Ladies and gentlemen, good day and welcome to Q3 FY23 earnings conference call of HDFC Asset Management Company Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. From the management team, we have Mr. Navneet Munot, Mr. Naozad Sirwalla, and Mr. Simal Kanuga. I now hand the call over to Mr. Simal Kanuga who will give us a brief, following which we will proceed with the Q&A session. Thank you, and over to you, sir. Yeah. Thank you. Thank you very much, good evening, everyone. Our results for the quarter along with the business update presentation is available on our website as well as on website of exchanges. Start with a quick overview on the industry. The industry crossed the milestone of INR 40 trillion, closed the quarter with AUM of INR 339.9 trillion and equity AUM of INR 20.1 trillion. Net new equity flows during the quarter summed up to INR 205 billion, materially lower than what we have seen in previous few quarters. The index fund number reported includes both equity and debt index funds. We have excluded debt index fund flows adding up to INR 177 billion from index fund number and have arrived at INR 205 billion. The comparable number for quarter ending September 2022 and June 2022 were approximately INR 346 billion and INR 642 billion. Net flows in debt index fund for September and June quarter are estimated as difference in AUM of debt index fund at the end of the quarter versus beginning of the quarter, as large part of this growth is through inflows. We continue to observe a negative correlation between flows and markets in the short term. Rapidly rising market tends to see muted gross flows and increased redemptions and vice versa. Debt funds continue to witness outflows. During the quarter, debt funds for the industry experienced an outflow of INR 152 billion. The rate of outflows decreased from INR 293 billion in quarter ended September 2022. We should ideally evaluate flows into debt funds along with flows in debt index funds and debt ETFs. For the current quarter, flows into debt funds, including flows into debt index funds and debt ETFs, the number is positive INR 103 billion. Liquid funds for the quarter saw net outflow of INR 12 billion as against net inflow of INR 191 billion for the quarter ended September 2022. Others as a category, which includes ETFs, arbitrage and fund of funds investing overseas, saw inflows of INR 100 billion. Individual flows for the industry crossed INR 140 million mark, and individual investors contributed 57.8% to industry's monthly average AUM for December 2022. Inflows through SIPs continued on their upward trajectory to be at INR 135.73 billion for the month of December 2022. The number for September 2022 was INR 129.76 billion. Also, the total number of outstanding SIP accounts for the industry crossed 60 million mark during the quarter. Now we are moving to us. At the end of quarter December 2022, our total AUMs stood at INR 4,481 billion with a market share of 11.2%. Our market share excluding ETFs on quarterly average AUM basis stood at 12.5% and on closing AUM basis at 12.7%. We closed the quarter with an actively managed equity-oriented AUM at INR 2,314 billion with a market share of 11.8%. On debt, our market share for the quarter end stood at 13.5%, while for liquid it was 14.9%. Our unique investors grew to 6.3 million in current quarter as compared to 6.1 million for quarter ended September 2022. Inflows through systematic transactions continue to remain robust as we processed 4.13 million transactions totaling to INR 15.7 billion in month of December 2022 versus 3.91 million transactions totaling to INR 14.3 billion in the month of September 2022. Our SIP book commitment for more than 10 years stands tall at 77%, and our SIP AUM as of 31st December 2022 stood at INR 848 billion. Our asset mix further tilted towards equity. Contribution of equity-oriented assets to our closing AUM for the quarter ended December 2022 stood at 54.5%. Before we move to financials, a quick update on new launches and our subsidiary in GIFT City. We continued on our journey of expanding our product range. During the quarter, we launched the thematic fund, that is HDFC Business Cycle Fund. The fund saw healthy interest both from distribution partners and investors. We got over 110,000 applications, and a AUM of INR 23.4 billion during the NFO. We also launched multiple debt index funds. For our wholly-owned subsidiary, that is HDFC AMC International IFSC Limited in GIFT City, we have onboarded two experienced and eminent independent directors. We have gotten Mr. Shyamak Tata, ex-chairman of Deloitte India, and Mr. Vijay Karnani, ex-Co-Chief Executive Officer of Goldman Sachs India Operations and Head of Securities Division. The subsidiary in GIFT City is aimed at targeting India-focused global capital along with targeting a pie of LRS capital flowing out of India. We have identified principal officer and have also identified one more resource for our GIFT City company. We'll keep you posted as we progress further on this. The quick update on financials. For the first nine months of the current financial year, we have reported total revenue of INR 18,448 million, and our operating revenue increased by 2% year-on-year. We reported operating profit of INR 11,600 million versus INR 11,595 million for nine months of last fiscal. Profit after tax of INR 10,478 million as compared to INR 10,496 million last year. In terms of quarterly numbers, revenue from operations increased by 2%, while profit after tax reported an increase of 3% on YoY basis. Our operating profit margin as a basis point of AUM stood at 36 basis points for nine months ended December 2022, with operating revenue margin at 50 basis points. That is of AUM. I will take a pause there. Thank you very much, everyone. Navneet and Naozad are very much here to take questions, if any. Nirav, we can start lining up the queue. Thank you very much. We will now begin the Q&A 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. Participants, you may press star and one to ask a question. The first question is from the line of Kunal Thanvi from BanyanTree Advisors. Please go ahead. Hi. Thanks for the opportunity. I had three questions. One was on the debt AUM side. We continue to see, you know, outflow both for the industry and for us. Great if you can, you know, take us through what's happening there, like, with the interest, like, you know, with the yields improvement, like, shouldn't we, you know, start seeing some inflows from, you know, lower yielding assets to the debt side? That is question number one. Second was on our market share. Like if you look at the month of December, there was a sharp improvement. Like, is it because of the launch of the Business Cycle Fund or it is like mixture of both the improvement in the performance and usual inflow in the existing schemes? Third, was on, you know, if you look at, for us, from 2018, the operating profits are kind of, you know, stagnant. Like, and now from here on, you know, what could be the levers for the improvement in the profit both for, you know, HDFC AMC, because like earlier the challenge was the market share. Now we are kind of seeing some green shoot in terms of improvement in the market share. Now from here on, you know, how do we look at the profit growth levers for HDFC AMC? Yeah, these are my three questions. Sure. I think the first question was on the debt, inflows, debt outflows from the market as a whole. I think Simal mentioned earlier that debt funds have witnessed outflows and I think the overall outflows were INR 152 billion. The rate of outflows has come down from the September quarter. Now we also have to see the overall debt fund flows along with the flows into the debt index fund and the debt ETFs. If we adjust for that, including flows into the debt index fund and debt ETFs, they saw a net inflow of INR 103 billion. You're right. Overall, I think with interest rates have been inching up over the last several quarters and given the pressure from the competing instruments like deposit rates have gone up, there has been pressure on the overall debt flows. Going forward, I mean, there could be factors which could be favorably placed for the overall fixed income market. I think CPI has eased from the peak and is likely to ease further in view of softening momentum, lower input price pressure and correction in international commodity prices. I think overall most of the major central banks, including RBI, seem to be close to their peak policy rates in our view. With that, over a period of time, if the yields remain range-bound with a slight downward bias. As and when the downward bias starts, there's a possibility investors come back into the longer-dated debt funds also. Your second question was on the flows, right? Equity market share. The overall equity market share and all. You said that whether Business Cycle NFO has helped. Of course, Business Cycle NFO has helped. It was received very well by our distribution partners as well as our investors. Flows have been good in all the other products as well. I think a strong performance across categories and I would add that vindication of our stance on portfolio construct is getting well recognized both by our distribution partners as well as clients, and this should further enhance marketability of our products. I think a top-tier performance coupled with new product launches, expanding our product offering both on the active side as well as passive side, significantly enhanced marketing and communication efforts, further deepening of engagement with our distribution partners, strengthen the digital platform. I think all of this should help us further. And the- The last question from the margin, how they are progressing on that. Operating profit has been stagnant. Yeah. I think last couple of quarters we mentioned about that as you are aware, like close to INR 5,000 crores of AUM multiple of every INR 5,000 crores, does dilute overall TER by 2-3 basis points. During this quarter, we saw three of our large funds, Balanced Advantage, Mid-Cap Opportunities, and Flexi Cap, crossing that hurdle. These three funds are like nearly half of our overall AUM. We do tend to rationalize commissions on new flows into the funds, so these three funds are like nearly half of our overall AUM. We do tend to rationalize commissions on new three funds are like nearly half of our overall AUM. We do tend to rationalize commissions on new flows into the funds. That impact will be visible only over a period of time. I must add this, that it is neither practical nor prudent to keep adjusting book commissions based on this AUM change. Secondly, the commission that we pay on flows is higher than that of book. I think this is a point we have repeated several times. Yes, there is dilution. The pace of this dilution was rapid in the last financial year. As you would remember, we mentioned earlier that gross flows as percentage of beginning of the year AUM was 45%, approx, approximate. In the current year, the same is somewhere in early 20s. I've mentioned this in past and will want to reiterate that our margins over long term will be determined by the asset mix coupled with flows and churn. I belong to the school of thought that states that volumes will more than compensate for loss in margins. Sure, sure. Just two follow-ups. One on the, you know, market share, like one of the new launch of products. Unlike the industry which was, you know, in 2020 when we saw a lot of NFOs coming in and there were a lot of commission pressure for the industry. When we are launching a product at this point of time when the interest is not as high as, say, it was in 2021, does it also mean that our commissions are not as, you know, bad as, say, that they were in, say, 2021? Any sense on, you know, the intensity of the distribution commission for the new products? As we've been stating for past couple of quarters, things are getting better on this front. Let me illustrate through a data point. The TER of our recently concluded Business Cycle Fund NFO came to around 55, 56 basis points. Comparable numbers, say, for our Multi-Cap Fund, which we launched in December of 2021, was approximately 40 basis points. That number even then was higher than most of the peer funds launched during that period. I'm of the opinion that this is still well below our desired TER, keeping in perspective the kind of cost and other investments expected out of top-tier asset management companies like us. I think we also need to keep in mind, actually a low direct TER, which is due to high commissions, hurts distribution fraternity in medium to longer term more than anyone else. Then I mention this point to all our distribution partners. Customers may opt for direct plan if the difference is materially large, and most of the distribution partners do understand and appreciate the same. I would believe that it'll fall in balance over the next few quarters. Sure. Got it. Got it. When we, you know, talk about, you know, like you did, pretty good on the margin that is the revenue got impacted- No, sorry to interrupt you. Your voice is breaking. May I request you to come in a better reception area, please? Sure, sure. Is it better now? Slightly better. Basically, you know, my point on the fact that, you know, our margins have kind of now stabilized and over the period of time they should improve with the equity mix getting better. My question was, you know, in apart from, you know, margins being stable, do we also see any levers on the cost side, which can help us grow our profits faster than our, you know, AUM? I think as I said, as the asset mix keeps improving also depends on the flows, in NFOs versus flows in the existing funds. I think some of those will determine the operating revenue side. I think as of now in last few quarters, we have seen increased spending on business promotion, marketing, and the digital and tech capabilities. Once that stabilizes, we assume that there would be potential for us to have better picture on that. Sure. Thank you so much, and all the very best. I'll get back to you. Thanks. Thank you. Next question is from the line of Lalit Deo from Equirus Securities. Please go ahead. Good evening, sir. Thank you for the opportunity. Just I have two to three questions. Firstly. Sorry to interrupt you. would like to inform you that your voice is coming little muffled. Can I request you to speak through the handset? Yeah. Hello, is this better? Yes, much better, sir. Thank you. Yeah. I just wanted to ask, on the AUM mix. Currently like, we have about like 53%-54% of our AUM coming from the equity side. Just wanted to understand, like from a medium-term perspective, like how much, where could this share go? Because increasingly in the industry there's a rise in share of the passive AUM. Just wanted to understand on this front, like how do we see this going ahead? One would assume that given the SIP book and given a huge under-penetration of equity products in household balance sheets, and plus the mark-to-market would be much faster in equity compared to debt. Logically speaking, equity should grow faster than the debt AUM. Having said that, I must mention this. Total mutual fund industry debt AUM was around INR 10 lakh crore when bank deposits reached INR 100 lakh crore levels some time I remember in 2016 or so. Since then, the debt AUM of the industry has grown to around INR 14 lakh crore, while the bank deposits have grown from INR 100 lakh to INR 170 lakh crore. Debt AUM as a percentage of bank deposits has actually come down. There is a lot of potential even on the fixed income side. Given our brand, our long-term track record, our product range, our long, I mean, the our processes, et cetera, I think there's a lot of potential for us to grow on the fixed income side as well. I mean, look at the number of folios on the fixed income in industry. Out of the 14 crore folios, less than 6% are in fixed income and liquid funds. There's tremendous opportunity on that side as well. Our idea would be to participate in the growth of each and every segment. Having said that, as I said, I mean, if I think statistically over a period of time, equity should I mean, the equity proportion within the AUM should increase faster. Sure, sir. Sir, like, on the flow side, so in this quarter we have seen a sharp increase in our SIP flow market share. Could you also indicate, like, how is the market share trending, like, qualitatively in terms of, like, the lump sum gross flows and whether how is it going in terms of redemptions? SIPs now account for a much larger share of the overall flows. I mean, if you see the flows in the last quarter that Simal mentioned, and you look at the SIP monthly number of last three months, I mean, they are accounting for bulk of the overall flows as the flows, non-SIP flows have slowed down. For us, I think, over the last couple of quarters, we have made good progress in building our SIP book. I think we have been one of the fund houses which have been a pioneer on that front. We were one of the early ones to as a proponent of the power of long-term compounding and SIPs. As our performance has improved across all categories and with, you know, the higher engagement with our distribution partners and all the other effort that I mentioned earlier, including the new product launches or improvement in our digital platform. In fact, the transition from customer service to customer delight, that we've been talking about over the last few quarters, all of them are helping us in growing faster on the SIP book as well. That's been one of the major focus area for HDFC, and she's always been, and then I think even the next several quarters, years, that will always remain one of the focus area to keep building our SIP book. Sure, sir. Sir, last question on the other OpEx. There seems to be some pickup in the other OpEx in this quarter. How do you see this number going ahead for like FY in 4Q and also for FY24? Naozad, you take it? Yeah. Hi. I think the increase in other expenses are partly attributed to expenses that we incur for our NFO, you know, driving user experience by refreshing our digital assets. Some expenses through a set up of our subsidiary in GIF, new schemes in factor funds, et cetera. IT infrastructure we've been discussing. There is some incremental CSR, et cetera. If you take a view of the expenses CAGR over three years, excluding CSR, it's about 7 -odd percent. Over a three-year view considering there was a COVID year in between, that's where the expense increase is. I think going forward, some of the investments, as you said, will continue on the digital front and on the IT infrastructure, where we continue to invest. Sure, sir. Thank you, sir. Thank you. Next question is from the line of Mohit Surana from CLSA India. Please go ahead. Yeah. Hi, sir. Thanks for taking my questions. First is that, I just wanted to get a sense of when, let's say HDFC Bank becomes your parent, you know, what kind of synergies do you expect to derive from that? You know, once the merger is complete, do you expect your bancassurance channel to grow faster than your overall AUMs? Second question is regarding your new initiatives. You know, if you could indicate some sort of a timeline before, you know, when these sort of initiatives start to give material kicker in terms of your revenue and profits. Thank you. I mean, you would agree HDFC Bank is a formidable distribution machine. If you look at the overall, the branch network, the number of clientele, and there is tremendous potential for us to grow within that. We will put in enough and more effort to capitalize on the opportunity. We would like to believe that synergies will increase and in fact if any should be only positive. In terms of effort, as you asked, I think we are seeing material improvement in the engagement at all levels and we'll continue to work on strengthening it further. Got it. Sir, second question regarding your new initiatives, when do we start to see some kicker in terms of revenues, profits, you know, from these new initiatives? I think we have seen the increase in the market share, in equity particularly. I think over a period of time, I think whatever I mentioned earlier that distribution partners and investors are recognizing the improvement in performance, the diversity in fund management style. Uh, so- Product range has got expanded and all the other efforts that we are making are clearly showing results in terms of enhanced market share. Sure. Hopefully will continue to work and, we will look at. Sir, sorry to interrupt. My question was more in regards to the launch of alternate strategies. Oh, sorry. On the alternative side, yeah. Yeah. Yeah. Yes, sir. Again, I mean, all the initiatives we are taking on that front are fund of funds that we talked about in the last quarter, has been launched now. The initial response is very encouraging, both from distribution partners as well as our clients. In terms of material impact on the top line or bottom line, I think these initiatives won't really give material kicker in the near term. I mean, these are businesses that we will build and results should follow over the next few years. Mohit, actually just to expand from what Navneet stated, right. We are a large top-line company. Even if we kind of build these businesses, at INR 20 crore-INR 30 crore kind of an incremental fees, even if that comes by over a period of next couple of years, it won't really move the needle. We are kind of establishing these businesses, from a perspective of next three to five years. Sure. Makes sense. Thanks, Navneet, and Simal. Yes. Thank you. Next question is from the line of Madhukar Ladha from Nuvama Wealth. Please go ahead. Hi. Good evening. Thank you for taking my questions. First, you know, we understand the pressure on equity yields. Are we seeing anything playing out on the debt liquid and the ETF other categories? Are we seeing any change in yields over there? There was an expectation that, you know, with increased interest rates, asset management companies would be able to charge a little extra on fixed income yields. Has that started playing out by any chance? Second, on the admin and other OpEx, you mentioned that there were certain additional expenses. Can you sort of quantify them, in terms of, you know, how much is for CSR and how much is for the subsidiary formation? Any sense that could help us what could be the recurring versus some one-time items this time around? Last question on the other income. Other income, interest rates moved up, this quarter as well. I thought that there would be some mark-to-market impact. I wanted to get a sense on, you know, what drove the other income in terms of mark-to-market on the fixed income side versus equity side. Yeah, those would be my three questions. Thanks. Yields on debt, not much change actually. Some money that has moved to debt index funds actually does put some additional pressure. Otherwise, the product margins on a standalone basis are very much similar to what it has been in last few quarters. Not much change. You said that whether higher yields will result in our ability to charge higher. What happens that while the current yield of the portfolios have gone up in line with increase in interest rates, but if you look at the NAV movement, because of the MTM movement, the last one-year returns wouldn't be what investors would be seeing when they compare that with the current yield of the portfolio. Even otherwise, I mean, the margins don't move in that fashion. Not much of change on that front. Your second question on the expense side, Naozad, you take that? Yes. I think at this point, it will be appropriate for us to give you a breakdown of the expenses. You know, this anyway available at the end of the year as part of the annual report, right? CSR is part of the regulation. It's a computed number, on its own. Yeah, we sort of get the details in the annual report. The MFO related expenses, could you quantify that? No. Otherwise, we don't get into those final breakups. If you can just excuse us for that, please. Sure. Okay. The other income part, if you could help me, you know, what drove the return? Yeah. Other income is almost similar to what we made in Q2, actually, give or take INR 100 crores. We obviously It includes gains on our equity AUM, which is part of the skin in the game investment that we have, and on the debt. Actually, given the duration that we are in, we didn't see any major MTM loss on the debt portfolio impacts for the quarter. That's why it's almost similar to Q2 other income now. Understood. Understood. Could you split between equity and debt, the other income? Actually, Madhukar, we have not gone through that final thing. Anyway, see, equity is like hardly, what, INR 300 crores odd, right? Yeah. Out of the INR 5,500 crore of our asset book, INR 300 crore is in equity. Okay. I can do some calculation. Yeah, yeah. Sure. Thanks. Thank you. Next question is from the line of Swarnab Mukherjee from B&K Securities. Please go ahead. Yes, thank you for the opportunity and congrats, on a good set of numbers. Most of my questions have been answered. Just one thing on the unique investor side. What I see is that our share of industry unique investors is going down sequentially. Wanted to understand, I mean, how to read this. Does this mean that the new people who are coming to the market, the distributors are kind of more focused on, maybe, you know, smaller funds where their commissions would be higher? Given that our performances have also, you know, inched up and we are giving, you know, top quartile performance in most of the categories, why is this share not increasing? That would be the first question. Second is, on the employee benefit side. Last quarter you had mentioned, the focus on, you know, not kind of stepping down on this side because you want to invest in talent. This quarter the number was slightly lower. Ideally we should expect it to have a higher run rate going ahead, right? Wanted to clarify that. Again, just on the other income side. That... I mean, just to clarify, there are no one-offs in this number, right? We should kind of broadly expect this to be a run rate, given in, given that, you know, there are no significant ups and downs in yields or, you know, market volatilities. These three are my questions. First on the unique investors. Our unique investors as identified by bank grew to 6.3 million in December 2022. That's 63 lakhs. As against 6.1 million in September 2022. That's a growth of about 0.2 million investors, as against industry growth of about 0.7 million, which is like roughly almost 30% plus share. I mean, 0.2 million against 0.7 million. That trend of that trend has reversed and clearly very, very positive now for us. Mm-hmm. In terms of incremental addition of unique investors. Okay. Okay. Got it. The employee cost, if you see, 9 months to 9-month period, and if you exclude the use of charges, I think it's, you know, up about 10%. That's the sort of way I would look at it, you know, on a 9-month basis rather on a quarter-on-quarter basis. Okay. Sure. Sure. On the other income side, if you can just highlight the sustainability. As we explained, the other income is linked to our investments where the breakup. You have the breakup in the deck that we circulate. Mm-hmm. There's equity and then there is debt mutual funds. It is a function of markets across both the asset classes. It'll move in tandem with the market price, so. Right. I just wanted to understand that given this quarter, maybe, you know, there was nothing very sharp both on the fixed income side or the equity side. In an absence of any kind of such volatilities, should we then expect that given that now your book has also, the size of the book has also increased, what used to be maybe, you know, INR 60 crore-INR 80 crore kind of a run rate in a normal scenario that could will be in this INR 100 crore kind of a number at a quarterly run rate? I mean, it's a function of these. You say it's primarily a function of how markets react on equity and debt, right? As you said, you can extrapolate it based on what market yields are. Beyond that, you can't comment on market movements, frankly. The data is there for you to extrapolate. Sure. Sure, sir. Got it. Thank you so much. Thank you. Next question is from the line of Dipanjan Ghosh from Citi. Please go ahead. Hi. Good evening. Thanks for the opportunity. Just two questions from my side. You know, you don't report the equity on a flow basis, but qualitatively can you give some color on your equity flow share compared to your equity AUM market share and how it has changed, especially on the flow side, how it has changed YoY or YTD? My second question is, you know, during your last NFO and also during this current quarter NFO, what we're seeing is the increase in four accounts, almost double or maybe marginally lower annual increase in unique customer count. Would you give some color on, you know, within your NFO, what will be the share of existing customers who contributed to the NFO or some breakup on the channel side for the particular NFO? If you can give some qualitative color on that. In the NFOs almost 30% of the customers were new, if I remember correctly. Your other question was on. Equity flow share. I mean qualitatively if you can give some-. Deepanjan, we have always abstained from really kind of commenting on the net flow share for reasons that we have already explained earlier. We can tell you that the flow share for us now is definitely much healthier than what it used to be. Got it. Got it. Sure. Thanks and all the best. Thank you so much, Deepanjan. Thank you. Next question is from the line of Hiral Desai from Manvit Portfolio. Please go ahead. Hi, Navneet. Good evening. Actually just going back to, you know, sort of what Kunal was asking earlier on the operating profit growth. For a while it has actually trailed the AUM growth. I understand that, you know, certain funds have, you know, gone above a particular threshold, which is kind of affecting the yield. But if I look at yield for nine months of this year versus nine months of last year, it's more or less flat or it has in fact improved. The other determinant of operating profit is obviously expenses. How long are you comfortable with a scenario wherein, you know, the AUM is growing, but the operating profit is actually not growing on a YoY basis? Because there are two parts to it, right? One is growing the AUM also and growing it profitably. Just wanted to get your thoughts on that. Sir, one of the things I mentioned apart from that angle of the INR 5,000 crore of AUM and multiple of every INR 5,000 crore does dilute the overall TR by 2-3 basis points. Also, the second important thing is that commissions that we pay on flows is higher than that of the book. I mean, when you have a time when the gross flows as percentage of the AUM are higher, which was like almost 45% upfront then. Now, of course, it's come down and in early 20s. Over a period of time, I think it should stabilize. Navneet, a lot of that will already be in the base, right? For the nine-month number. You know, obviously this pressure was much more relevant a year back versus where it is right now. Wouldn't the FY 2024 base sort of become more favorable if we were to just compare it like to like? No. Why would you say that? No, no, I'm saying the incremental flow as a percentage of the overall book. Right. You mentioned that the number was, 45% last year, which has now come off to about 20, 25% this year. Right. Which essentially means that the pressure that you would see on pricing- Uh- On a YoY basis. See the 45% of fresh flows that came in, let's say in FY22 is already actually in the base, right? That's right. FY 23 numbers. Sir, what happens also is the fact that when my AUM will cross. Let's assume that the AUMs have a further increase, right? What has happened in the last six odd months. Like one year returns, if you look at for most of our equity funds are up by 10%-15%. Mark to market change has diluted our yields by 3, 4 basis points. If 50% of my AUM has had a dilution of yields of say 3 basis points, that would actually mean that I lost 1.5 basis points on the entire corpus. Simal, that is not visible in the nine-month yield number, no? Because I have not. No, it is. If you look at, for example, our revenue from operations, right? If you look at 9-month number, it is INR 1,626 crores versus INR 1,599 crores. The growth has been 2%. Right. Right? Now compare that with the growth in the AUM and look at the growth of the equity AUM. You will get all of those numbers, then you'll be able to reconcile. If I look at the average yield, I think it's been in that 51 to 52 basis point. Now, the AUM growth this year is slower because you've seen an outflow in the debt AUM, right? Right. No, that's what I'm saying. What has happened is the margin has got diluted despite the asset mix changing in favor of equity. See, let's assume that if the margins were constant- Right. Right? With the AUM, equity AUM growing by 15% on the Q AUM YoY basis. Right. That 50 should have gone up materially, right? Yes, it would have. Yeah. That's where the impact is coming from. Okay. Okay. Got it. If you look at it, see the revenue chart, the operating revenue, I mean, that has just gone up by 2 -odd percent, right? Yeah. For the nine-month period. I'm just comparing. If you even if you look at Q3 FY 2022 and 2023, again, the increase has just been about 2%, despite a 15% growth in the equity AUM. Right. Right. Some bit of contraction. You are seeing 50 remaining 50, thankfully, because asset mix has fallen in our favor. Got it. Got it. Assuming that the debt piece will come back a bit in FY 2024, you will tend to see some more pressure on the yield on an overall basis. Yeah. If debt becomes a larger part of our overall AUM, with equity remaining constant. In terms of yield, the statistical number answer is yes, but obviously there will be a positive contribution. Got it. If this gap sort of sustains for like next couple of years, wherein the operating profit growth actually trails the AUM growth, you guys are comfortable with that? See that is the nature of this business, right. At some point in time, it's not about being comfortable. I think as Navneet mentioned, right, in one of the earlier questions saying that we are of the opinion that over a period of time, the growth in the AUM will itself compensate for loss in margin, and thereby the overall profit number should see a healthy increase. Right. Right. Got it. Could you just remind us on this, the specially managed accounts and the PMS AUM, you've seen a sharp year-over-year decline? What led to that? Actually, the number last quarter was also much lower. That's right. We commented on that last quarter. There were a couple of these large accounts who took a call of taking money off the table from India, and we lost those mandates. Okay. Okay. Any initiatives that you're taking on that side, to basically revive the AUM growth? The answer is absolutely, yes. Absolutely, yeah. I mean, we mentioned about the steps we are taking. Qualitatively you would just... Also over a period of time as interest comes back and given our long-term performance track record, I think our team, processes and given our brand, I think we expect that over the years, we should be able to garner money from global investors investing into India through us. The GIFT FOM, FOF AUM will be a part of this, specially managed pool or a part of the. No, that's no. I mean, the FOF has nothing to do with GIFT City. Yeah. Okay. Okay. Got it. Got it. Fair enough. Thank you. Thank you. The next question is from the line of Prashant Kothari from Pictet Asset Management. Please go ahead. Yeah, hi. I had two questions. The first was on the outflows again. I mean, there were some news articles about the SIP outflows. Were you able to share some data on what is the kind of roughly the amount of outflows that are there on SIP books? Are you mentioning to that SIP cancellations have gone up, right? Yeah, yeah. Something like that, yeah. What we have disclosed is the money that we have received on account of SIP. Ours is on actual flows basis. The total systematic transactions, which include both SIP as well as STP, systematic transfer plan. Sure. What is our usual experience like when the SIP tenure is over after whatever, three, five years? Does the money usually stay in or do people tend to kind of move out to something else? No, it's not that somebody will have a three-year SIP and after the three years are over, they will pull out that money. Not necessarily. I think a lot of that money stays in the system and grows over a period of time. Actually, Prashant, if you look at. Therefore the SIP AUM is what? INR 6.5 lakh crore or so. Yeah, six point-. Yeah. 6 point- Six point seven lakh crores. Actually, Prashant, for the industry, you might just want to look at slide number seven of our presentation, where we have, like if you look at the AUM that came in via SIP mode, the number was INR 5.7 trillion for December 2021. For December 2022, that number actually is INR 6.7 trillion. The growth has been fairly healthy in terms of AUM, the SIP AUM. Even if you look at monthly flows, what we saw was INR 113 billion in December 2021. That number for the industry was INR 136 billion in December 2022. These are actually net numbers, so that will give you an indication. Okay. Okay. Fair. Fair enough. Second question was on employee cost side. I mean, now that the engine is working much better than what it used to, I would think that the employees would also demand more increments and some of our employee cost is still kind of flat year-over-year. How are you managing that? I mean, could that be a source of risk in future? I think, yeah, cost inflation on the employee side is something which is true for the sector as a whole and financial services as well as sector. That is something we'll have to factor in as we sit through our planning for the next year process. Difficult to give a specific number, but yeah, it will tend to go up a bit is what we feel from what we've done for the last nine months is around 10%. Give or take around that range or a little bit more. I'm sorry, 10%? For the nine-month period, the cost was up by 10%. I would say if we take that as a base for next year, we would assume that it'll be in a similar zip code. Okay. We have to still apply a sort of, full study on that, but we believe this is what we should expect for next year. Right. My last question is, your market share, are you happy with the kind of sales performance? Obviously investment side has done very well, but do you think, the sales side also kind of done as well? Are you happy with the market share that you have gained so far in this good period for your investments? No, our expectations are always higher. I think our brand, our franchise, our distribution network and the quality of our people, I think on the ground, their engagement with the distributors and all the other things that we have in terms of our digital assets, in terms of our client servicing capability, et cetera. Over a period of time, our expectations would be higher than where we are today. We are moving in the right direction. That makes us happy, but we are always hungrier to get a lot more than where we are today. Prashant, if I can just add, basically the sales market share zooms up with a lag after performance gets recognized. If you look at, if the performance for us has turned around somewhere starting mid of 2021. The one-year number started looking good somewhere in mid of 2022. Now if you look at it maybe in this quarter or the quarter next, we'll start seeing improvement in various ratings and that generally tends to kind of get our funds into the selected list of various large banks and national distributors. We're just about getting there, and hopefully that should have a positive impact in times to come. Right. Right. I mean, yeah, just the thought was that the performance tends to be cyclical in this industry, therefore you only have a limited time window in which to kind of, regain your market share. Are you kind of, doing enough on that front or not? Yeah, that was just a thought in my mind. No, we can say that we are doing enough for sure. Let's hope the numbers follow. Sure. Sure. All right. Okay. Thank you very much. Thanks. Bye. Thank you. Next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead. Yeah, hi. I have a couple of questions. Firstly, on if I look at the mix of equity, so that has really gone up year-over-year basis. If I look at the share of MFDs and I'm looking at the equity side. That has gone down in favor of direct and national distributors. Is there a trend change that's happening on this side there, you know, where the share of NFDs is reducing and the focus on direct and national distributors is kind of increasing? How do we see this going ahead? Not a big change. If you look at it, direct has gone up a bit from 21.5% in December of 2021 to 22.1%. I'm talking about equity-oriented AUM. Yeah, yeah. Right? If you look at direct has moved that way. If you look at banks, they're more or less constant, 13.6 versus 13.5. National distributors more or less like 20, 30 basis points, that kind of change always can come by. Yeah. No, so the purpose of asking this is there something that you guys are, you know, have kind of started paying out more to national distributors and, is there a trend change that we can see? Is this just a part of it and things could pan out in similar direction going ahead? No. Yeah. This is on the AUM, so I think the flows won't make so much of difference to that and it's hardly any movement, right? Yeah. 23.4 becoming 23.7. Okay. Got that. Secondly from, you know, I think you answered this in some form, but just wanted to reconfirm this. Now you're talking about 10% increase in employee cost next year and stating that your expenses on, or investments in, tech, IT, digital will continue to happen. I'm sure there is a good product lineup. If you could also throw that, you know, for us, that would be helpful. The product lineup would also be there in terms of new NFOs. That would again be on the cost front. Do you think that, you know, this kind of trajectory of flat to profitability will continue, say, possibly even in FY 2024? Obviously there could have been- In product lineup, I mean, last year we had 8 NFOs. This year in last, two quarters there were like 16. I think we are more or less done. Among the core categories, our product range is now full on the passive side. We have launched lots of products and wherever we had gaps in the sector and thematic or in international funds, et cetera, by and large is done. There would of course be, let's say, a series of target maturity funds, on the debt side, and maybe a few other on the passive. That they don't require much of the, business promotion expenditure or, or the advertising budget. On the product side it should slow down, quite a bit. On the new product, related expenditure it should slow down quite a bit. On the overall expenditure side, I would have mentioned in my first call after joining, as a culture, we are an extremely frugal organization. That culture of frugality is so ingrained in our DNA that will never go away. This was some of the investments that we had to make over the last couple of quarters. Also would appreciate the fact that post-COVID, for one and a half years where travel was restricted, the number of events were restricted, our ability to move around was limited. Things have opened up in last 4-6 quarters, all of us have been going and connecting with our investors, distribution partners, our own people and all of that is reflecting in the cost. Of course, I think in light with the technological changes, in light of all the opportunities that can come through better digital, you know, engagement or amplifying our distribution with more digital support to them, so on and so forth. I think that's an ongoing thing, but that's an investment in future. Some of the new things that we have started, whether it's launch of PMS, I think we launched two strategies and then, and hired a resource for that or the AI-related cost or the setup costs for GIFT City and other things. These are all investments in future. I think by and large, the one point I think you need to keep in mind that. I think that comes from the group it holds. We have a highly frugal culture, That will never change. I think it's so ingrained in each and every person in the organization from top to bottom. I think we all need to appreciate that. If we are making some expenditure, I think you should be rest assured that they are all investments in future. Prayesh, just one thing to clarify. The 10% that Naozad referred to is for the current year, the growth in the first nine months versus what was there in December 2021. As you know, right, we don't tend to give any kind of forward guidances. I think the three-year, you know, the CAGR he gave, I think ex-CSR was like around 7% or so. Yeah. Mm-hmm. I mean, if you look at the total inflation in the country over the last three years, you would appreciate that I think we have done a reasonably good job on keeping costs under control. Indeed. Indeed, Navneet. Thank you so much for We always keep an eye on how the flows are moving, how the industry is moving, the prospects in terms of the AUM growth. Then we adjust the trajectory. We keep an eye on the growth prospect and accordingly we look at our cost. Great. Thank you so much. All the best. Thanks. Thank you. Next question is from the line of Aditi Jain from Quest Investment Advisors. Please go ahead. Yeah, hello. Good evening, sir. Thank you for the opportunity. I know you've alluded to this before, but despite industry leading performance, if you see the share of HDFC Bank in our distribution still remains at the similar level. Just wanted some qualitative colors and if you can give some quantitative data on this. For example, is the share from HDFC Bank improved in the new NFO and the gross install that have come in the quarter and during the last two quarters? Some color on that would be helpful. No. Are you referring to the percentage contribution that we get in our equity and overall AUM from HDFC Bank, which is static also? Yes. Also, from the distribution done by- I think with the improvement in performance and these product launches, all other distributors have also participated, whether be they the MFDs or national distributors or the other banks. Incrementally, we are as I mentioned earlier, incrementally we are positive on getting better flows from HDFC Bank over a period of time. Okay. The new flows that have come in there, the share is still the same that was there previously, right? Yeah. Okay. How do you target that increasing in the coming quarters? Is there some set target in your mind? No, as I mentioned that our engagement has been increasing. Also as you know that HDFC Bank has been an open architecture. Mm-hmm. Mutual fund distribution. As product performance has improved and gets recognized, products come in the recommended list for their clients. As more products come into the recommendation list with improvement in the engagement, over a period of time we expect better flows. Okay. Thank you. Thank you. The next question is from the line of Saurabh from JP Morgan Chase. Please go ahead. Sir, two questions. One is basically on this dividend. Is it feasible that, like last two years, the dividend growth should be faster than EPS growth? I mean, your payout can continually increase because you just have added cash on balance sheet. I think our dividend payout ratio for the last financial year was just shared under 65%. Yeah. I think, yeah, I mean, no second guess to board, but yeah, board is cognizant, of the cash on the balance sheet and the incremental cash flows, so. Okay. Got it, sir. The second is that on this regulation. Basically, I mean, in December it was this news that SEBI has initiated, you know, a study again of the fees and expenses charged by the AMCs. Given that the AMC fee structure in India is gonna be higher versus rest of the world, is, do you think there is a risk of, like what we saw in 2018 in terms of some fee capping? Also is there like a, has SEBI also in your view, also done a study of, the distribution done by banks of their of their own AMC and is there, like an opportunity or risk there? I think you are referring to the press release by SEBI in the last week of December that they are conducting a study of fees and expenses charged by mutual funds. The regulator is engaging with industry body and is evaluating on how to optimize mutual funds from the perspective of all stakeholders. I think early to expand on this as this is currently being debated at various levels. I can definitely state that our regulator is very much open to discussion and constructive feedback. I will put it this way that regulator is mindful of all stakeholders and will do the needful, which will hopefully benefit the entire ecosystem over time. We'll keep you posted on the developments on this front. Any push towards open architecture will be part of that or no? The current structure where other banks continue to keep 20% of their own AMCs charged? Not that we have heard anything on that front. Okay. Got it, sir. Thank you. Thank you. The next question is from the line of Abhijit from Kotak Securities. Please go ahead. Yeah. Hi, good evening. Just one question remains. In terms of flexibility to manage retentions, you know, in case there are any fresh headwinds on the regulatory front, you did talk about, you know, tweaking payouts, but can you give some more color in terms of how do you manage that balance? Do you really, you know, have the ability to change the yields on the entire book? Just some color on that would be really helpful. I mean, if it is driven by the regulation then I think the whole industry has to follow, right? Mm-hmm. On an ongoing basis, not much really, right? For the better retention? No, in terms of, let's say the steady, you know, decline in retentions, because of the current regulatory structure itself. Is there any more flexibility that you can kind of create with your distribution partners in terms of how we can, let's say potentially, you know, have a much better balance of how the TR gets shared between the two partners? Abhijit, what we do in that case is like for the future flows, if the AUMs go up and we are kind of seeing some bit of impact on the TR, on future flows we tend to moderate commissions. You might see a bit of a lag effect. Over a period of 6, 12 months with future flows that would kind of get adjusted. Keep like, kind of keep doing that on a quarterly basis, as Navneet mentioned earlier, might not be really a prudent thing to do. Got it. Got it. All right. Sorry, just one follow-up on the earlier question on the December press release. Do you really see any, you know, gaps that the regulator is looking to fill up? Because I think one would have thought that the mutual fund product today is, you know, is a very, very clean investment vehicle. Looks like there's still something which is missing, right? We wouldn't second-guess. I think, the press release is in the public domain of the study that the regulator is conducting. As I mentioned earlier, that it's getting debated at various levels. I must say this, I think I mentioned earlier, the regulator has always been open to discussion and the constructive feedback from all stakeholders. I think we have to wait and watch. Mm-hmm. Okay. Got it. Thanks a lot. Thank you. Next question is from the line of Devesh Agarwal from IIFL Securities. Please go ahead. Good evening, sir. Just one question from my side. abrdn wanted to sell their stake in the company and for that they said that they want to cease being a sponsor, co-sponsor in HDFC Mutual Fund. I think we had moved the regulator for the same. Any update on that? We are awaiting the response from the regulator. Okay. Any timelines, sir, that you can share? Probably in this quarter you're expecting an approval from the regulator thereafter it may take 3 months to follow the process? No, I think we are awaiting the response. All right. Thank you, sir. Thank you. Next question is from the line of Amaresh, individual investor. Please go ahead. Many thanks for the opportunity and congratulations on the operational parameters moving in the right direction. My question is relating to the B30 market and if you could provide some color on drivers. It seems to be growing faster than the overall and if you could provide some qualitative color on what are some of the drivers and how it is different from the rest. Also on HDFC AMC's market share, which it seems to be flattish. I know you'd mentioned last call that this is an area of focus. Any further update would be appreciated. B30 and T30 growth has been same. You would appreciate that while there's tremendous potential in B30 but even T30 are also under-penetrated. I think the overall mutual fund industry is under-penetrated and there are opportunities on both sides. In terms of newer SIP count, if you look at I think the B30 contribution in count, not in amount, in count the contribution has been increasing. In the nine months ending December 2022, 60%, I mean in the growth of the SIP count, 60% has come from B30. This number was I think 55%-56% in the previous financial year. I think less than 50% in the previous financial year for the industry. On HDFC AMC's market share, is there anything we can look? I mean, incrementally slightly better than the industry growth. Thank you so much. All the best. Thank you. I now hand the conference over to Mr. Navneet Munot for closing comments. I would like to wish everyone a very happy, healthy, purposeful and a blissful 2023. All the best. Thank you very much. On behalf of HDFC Asset Management Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.