business for years to come, or if not decades. In the 9.5 years, the audited performance of our model portfolio of 38 exits and 36 entries in the portfolio has resulted in 2.23% alpha over NIFTY compounded for the last 9.5 years, is the outcome of our statistical evolving mathematical model for a choice. Thank you. Sorry for the monologue. We require- Varun, does it answer at least, conceptually? Yes. Yes, it does. Thank you. Thank you. We have our next question from the line of Aejas Lakhani from Unifi Capital. Please go ahead. Yeah. Hi. Thanks for the chance. Just one question that, you know, from the current revenues in the PPD, the way you report it, out of your INR 141, INR 47 is trails, that's clear. The balance INR 95, how much of it comes from the up-fronting of the MLDs? Could you quantify that? That's just a query I have. The second one. Actually, if you could quantify this, if it's possible. Yes, yes. Surely possible. Jugal sir, if you can say that. A reasonable portion of that will be MLD, primary, secondary, and some broking income, some things which are generally there. Yeah. Out of that, like 91 or 91 and half is from the MLD and rest is from other trails. Perfect. Feroze, you mentioned a couple of times that, you know, your growth is, you know, in the MF has, you know, been INR 2,000 ballpark crores and the industry has had minus INR 15,000. Could you just tell me what is exactly driving that? What do you think are the growth drivers for that in FY 2023, 2024 and 2025? Measurement is driving that. If a client came to me or if we went to a client, we try and find out transaction-wise alphas of his over NIFTY. Most distributors don't give this number. On a specific day. Let's assume, few days back, I just met a large client who had done 426 entries into mutual funds and about 121 exits into mutual funds over the last four years. I take the transaction information, put that on an Excel sheet, compute if he bought and sold NIFTY on those specific dates, would he be richer or poorer? If he is poorer, he has underperformed NIFTY, and he doesn't even know. Most people don't even have the exact transaction-wide alpha. We analyzed last five months. We analyzed 239 external portfolios, transaction-wise. no approximation, because NIFTY moves 1% every day. If you have to measure alpha, you have to measure it on the same day if I bought and sold NIFTY. Out of the 239, about 170 of them didn't outperform NIFTY in spite of being in active funds through other distributors. 219 of them couldn't beat my model portfolio. 20 of them have beaten my model portfolio. I learn from the people who beat me. The 219 clients who underperformed my model portfolio on a transaction-by-transaction basis, that's the crux. I go to them and say, "Sir, you may go direct. You might think that you have saved some cost, but your revenue has dropped far more than your cost. That's why you've underperformed NIFTY by 3% in spite of saving half a% or 1% on cost. I am able to move even a direct client. Large direct clients are moving to regular. Measurement, which we started lately, mathematically exact same precise measurements is helping us establish that we are great distributors, rather than in English, but in numbers. Thank you. I request you to come back in the queue for further questions. We have our next question from the line of Varshil Shah from Envision Capital. Please go ahead. Yes, sir. Thank you for taking my question. Just from a reporting perspective, would it be better if, you know, you could report maybe some average AUM for the quarter? Because, you know, it'd make it easier for us to calculate yields. I mean, surely internally we do that exercise, right? As a class wise. Great suggestion, sir. Okay. On the MLDs, so we are completely unimpacted by any regulation, taxation change, right? Regime. Because they're non-principal protected. In our belief we are positively impacted by that change because that's what we called out saying this will happen. From a taxation standpoint, the answer is yes, we don't get impacted. That belief gets solidified because debt funds with 35% equity also don't get impacted. The Section 50A basically says if you're taking the risk, no problem. If you're not taking the risk, please don't take indexation and long-term capital gain benefits. That's why debt funds with more than 35% in equity are exempt from The Section 50A. Does it answer? Yes. Thank you for taking my question. All our products are risked. They can also lose full capital if NIFTY becomes zero. They're more equity-like. Thank you. Thank you. We have our next question from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yeah. Hi, sir. Thank you for taking my question. Just a small one here on the NBFC that's backing the structured products. Just I understand it's, you know, into G-Secs, derivatives and a small amount of loans. Just want to understand what's the yield on the loans, loan book there. Jugal ji, you may be able to answer this one, the yield on the loan book. That is a question related to NBFC, but, I'm sure that on the NBFC front, whatever lending which has been done, the average yield which they are earning is about 11.5% for the loan against sales portfolio and for mortgage and construction finance book, the average yield is in excess of 13%. Oh, 13%? Yes. Right. Sir, second question would be on what would be the average age of the clients that, the 3,500 clients, what would be the average age? Pallavi, sorry. Average age of? Of the clients. Yeah, of your client. The average age I can't tell you, but I'll tell you one number. 63% of the clients are finished more than three years. 37% are less than three years. Right. Okay. In our belief when a person goes through one cycle of three years, then he's a mature relationship with us. Right. No, I was asking is, you know, the higher. Okay. Okay. You're not speaking of the vintage with us, you are speaking about the age. Okay. The age of the client. 50 years, 20 years? Yeah. No, no. Sorry. 50 years, 60 years. Yeah. The actual age, right? That's what you're asking. Actual age. Yes. Okay. I'm so sorry. I misunderstood you. I thought the vintage with us is what you were looking for. If you could tell me how many of them would be, you know, higher than 60 years old? Okay. Rakesh Sir, you wanna take that to break the monotony of my voice? I don't have a precise number, but my experience says that it'll be close to about 40% would be higher than 50 years, 55 years. Right. That's why I was just relating that the debt funds that are going to be, you know, becoming more unattractive in the whole scheme of things. Do you see money then shifting or Would you be looking at within your allocation shifting more clients to equity and or, you know, yeah? That's what I found is that people with 50 years, 55 years, 60 years have the same aspiration to do well and earn 12%, 14% return as maybe with a guy of 30 years of age. This is a misnomer that when you are 60 years, you are relegated to a old age near death bucket. You know, there's a lot of life still left. I'm 67 years. You know, we are, we're very comfortable with equity, unlike the perception. I see a lot of young people put money in deposits. Hello? Yes. Yes. Yeah. I mean, but money shifting to FD, it's just like you have put, you know, your money into an FD, the company has, right? You know, but industry-wide there's a shift expected from debt funds to. No, no, I'm looking. I'm just saying. Generational. Sorry. Sorry, sir. You were speaking. I didn't hear you. I'm sorry. Please go ahead, sir. I'm basically saying that if a person has a 12%-14% aspiration, any client, whether 60 years, 65 years, 50 years, 80 years, then there is a mechanism to do that which involves a certain degree of equity. It's not about the age, it is about what objective that person has. The point I was raising was that it doesn't make sense to have a 6%, 7% kind of objective when you have inflation of 5%, 6%. That's why most people or many people have chosen 12%-14% which is... They get comfort over it, you know, over time in equity. Age profile, at least in my experience, hasn't doesn't have a correlation to what kind of equity exposure they have. I don't know if that answers it. It does. At least my experience tells me that it doesn't have a correlation. Yes. Suraj, you can add to that. Right. That was very useful, sir. Thank you. I'd like to add to that, Pallavi. Yeah. What happens is with age, earning potential reduces. A person who's not financial free. If the present value of all the HNI's goals is less than his current net worth, then he's attained financial freedom. If he has attained financial freedom, then he has intergenerational money. If I'm 80 years and I'm not gonna be using INR 35 crores, for example, it is gonna be dependent on who is the Karta. If I'm electee, I'm 80 years, and this money is in the trust of a benefit of my three grandchildren who are 18 years each. Will my risk appetite be dictating the allocation or the 18-year-olds who are actually the beneficiary of this money? What do you think, Pallavi? Yes, I got my answer. Right. When we look at this perception, it is coming because 99% of India is living hand-to-mouth. Right. They are not able to fulfill the goals of their lifetime. Right. We have collected a homogeneous group of those guys who if they want to achieve all their goals, they will still be left with money. Right. That's why Rakesh sir is only implying return objective, not retirement objective. He's saying 12%- 14%. He's not saying retirement. Right. Right. You understand what's the difference between ARWL and 99% of India is operating with the same mentality which you said because Right. I got. Thank you so much, sir. Thank you. Thank you. We have our next question from the line of Prayesh Jain from Motilal Oswal. Please go ahead. Yeah, hi. Firstly, a question on the client addition trajectory that we're seeing. It's kind of on the weaker side when we compare it what you have been doing in the past. Is there... Also I see that, you know, generally in, whatever numbers, reported numbers we have, even in last year's Q4, that number used to be on the lower side. First of all, is there a seasonal trend in terms of client acquisition trajectory wherein you kind of, get into some slowdown or that sense? No. Prayesh, if you look at client addition, the number which you would be looking at is net. Mm. What happens is if a client's market value falls below a certain threshold, we stop counting him as a client. Okay. When markets fall, we have some degree of outflow, not that the client has gone away, right? Mm-hmm. Client mark to market has brought him beyond the threshold which we like to see. If you look at gross addition, it will give you a true picture. Let me give you the gross addition. Mm. In the first half of the last financial year, we had 1,230 gross additions. Okay. In the second half we had marginally lower, 1,070 gross additions. Okay. Okay. The market on March 31st closed significantly lower. Mm-hmm. Right? Than the December number of 18,100, some of them would have slipped lower. Okay. The beauty is, of course, there is a 5%, 10% lower in the second half than the first half. The quality of addition, the client who started in the first half gave us INR 91 lakhs average to begin with. Mm-hmm. The client who gave us money in the second half started with INR 1.45 crores as an average. Okay. As we have become a listed entity, we're getting popular, we're becoming more trustworthy because there's a perception attached to a listed company of governance and transparency. Mm. People are ready to cut bigger and bigger checks as we progress. It's the quality of acquisition has improved. Marginally, you are right. In the second half, there was a marginal drift relative to the previous half. Mm. If you compare it to the previous year, we've had a gross addition increase significantly. Okay. Just a question on the employee cost. You know, how do you account for the variable cost? It's on a quarterly basis, you forecast for the full year and then approximate during the year. Do you account it in one particular quarter? How do you do that? Jugal ji, if you... Yeah. I can understand the problem he's facing. See, the incentive, the larger portion of the incentive is accounted on a quarterly basis. Okay. Okay? There are certain incentives which are like add-on incentive linked to the achievement of certain threshold limit. Okay? Mm. We come to know in the last quarter only that whether every any individual RM who has crossed a particular threshold and because of this there is some incremental incentive which is getting accruing to him over and above the incentive which has been provided for. Mm. That is why when we are finalizing the annual accounts, the assessment of the incremental accrual to any employee on account of incentive that gets computed in the last quarter. That is why you will see that in fact the employee cost for the Q4 is higher by, say, about INR 5 and half crore in Q4. That is on account of that incremental incentive. You can say that largely about 90%-95% of the incentive that gets computed and accounted in respective quarter and the remaining 5%-10% of the incentive, which is add-on, that gets computed and accounted in the final quarter. Thank you. I would now like to hand the conference over to management for closing comments. Over to you. Jugal ji. Yes, please. I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information or clarification, kindly get in touch with our IR head, Mr. Vishal Sanghavi or CFO, Mr. Rajesh Bhutra or Strategic Growth Advisors or investor relation advisors. Thank you very much. Thank you. On behalf of Anand Rathi Wealth Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.