Ladies and gentlemen, good day and welcome to Nippon Life India Asset Management Limited Q3 FY 2022 earnings conference call hosted by JM Financial. 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 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. Sameer Desai from JM Financial. Thank you, and over to you, sir. Thank you, Neerav. Good evening, everyone, and thank you for joining this call today. From Nippon Life India Asset Management, we have the entire management team led by Mr. Sundeep Sikka. Without wasting time, I would want to hand over the call to Mr. Sikka. Over to you, sir. Thanks. Good evening, everyone, and welcome to our Q3 FY 2022 earnings call conference. We have with us our Chief Financial Officer, Prateek Jain; Chief Business Officer, Saugata Chatterjee; Co-Chief Business Officer, Aashwin Dugal; Chief Digital Officer, Arpanarghya Saha; Head of Elite Partner Client Group, Nitin Gupta; and Hiroshi Fujikake, nominee from Nippon Life Insurance, Tokyo. Overall industry assets grew at an even pace in the quarter driven by rise in equity and passive segments, while fixed income saw muted growth. Despite high equity market volatility, industry's steady performance was a result of continued interest by retail and HNI segments. The industry unique investor grew by 15% in Q3 and crossed the 330 million mark. The strong growth in the investor base and the overall assets indicate confidence by long-term investors in mutual funds. We expect the industry to grow and to maintain its growth momentum in future also. At Nippon India Mutual Fund, our priority is to be future ready and capture the long-term opportunity. As stated earlier, we are confident of regaining our market positioning as well as recreating and reinventing by continuously innovating and disrupting ourselves. Towards these goals, I'm happy to share our overall market share rose by 22 basis points in nine months, the last nine months to 7.34%. AUM increased by 32% to INR 2,806 billion. This is the third sequential quarter of market share gains along with the improvement in other qualitative parameters. We increased our share of industry unique investors to 33% with a base of 10 million investors. Also, our share of industry B30 portfolios grew from 10.4% as on December 2020 to 11.6% as on December 2021. The growth was driven by improved fund performance, comprehensive product portfolio, enviable track record in passive segment and robust risk management and granular distribution network. In line with our investor-first philosophy, we keep extending our product suite to cater to the investors' various varied needs and diversified demands. In Q3, we launched India's first fund focused on dynamic and growth opportunities in Taiwanese markets. The Taiwan Equity Fund raised 65,000 applications, including 6,000 HNI and private offices. In January 2022, we completed the NFO of India's first Auto ETF and Silver ETF fund of fund. Other such unique offerings in the pipeline include S&P EV Index Fund, the Innovation Fund and Artificial Intelligence Fund of Fund. In total, we have filed 11 schemes for regulatory approvals. These products will provide investors with more value-accretive avenues to diversify risk and generate sustainable returns. Here, I would like to reiterate that even in future we will focus on strong asset growth but never at the expense of profitability. Driven by keen retail focus, we have one of the largest retail AUMs in the industry at INR 776 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 28% compared to 23% for the industry. We are amongst the market leaders in B30 cities category. This category contributes an AUM of INR 488 billion. 18% of the total assets are sourced from these locations against the industry average of 17%. As on December 31st, 2021, 70% of the individual assets have a vintage of more than 12 months. The annual SIP transaction book is at INR 82 billion. On a gross basis, the systematic portfolios rose by 385,000 in Q3. Our systematic AUM rose by 38% to INR 507 billion. 45% of our SIP AUM has continued for more than five years versus 20% for the industry. In the volatile markets, portfolios with low ticket size have demonstrated longer vintage and better stickiness. 8% of our SIP portfolios have continued for more than five years as against the industry average of 8%. Today, Nippon India Mutual Fund offers the industry's best yields in passive products. The strong growth in industry passive assets. Our ETF ecosystem is already in place and far ahead of the peers in terms of investor base and mind share. In this segment, we manage AUM of INR 515 billion and have a market share of 13%. Excluding the EPFO allocation which goes to two public sector mutual funds, we are the largest ETF player in the country. Our gold ETF is the biggest fund in the category with assets in excess of INR 63 billion. Nippon India's share in industry ETF folio rose to 60%. In Q3, we added 1.6 million investors and accounted for 70% of the total ETF folio additions in the industry during this quarter. Nippon India Mutual Fund has 69% share of ETF volumes on both NSE and BSE. Our ETF average daily volume across key funds are far higher than the rest of the industry. As a well-diversified asset management company, we have begun to grow our non-mutual fund segments over the years. Along with the government mandates, we manage assets of INR 677 billion in non-mutual fund segment. The offshore business has assets of INR 115 billion under management and advisory. Leveraging Nippon Life's global network, we continue to ramp up our international presence. As mentioned earlier, Taiwan Equity Fund and other products which are in approval stage are a step in that direction. In our AIF business, we managed Category II and Category III AIFs across asset classes. As on December 21, Nippon India AIF has raised commitments of INR 42 billion across all funds. We have received IFSCA approval to carry out asset management operations in our GIFT City branch. By expanding our reach to unique locations, we expect to accelerate global allocation into India and add value to international investors and partners. Online and digital assets have become a strong source of investor acquisition and syndication. Our strong digital acquisition and engagement framework with targeted performance-oriented campaigns is driven through cutting-edge tools like Adobe Campaign. These initiatives have helped fuel consistent growth on our own storefront and various other conclaves. The focus is towards creating a digital experience that is friendly, futuristic, and frictionless for all our partners and investors. In Q3, digital platform contributed 58% of our total new purchase transactions. Over 750,000 purchases were executed through digital assets, an increase of 83%. Nippon India Mutual Fund has a well-diversified and a level distribution base. As on December 2021, we have approximately 83,800 distributors on panel with us. The MFP base rose by over 8,500 with an addition of 1,800 distributors during this quarter. Also we have ongoing ties with 20 prominent digital partners. Direct digital direct channel contributes 55% of the mutual fund AUMs. On the distributor assets share of MFPs was 58%. 88% of the distributed assets are contributed by individual investors. Nippon India Mutual Fund has a wide presence across 270 locations across the country. We continue to review our existing branch operations and future expansion plans. In recent quarters, our marketing efforts have increasingly focused on digital channels which are more cost effective as against offline advertising. Now on our financial performance. For the quarter ending December 31, 2021, profit after tax was INR 1.7 billion. Operating profit increased by 48% to INR 2.1 billion. Operating profit as a ratio of average assets under management rose from 26 basis points in Q3 to 29 basis points in Q3 FY 2022. Our aim is to create sustainable value through growth across asset classes, cost optimization initiatives resulting in expanding and favorable operating leverage. We continue to grow organically through our physical and online channels. Additionally, we remain open to evaluate investment in strategic opportunities that add to the profitability or complement our existing businesses. As a signatory to UN PRI, world's largest voluntary sustainability initiative, we aim to create sustainable future for our stakeholders by integrating ESG principles into our business operations, investment processes, and stewardship. By introducing formal policies including case of fund management, we intend to share a strong and a clear message about the organization's purpose with our stakeholders. Also, as stewards of our investors' capital, we continuously engage and evaluate all our listed companies on their performance on issues related to sustainability, governance, and value creation for diverse stakeholders. To sum up, I would like to reiterate, at NAM India, investor centricity remains the key theme. We strive to deliver a complete product suite customized to investor needs, superior fund performance, efficient client servicing based on comprehensive digital ecosystem. We are confident to continue our trend of profitable growth in coming quarters. With these comments, we are happy to take your questions. Thank you. Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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. Anyone who wishes to ask a question, you may press star and one. The first question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead. Yeah. Good evening, sir. Three questions from my side. Firstly, if I look at your sequential AUM mix, there is a marginal improvement on the equity shares, but the yields have dropped, if I, you know, divide the revenue by the overall. So what is the reason for that? And could you give some understanding as to how the yields for the overall business could move going ahead? That will be my first question. Second, is the sharp fall in your other income, what is the reason for that and what could be a sustainable long-term trend, if any? And lastly, on the other expenses, because there, you know, there has been a decent decline on other expenses, whether, you know, this is sustainable trend. I'll request Prateek to take your three questions, please. Yeah. Hi, Prayesh. In terms of the yields, you know, what we've seen is that if you look at our average AUM compared to the last year, you know, what has happened is that our average AUM is about 43% up, you know. Obviously, one, because of the size issue, if you see, most of this has been because of the mark-to-market impact, so the size issue, the TER goes down. That is one. Two, there has been an increased competition on the NFOs, which has also, as you know, asked us to relook at some of the distribution tie-ups. You know, the other third part is that, you know, the change in the old assets getting replaced by the new assets. These are the three key reasons wherein, you know, we have seen marginal decline in our equity realization. The reason is that, look, if you see in the last two quarters, you know, there has been slew of NFOs, and each one of them, you know, and especially from the new players, or rather the smaller players, which has gone and, you know, given very high kind of a distribution commission, which has, you know, sort of created some kind of, I would say, you know, in, you know, a tilt towards the, you know, or rather people focusing more on the business growth rather than the profitability. However, we remain focused. You know, we continue to focus on profitability, but on a tactical basis we'll keep reviewing the tie-ups and, you know, while we'll keep growing the business, but our focus will remain on profitability. That's on the yield part of it. On the other income side, you know, you would recollect that, last quarter and, you know, earlier also we had mentioned that, you know, we have, you know, pared down our total exposure to equities. Yet, you know, we have almost 10% of our total asset under management or rather the net worth into equity. Of the total assets what we have, or the total cash we have, 90% of that is in our own mutual fund and fixed deposits. Of that, 10% is in the equity. You know, previous prior quarter saw almost 10%-12% increase. This quarter was actually a decline by 2%. Those mark-to-market impact, you know, have led to the difference in the other income. There is no one time or, I would say, any aberration. This is all mark-to-market even, and that happens, you know, on the last date of the month. Even if you see on the fixed income side, there has been some yield elevation on the back end of the quarter, which has also, you know, got mark-to-market. For that reason, you know, our other income is down as compared to the previous quarter. Coming to your other expenses part, we have always been maintaining that, look, you know, close to about INR 45-50 odd crores would be our run rate expense. You know, we will be, you know, there are expense which are, more towards, you know, discretionary part, in terms of marketing and digital spend, which we keep, you know, monitoring and, you know, depending on the activity levels. You know, those are, you know, semi-variable. You will see, you know, this expense remain range bound. There is, you know, again, no one-off kind of expenses. There is just one thing that, you know, the transitionary expenses which we were incurring because moving out of the old architecture environment from the previous parents has now completed and therefore some of the duplicacy of the expenses have come down. Okay. Thanks for that. Just on the yield part again, while you mentioned that the three reasons for the fall in yield, out of which I think the NFOs continue to be very, you know, priced aggressively or, you know, distribution commissions are given aggressively out there. The peer TER movement with regards to size, if the equity markets may have come back to a growth, obviously will continue to be. In a way that directionally equity yields will continue to drop plus overall number of Yes. ETF, share of ETFs will move higher. In that sense, is it fair to assume that the yields which are, you know, will continue to decline from here as well in the next couple of years? Yeah. See, if you see, if again, you know, from our perspective, the assets, you know, have grown almost like 45%-50%. Then again because of the size issue, you know, because of regulatory size issue, you will see some compression happening. To that effect, you know, there will be a compression you are likely to see, but that will be offset by the absolute growth in terms of the overall fees. Okay. Got that. Thank you so much. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Mohit Surana from CLSA India. Please go ahead. Good evening, sir. Sir, my first question is a continuation of previous question. You obviously said that, you know, as the size of the AUMs grow, there will be some kind of a yield compression because of regulatory rules around that. In terms of NFOs, do you expect the current situation of pricing, you know, the distributor commission very generously. You know, do you think that will have an impact in FY 2023, 2024 as well or do you see this as a transitory kind of an impact? That's my first question. I think, Sundeep, the way I see it, this is a transitionary thing. I think we have seen, you know, that some AMCs trying to filling up their portfolio by launching new schemes because there's also a constraint on how many. Now you cannot launch multiple schemes. I mean, as, SEBI has already one scheme per category and you have seen some new AMCs coming into play. I think this is transitionally. I think I take it more, you know, from a long-term point of view, I'm seeing more focus on profitability in this industry than ever before. I think I feel, my personal view, this is a transitionary thing and we'll set it on very soon. Even if, you know, this industry is all about volume, I think, a drop in 1 basis point yield, 1 or 2 basis points can happen, cannot never be ruled out. But I think more than that can be compensated by increasing volume, I think. From our perspective, what we continue to focus on increasing volume by getting better quality assets. As I mentioned in my opening comments, the stickiness of the assets, smaller ticket size, I think all these things are going to play an important role because markets will remain volatile. I think so that I think as we play through the different market cycles, the stickiness of the assets, is going to be more important than just the AUM. I think our focus remains on that. Got it. Sir, the second question is around ETFs and index funds. Obviously, you have a lot of index funds in pipeline. I just wanted to understand, in terms of your contribution to bottom line, how should we look at it in terms of your, you know, your strategic plan to grow into ETFs and passives? How should it incrementally contribute to the bottom line? I think from our perspective, I'll just give you a directional view how we see and then Prateek will answer about the P&L split. I think from our perspective, we've always believed our philosophy is investor first. I think we clearly believe whatever is good for the investor is good and is good for the AMC and the entire ecosystem, and we need to keep offering. I think we have clearly seen there has been a shift towards the ETFs and index. I think we've been, you know, we were able to catch that trend early. If you were to go to slide number 18 of our presentation, that will tell you our position, where we stand, where we are almost 70%-80% of the volumes of the stock exchange. Unlike mutual funds, where normally investors like to diversify into 4, 5 different schemes, in ETF there is no need for an investor to diversify into multiple ETFs because I think the underlying is the same. I think there is going to be a first-mover advantage that we have and we will enjoy. From our point of view, I think we broadly make, to be fair, we are having a realization of about 9-10 basis points. I think on a total, our today ETF books total book is about only INR 50,000 crore. Accordingly, about INR 50 crore is getting contributed to the bottom line because of that. Okay. Why are there no additional expenses related to ETFs and index funds? I think from our perspective, you know, broadly, I think the ecosystem that we have built up, I think today, any new launch does not, you know, I think, lead to any incremental cost for us. Maybe Prateek would like to talk more. Sure. Thanks a lot for your response. Thank you. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Amit Nanavati from Nomura. Please go ahead. Yeah, hi. Question on OpEx again. Basically, if I look at just the quarterly run rate of non-employee, non-brokerage kind of expense, purely overheads, they've been clocking around INR 50-53 crores odd. This is roughly 10% lower than last year's. If I look at pre-COVID run rate, this used to be around INR 70 crores, right? It's a decent improvement that we've seen here in addition to cost rationalization on the employee cost as well. But if you can just qualitatively, you know, indicate towards which segments or what heads are seeing rationalization in cost and how can this trajectory be maintained or these are like one-off cuts and which more or less has kind of bottomed out? No, Amit, if you recollect, almost 12 quarter back, you know, we had a lot of questions around our higher OpExes compared to some of our industry peers. Thereabout, you know, we started deeply looking into all of each individual line item expenses. If you recall, two quarter back, I mentioned that, look, we have now reached to a steady state with 10% plus and minus, because most of these costs are broadly fixed in nature. Some of them are semi-variable and some are discretionary. A large part of this cost of INR 50 crore what we talk about, almost 70% is broadly considered as fixed and semi-variable, where, you know, these costs will continue. There is still some discretionary cost which we have, you know, based on the transaction volume, based on the activities. You know, those expenses keep moving up or down. Also, again, as mentioned to be future-ready, you know, we keep engaging into expenses related to, you know, either digital or marketing. You know, these are some discretionary spend which we keep depending on the market environment, depending on, you know, if we come out with a new fund offering, et cetera. Obviously, there will be some elevated spend towards that. That discretionary element will remain. But barring that, if you see, you know, these expenses by far will remain in the range down in, you know, around this number. Which if you look at the last eight quarters, you know, this has been around this and, you know, these numbers only. Yeah. Basically, would it be largely marketing spend cuts that we would have done? Rent may not go down as sharply. Other heads would be smaller, right? It's largely marketing and advertisement where we would have seen large cuts or will be some other segment? No. It was if you see, from the past, it was across. You know, we had a lot of these service providers which we have gone and renegotiated costs with them. Some of them we have changed. You know, and some of the other establishment costs which we were incurring, we have actually gone to, you know, like take the example of our own head office. You know, we have now moved to, you know, a smaller location. You know, and then we have got consolidated everything, our IT under one umbrella under IBM. We have done quite a bit in terms of rationalization of our third-party spend which were related to, you know, of course, travel, conveyance and others have also come down because of the COVID costs. In terms of marketing also, you know, earlier we used to spend more on the offline media. Now, the online media is comparatively cheaper. You know, it's not just marketing, it is across the board. You know, we have looked at each and every spend and that we started almost 12 quarter back. In the last five or six quarters, you know, we have been into some kind of a steady state expenses. You will see ± 10% in the quarter-on-quarter. This is now due to the discretionary spends. Got it. Secondly, on the AUM side, right? One larger drag on the yield also is because your upfront plus trail AUM kind of is getting replaced by a full trail model as well, right? Where are we in that process? It's already two, three years now, right, since the regulations changed. Would it be fair to assume large part of the AUM which needs to get replaced is by and large replaced? Obviously, there'll be some sticky AUM which will take longer to get replaced, but by and large. Yeah. If you see, you know, like, you know, unfortunately, for us, you know, for a large part of the last two, three years post the regulatory changes, you know, we have seen, you know, quite a fund outflow which has happened earlier because of our transition issues and later on because of the performance issue. Now with the performance coming back and the top ten of our schemes now under the quartile one, I think we believe that, you know, this outflows is more or less over and, you know, this asset getting replaced. Also there is a fatigue factor coming in from outflow, you know, because most of the money which was to go out has already gone out. If you see our market share stabilizing now here and with the improved performance, we're likely to see more inflow coming in. The asset replacement which is causing this drag is not likely to be there, but yes. The asset replacement drag may not be there, but the new asset, which is only the trail, definitely will keep pressure or putting pressure on the yields. Yeah, which is fine. It will take, That will be only on the new incremental one as compared to the yield, you know, the amount which that outflow has, you know, a much larger impact because that was, you know, upfront plus trail and the new one which is coming is only on trail. Got it. Lastly, if you can just quantify the yield in the equity segment that you are making now? We do not give, you know, specific yields asset-wise. It's been, you know, it has declined, you know, over the last few quarters. As I mentioned to you broadly because of the three reasons. One, the increase in size, you know, from INR 80,000, if you see for the last quarter, comparative quarter to INR 120,000. That has been one. Second, of course, replacement of the old assets. Third, of course, because of the current new environment where fund is coming, you know, largely through the new NFOs, et cetera, where, you know, competition has been getting very high in distribution costs. All three reasons have played out and, you know, we have seen some compression on our equity yields. Thank you. Sorry to interrupt you, Amit. I'll request you to come back in the question queue for a follow-up question. I request all the participants, please restrict to two questions per participant. If time permit, please come back in the question queue for the follow-up question. The next question is from the line of Sahej Mittal from HDFC Securities. Please go ahead. Hi. Good evening. My first question was around our equity market share loss, which has still persisted even in Q3. If you could highlight, you know, what is causing this loss? Is it performance or is it flows? What is the problem you are facing? And the second one was around if you could quantify the NFO expense line item for Q3 and maybe Q2. To understand such a sharp improvement in our other expenses. And third one's around, you know, if you could explain to us, you know, what is the concentration of your IFA sourcing to your equity AUM to understand what are these new IFAs bringing to the table in terms of AUM or the flows beyond this new acquisition. I think the, Sundeep, this I'll take the first question on equity market share. I think, our overall market share has stabilized and as you can see in the last three quarters overall, AMC market share has gone up by 22 basis points. Equity still continues with being a little minor dip. I think one of the reasons for that, while we have started seeing new flows coming in, a lot of flows which are coming in the industry are also a function of the SIPs which were started in the last two, three years. The last two, three years, as you're aware, we had a little bit challenge in equity performance. The performance has been very good now. The new flows have started, so and also if you can see over the last three quarters, our SIP numbers have started going up. Effectively there will be a possible lag effect and a lot of new SIPs which are getting registered, I think that will help us to increase our market share. The present flow that is coming out of SIPs which are registered last two, three years may be based on the other market share. But directionally I think we are happy. I think the new flows and the new SIPs have been increasing. That is number one. I think the other question, Prateek, on the NFO? Yeah. From the NFO perspective, there are no specific costs related to NFOs. You know, I could not get your question. There are no NFO costs these days, you know, which we have to incur. The only thing one could be that look, if some spend has been done on the advertisement basis, otherwise there are no specific NFO expenses, which were incurred in the previous quarter as compared to this quarter. Yeah. My question was around the marketing expenses, specific to the NFO which we have done. Those wouldn't be that material? Overall if you see the expense as I mentioned to you that look, this expense line item has been range bound plus or minus 10% here and there. If you see you know of course there is you know in previous quarter we had one large you know offering which was there in terms of our Satya Kai Fund. But you know there could be some impact of that marketing spend which we've done higher. But you know that is not very significant you know to talk about because overall spend has not been you know changed dramatically. Against the INR 42 crore this quarter this was last year INR 45 crore. I think your final question on the fees to the IFAs and distributors, that's on slide number 27 of the investor presentation. The detailed breakup is shown there. Just to follow up, against this INR 42 crore you said that for the last quarter this number would look like INR 45 crore. Is that right? Q3 other expenses, if you go to the detail of the consolidated numbers what we have presented, so if you see the other expenses which account for INR 42 crores in Q3 was INR 45 crore last year, last quarter. YOY and INR 49 crore, sorry, INR 49 crore last quarter and INR 45 crores in Q3 2021. Good. Some color around our fund performance, whether there has been some change in the strategy or how the early strategies are panning out for us? Some color around that. I think we have had a new risk framework that we have implemented. I think leveraging on our research and a new risk framework that has been implemented working closely with Nippon Life from Japan also. I think a lot of things have been, so it's a proprietary tool from Nippon that we are trying to use. It has helped us. It's both a mix of art and science and trying to have a better risk framework. I think we'll not be able to, you know, go too much into detail for that. I think ever since it's been implemented, like, and along with a strong research capability, fund performance has stabilized. Got it. Thanks for this. Thank you. The next question is from the line of Akshay Jogani from Xponent Tribe. Please go ahead. Thank you for the opportunity. I have a little bit of a bigger question. If you kind of take few steps back and think about how the industry structure has evolved, would you kind of talk about the power balance between distribution companies and manufacturing, right? How has that changed over the last four, five years according to you all and where do you see that going? One of the reasons that I ask this question is that you spoke about how the current spike in commissions that the distribution companies are getting is transitory and from the way I see it will not be because, you know, on the manufacturing side there is a far more number of companies are entering and they seem to have a different positioning and all will likely be building the same distribution channel, right? If you sort of give your thoughts on how it has evolved and where do you see it going? I think it's very difficult to answer this question. I think all stakeholders are jointly working towards the growth of the industry. Your question on power, I don't know what you mean by power, you know, equation, you know. I think broadly, it is anybody, whether it's a distributor, advisor, MFD or a manufacturer, everybody has to add value to the investor. Secondly, you know, it will all depend on the coming back to the question on manufacturers, it will depend on different manufacturers, what is the strategy? If somebody who's working for a growth and top line could have a very different strategy. I think as we have articulated in past also in my earlier comments, I think we will be focusing. Broadly our focus will remain on profitable growth and we will not mind walking away from business that does not leave anything on the table. Sure. Only if I may kind of follow up. Sir, what I meant is that if you see the realizations of the asset management companies are sort of getting compressed, right? The competition is not on the same level among the companies that are actually distributing the products, right? That kind of seems to suggest that they seem to be able to get a better pricing for what they do. Is that a fair assessment? I don't think so because they are not that data may or may not be available. I mean, they are as transparently, you know? But I think the way I see it, I think we have very clearly, I think, mentioned in past, there can definitely, and Prateek also mentioned, there can definitely be a compression in realization. That could be where the competition, whether it could be what you call distributor power or whether it could be because of the investor, you know, or could be because of regulator. I think what we have to see is how are we building up our ecosystem to do the same business at a lower cost? Mm-hmm. How are we building up reach to go deep into, you know, Bharat. I think your question, you know, on I think every manufacturer who come will go to the same distributor, that necessarily may not be true. It depends basically. I think if you have a long-term vision today, I think we are one of the few bank, non-bank based that asset management company, the kind of general reach that we have built up and we commented on a B30 strategy. I think it's about building up a general business. I think working closely with distributors, keeping investor in mind in the center. I think that is the key. I think it is not about sharing all the, our fees or what we are sharing. I think as long as we keep adding value, all of us keep adding value to the investor. I think we clearly see there's enough juice available for everybody. Definitely. The second question is on ETF economics. Just correct me if I heard it wrong. I heard that realization at the revenue level was about 9-10 basis points. Is that correct? Sorry? ETF economics, you said that you make realizations of about 10 basis points. Is that correct? Yeah. We make net, including the government mandates, you know, we make about 10 basis points. If you remove the government, the CPSE part of it, our realization is about 13-14 basis points net of all expenses. Sure. Okay. This is the operating earnings realization? Sorry? This is the profitable, profit realization? Yes, yes. Can you say again? Besides that there is just you know the employee-related cost you know the small team that we have which runs the ETF. Because we have a common distribution team. You know we have few employees which are dedicated to ETF which is you know on the fund management and the product side. Then of course you know we have a separate dealer. You know that small team you know that is a separate cost for running the ETF, the rest all is same. Sure. Is it fair to assume that, let's say, the INR 50,000 crore goes to INR 1 lakh crore, then the whole incremental 10%-30% needs to be slowed down to operating earnings? Oh, yeah. Entirely, you see, whatever expenses. See, all our expenses, what we charge to ETF, are available. Of that, if you remove the 2 basis points and another 1 or 2 basis points on top of other expenses, then it becomes our net income which is directly adding up to our profitability. Because obviously we will, you know, if this amount becomes INR 50,000 to INR 1 lakh or INR 1 lakh to INR 2 lakh, we will not need, you know, more number of people. You know, there is no incremental fixed infrastructure or employee cost associated with it. Okay. Thank you so much. This is Thanks. On ETFs, I'd also like to add. Yeah. I think unlike other assets, you know, with the liquid funds and all, more than the expense, the traded volume is more important. Because if the volume is not there, the impact cost leads to, you know, negative carry for the investor. I think, and the fact that we have the highest volume with the stock exchange actually puts us in a very comfortable position. Thank you. I'm sorry to interrupt you, Akshay. I'll request you to come back in the question queue. Participants, please register to do questions per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from the line of Dipanjan Ghosh from Kotak Mutual Fund. Please go ahead. Hi, good evening sir. Two questions from my side. One is I was looking into your individual equity market share broken up into channels direct and regular. It seems that in B30 cities your market share on equity portion for the individual segment has almost in the direct channel declined by 600, 550, 600 basis points, much higher than declining across other channels or overall for the company on the equity side. Just wanted to get some color on that. On the second question, if you can shed some light on, you know, how the customer journey changes between, let's say, 10 years back when they used to go through the direct through the broker channel or even today versus when they come through some of the newer fintech sort of channels or the direct channel. Does that indicate that performance as a parameter gradually becomes more and more important to track? That's all from my side. I'll take the second question first. I think we'll come back to the data. I think the customer, I think whether it's coming through the conventional distributor, IFA bank or a fintech, I think performance has and remains as an important parameter. I think having said that, but performance neither was and neither will be the only sole parameter because I think ultimately it's going to be the brand, it's going to be the overall customer service. Also there is a realization today that I think it's performance. I think consistency of performance is more important rather than performance for that one day at that point of time. I think we have seen, adding to your question, over the last 10 years, investors, irrespective to which channel they are coming, they're evolving. Investors are deciding which five, six funds they want to invest. They pick up the funds, and it is not necessarily based on the fund only one parameter that is last 12-month performance. It is more consistency of performance along with the brand, service, the local service and multiple things. That's exactly the reason, I think if you see from our perspective, we continue having a very strong network of 270 branches, 85,000 distributors. At the same time, keep investing in a digital ecosystem where we are doing almost 58% of any purchases are coming through that. I think performance remains was and remains important. I think it's a complete ecosystem around it. The one big change is people like to see consistency in performance rather than just a flash in the pan. Sure. Yeah, that's elaborate. Maybe on the first question, you know, your sharp decline in market share for individual equity segment through the direct channel in B30. Yeah. I think, you know, again, you know, the B30 more has been towards the equity flow. You know, as I mentioned in the past that in our earlier conversation, that look, we have been you know, lagging in terms of our overall equity sales. You know, which will come with a lag effect because, you know, obviously last two to three years have not been so good because of the transition as well as the fund performance. If you look at the last six to nine months, you know, the performance has come back sharply and most of our funds are now doing good. You know, the flows will come with a lag effect. That's how you know you'll see that, you know, whatever we have seen the decline over a period of time, we're likely to recover this. Still, I would say that, look, our contribution from B30 locations still remain at 17.5% as compared to 16.6% of the industry. just to interrupt, I think I was asking more from the differential between direct and regular in B30. The market share losses seems to be more profound in the direct channels. I think that's what I was, you know, kind of trying to understand. No, again, that the direct is even more profound because of the performance. See, you know, the look of a guy who's, you know, like, you know, because there is no, you know, they are looking at a very near-term performances, you know, when they are investing, especially for last two years, you know, last two years, if you look at it in the COVID, people who have been investing direct are more because of the fact that, you know, where the performance has been. They've been investing into those schemes through various partner websites. And there, you know, probably our schemes are not featuring. We understand that. Now if you look at most of the partners, RIAs, et cetera, you know, our performance have been featuring in, you know, in any of the competition matrices. You know, our schemes are featuring there. Obviously we see that, look, we'll be able to recoup much of the market share loss over there. I think the way we are seeing the change in trend in overall AUM, I think we are confident. I think over the next few quarters, equity will also market share we'll be able to regain the market share. Definitely. Thanks and all the best. Thank you. The next question is from the line of Abhishek Saraf from Jefferies India. Please go ahead. Hi, good evening, everybody. Thanks for the opportunity. Several of my questions have been answered, sir. Just a few of them remain. If you can just help me understand on the NFO part, I mean, how much money did we raise in this quarter in NFO? If possible, to break out across different launches. Secondly, if I see on the industry NFO traction, clearly there has been a sharp dip. 2Q was very, I mean, high on NFO mobilization, and 3Q kind of came down. Are you expecting or are you seeing some kind of NFO fatigue which is setting in? Or do we still expect that the kind of NFO momentum we have seen across industry that is going to persist for at least next few quarters? That was on NFO. Also if you can help me understand, is there any product gap in the whole equity offering that we wish to do apart from the ETFs that are lined up? These are my questions, sir. One more that I'll follow up later. Sure. Thanks. Okay. As far as the NFOs are concerned, as we mentioned, I think in our presentation, we did one fund, which was again a unique product offering. Before this we had done the Flexi Cap. I think from our perspective, we do not see any major NFOs coming up from our side. We will continue filling up our product suite by coming up with unique products. I think a lot of these products that will come, we will not like to go for mega NFOs for two reasons, which I'll try to address after this. I think the key thing is going to be we'll continue to completing our product suite and let the investors and the advisors decide as and when they need. Example, in the Q2, we launched our IT ETFs. Now I think Auto ETF, Silver as a fund of funds, electric vehicle fund is coming, Europe fund is coming. You know, I mean, there are a couple of things that we'll keep launching and our objective will not be to come up with one mega fund. The reason why I say this, you know, I think we clearly believe, I think, we do not want too many first I think go aggressive in pricing and try to raise a lot of money. I think we believe, I mean, like I mentioned earlier, it has to be profitable for us and we, I think we'll prefer seeing investors coming over a longer period of time rather than getting from risk management point of view, getting INR half a million from investors in 10 days and all these investors ride the same cycle. I think from our perspective as a better risk management, we like to see investors coming over a longer period of time rather than just an NFO. I, while from the industry point of view, I will not be able to comment too much whether the fatigue is there or not, but from our side you will not see any mega NFOs. I think we like to go with a steady growth going forward. If you can just touch upon how much were we able to raise in this quarter through NFO and route? I mentioned that, Sundeep, that look, you know, we are not raising too many NFOs. We just did one NFO last quarter, which was the Taiwan Fund, and we raised about INR 620-odd crores. The last one was only one NFO, which was Taiwan Fund. Prior to that, you know, that quarter we had two funds. One was on the ETF side and one was the Flexi Cap Fund. The previous quarter we raised about INR 3,800-odd crores. The last quarter we raised about INR 620 crores. See, the important point which Sundeep, you know, did mention that look, you know, we do not want to grow too much of assets, you know, unless there is a unique, product which we want to offer to our investor as an investor-first philosophy. It is not that we go for a me-too kind of a product and launching large NFOs. Yeah. Thanks. I think that's quite helpful. Lastly, one bit on the interest rate side. Given that interest rates are expected to go up across the board, what effect do we see for our debt funds? Debt funds had very good inflows in FY 2021, but after that it kind of petered out for the whole sector. Can we expect that this year? What is your outlook for the debt fund flows given that interest rates will be on a rise? Secondly, what that could mean for our other income pool, which has been a bit volatile. Going ahead with the mark-to-market impact that you also referred to during the early part of the presentation. Could we kind of be building in that kind of impact further in FY 2023? Well, I'll request Aashwin Dugal, our Chief Business Officer, to take the first part which is our portfolio for the investors. Ashwin? Thanks, Sandeep. This is Ashwin here. Just to answer the first part of the question relating to you know the likely interest rate scenario which is panning out for the markets. I think we in our portfolios you know as Sandeep and Prateek have mentioned we have now a full suite of products both on fixed income and in equity. As we go along for the next quarter at least you know we see most of these flows coming in at you know at the shorter end of the curve. Okay. That has been the case over the last you know I would say about two quarters. Whereas, you know, the expectation had been that, you know, the central bank action, et cetera, would lead to, you know, eventual hike in interest rates and withdrawal of liquidity. Hence we've already seen over the last two quarters the bulk of these flows coming into the liquid and ultra short-term categories. However, there is another segment of funds which is largely roll-down products which are in that three to five years buckets, both on ETFs as well as, you know, some of the actively managed funds which have been repositioned in that space. Therein we are seeing, you know, some money which is coming in purely because it provides the investor visibility of returns for the period that they are invested for. From that point of view, I would say that, you know, we are fairly well positioned to capture any, you know, cycle, you know, on the fixed income side, you know, and be it at the longer end or at the shorter end, and we have the full suite of products. On the realization thereof, you know, how it could impact, I'd ask Prateek to shed some light. I think, you know, obviously we have seen that, you know, in many of our funds, you know, given how our performance has been and how the portfolio construct has been, you know, we have been marginally improving our realization. We expect that, you know, while there could be, you know, because most of our portfolios were constructed in the recent times, you know, and they were at a lower yield. Hence, we do not see any compression coming in. Once, you know, the net yields for the investor keep going up, you know, there will be a propensity for us to charge more. Obviously, it will be interesting to see from second quarter through to FY 2023. You know, we may see, you know, because right now the debt yields are at, you know, at one of the lowest. You know, if it goes up then probably, you know, from our perspective, we will be able to charge slightly higher expenses, from third quarter FY 2023. Thanks a lot, Prateek. Thanks, Aashwin. Thanks, Sundeep. Yeah. Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead. Yeah, thank you for that follow-up, Jain. Firstly on the FinTechs, you know, the kind of scale-up we've seen these FinTechs, you know, in terms of distribution, what is the size that Nippon would have been to these FinTechs? Secondly, in your non-MS business, what is the revenue contribution at this time to our contribution from the non-MS business? I think regarding the fintechs, you know, Arpan, our Chief Digital Officer, I'll request him to take this question and then I will come back to Prateek. Thank you, Sundeep. Actually, on the fintechs, can you repeat what on the fintechs? What was your exact point on the fintechs please? See, the size of the fintechs has been growing in terms of distribution. Sure. Where are we in terms of market share? What kind of tie-ups do we have with these fintechs who are distributing and further scale-up possibilities on that side? Sure. Thank you. What we have done with the FinTech is that we have been able to build our complete digital ecosystem, where they have been able to integrate with us. I think what really matters in this digital architecture is how quickly and efficiently can you build a very agile ecosystem which can be permeable as per the various users or journeys that various FinTechs might have for their customer journeys. I think Nippon leads in that. We are always the first point of contact for any potential FinTech in this country, where they would want us to help them hand-hold in getting into this advanced value. Once we are into business with them, we have seen that we always feature in the top five of being able to attract investors. That has been because of our exciting digital channels and of course our low product performance and other factors which my colleagues were talking about. Yes, on the FinTech piece, you know, Nippon is probably one of the top picks for any existing and new FinTech who wants to get into the mutual fund space. Okay. Any numbers you want to quote out there as to what kind of size is the FinTech industry and what would be the market share of Nippon there? You know, if you look at the FinTech industry right now, the entire AUM is 1% of the overall industry AUM. So on the AUM piece, it is negligible, but what it is doing is it is opening up the market and helping a lot of millennial customers coming into the mutual fund industry fold, which itself is very welcome. As I said, you know, on our share piece, we are on the top 5 across any FinTechs in this country. Just to add to it, if you were to look at it, a lot of FinTechs, like in mutual funds right now, so FinTechs have been small. I think you've seen especially in the broking side, FinTechs have done a great job. You know, I think they've been able to get a lot of new investors, new demand accounts. If now you were to marry that with the increase in our own ETF investors, that tells you the story. I think we have a well-integrated API ecosystem, I think integrated with majority of the FinTechs, which is not only related to the ones into wealth management and mutual funds, but also into the Indian capital markets. I would attribute a lot of increase in our investor base, which has happened in the last 18 months in ETF due to this FinTech integration. Yes. Under my second question on the non-mutual fund revenue, AUM, debt and tax contribution. Yeah. We make almost about 100-odd crores, you know, on the non-mutual fund businesses. You know, almost 50% would be the net profit on that. Okay, great. Lastly, just looking at one more. What is the plans of utilization of the cash? Any further developments that you can talk about? I think we continue exploring options, you know, both, as I mentioned in my earlier address, you know, organic and inorganic opportunities. That is number one. I think for us the key thing is that it should be accretive to the shareholders, number two. I think we are not only talking of acquisition of another asset management company or something. I think we remain open to invest into companies which can help us increase our ROE in our entire operations. If you were to look at it, we are doing almost 50 million Indian transactions, you know, per annum. There are a lot of things, you know, where I think we see opportunities of investing which can help us increase our ROE. Whether it's asset management company or anything else, any other company which can help us increase our ROE, that is our approach. I think we continuously keep evaluating and whenever there's something concrete, I think one of the calls we come and share with you. Good. Thank you so much, and all the best. Thank you. Thank you very much. As there are no further questions, I will now hand the conference over to Mr. Sameer Desai for closing comments. Thank you everyone for joining this call today, and thank you to the team of Nippon Life India Asset Management for giving us this opportunity to host the call. Thank you and goodbye. Thank you very much. On behalf of JM Financial, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.