Aditya Birla Sun Life Amc Ltd (ABSLAMC) Q3 FY23 Earnings Concall Transcript

Aditya Birla Sun Life Amc Ltd (NSE:ABSLAMC) Q3 FY23 Earnings Concall dated Jan. 28, 2023.

Corporate Participants:

A. Balasubramanian — Managing Director & Chief Executive Officer

Parag Joglekar — Chief Financial Officer

Analysts:

Jignesh Shial — InCred Capital — Analyst

Swarnabha Mukherjee — B&K Securities — Analyst

Lalit Deo — Equirus Securities — Analyst

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Dipanjan Ghosh — Citigroup — Analyst

Abhijit Sakhare — Kotak Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good morning and welcome to the Q3 FY ’23 Earnings Conference Call of Aditya Birla Sun Life Asset Management Company Limited, hosted by InCred Equities. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Jignesh Shial from InCredit Equities. Thank you and over to you, Mr. Shial.

Jignesh Shial — InCred Capital — Analyst

Yeah, thank you, Michelle and good morning, everyone. On behalf of InCred Equities, I welcome all to this Aditya Birla Sun Life Asset Management 3Q FY ’23 earnings conference call. We have along with us, Mr. A. Balasubramanian, Managing Director and CEO; Mr. Parag Joglekar, Chief Financial Officer; and Mr. Prakash Bhogale, Head, Investor Relations. We are thankful to the management for allowing us this opportunity.

I would allow like to hand over to Mr. A. Balasubramanian, Managing Director and CEO of Aditya Birla Sun Life Asset Management for his opening remarks. Over to you, sir.

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. Thank you. Thank you for the introduction, and good morning to everyone. I hope you all had the opportunity to go through the earnings presentation, which is available on the stock exchanges and our website. Let me, of course, first begin by wishing all of you happy and prosperous New Year, as we begin 2023. And let me start with the updates on the economy and mutual fund industry.

On the economy front, 2022 was year of re-setting and recalibrating. From the old theme of easy liquidity and extreme low interest rate, 2022 saw one of the fastest and highest interest rate hike cycle. Highest rise in global inflation was accompanied by highest fall in NASDAQ stocks. Erosion in equity value and increase in bond yields resulted in one of the largest mark-to-market losses in the world economy.

The US gold bond represents an inverted yield curve with a 10 to two-year inversion at more than 50 basis points indicates risk of sentiment as a result of concerns fueled by recessionary pressures in the U.S. We recently came out with our annual investment outlook for the year 2023. And as per our research and analysis, we expect inflationary pressures in India to ease based on expectation of normalization of high food inflation and supply chain. Moreover, the moderation in global inflation will also aid in domestic inflation management and also mean that pace of rate hikes normalizing.

We expect internal rate to settle at 6.5% for India in FY ’23. We expect credit growth to pick up this time. And while urban consumption will continue to drive growth, one can expect a revival of rural consumption from the slowdown seen in 2022. While global headwinds will continue to pose challenges in 2023, India is in a relatively better position with a more domestic demand-driven economy, political stability, increased government spending, supported by robust tax collection and uptick in private capex boosting investment going ahead. And over a longer term, positive levers in the form of strong political leadership driving pace of reforms, demographic dividend and China Plus One strategy, domestic manufacturing and digital push should drive India to become the third largest economy by 2030.

With respect to mutual fund industry, during the quarter, the quarterly average assets under management for the Indian mutual fund industry touched INR40.25 lakh crore as on December 31, 2022 as against INR of INR13 lakh crore as on September 30, 2022. The industry grew by 5% to INR38 lakh crores as on December — from December 31, 2021. In Q3 FY ’23, the mutual fund industry witnessed some fall in inflows across various equity and ETF schemes on a quarter-on-quarter basis. A significant proportion of the inflows came from small cap, mid-cap, sectorial funds and larger mid-cap funds. As on December 2022, the total number of mutual fund investors stood at 14.29 crores versus 13.99 crores on September 2022, an increase of 2% on quarter-on-quarter basis.

Continuous awareness initiatives in SIPs have improved monthly SIP contribution. The overall monthly SIP book was the highest ever, INR13,525 crores in December 2022. The total number of SIP accounts were about 6.12 crores. The industry witnessed net equity sales of around INR1,000 crores, excluding index funds in Q3 FY ’23. However, there was a reduction in net inflows as compared to the previous quarter, while the net flows were around INR1,500 [Phonetic] crores. NFO contributed around INR21,000 crores, of which around INR8,700 crores had come in equity and the rest of it came in [Indecipherable]. In general, equity flows have been coming down mainly on account of prevailing interest rate scenario. On account of continuous awareness compliance by mutual fund industry, the overall retail concentration in the industry has increased in excess of 57%. However, overall reduction in fixed income assets is also leading to a higher dominance of individual mix to the overall industry area.

Coming to ABSLAMC performance, ABSLAMC has always been a leading investment manager that have committed working towards financial inclusion, deepening our financial market and development of mutual fund industry. Therefore, in order to build business scale and ensuring long-term value for our customers and shareholders, our area of focus are scaling retail franchise and diversify product offering, expanding geographic reach and strengthening multi-channel distribution network, leveraging digital platform deliver best-in-class service. And all of this are driven by strong and robust risk management and governance framework.

Our total quarterly average AUM for the quarter ending December 2022 stood at INR2.9 [Phonetic] lakh crores. Our total mutual fund quarterly average AUM was INR2,82,000 crores [Phonetic] with a market share of about 7.9% ex ETF funds. Our equity fund — mutual fund AUM for the December 2022 quarter was at INR1,20,000 crores [Phonetic]. Our overall equity mix stands at 43% [Phonetic].

Customer association remains an integral part of our strategy. We’ve added about 0.1 million new folios in Q3 FY ’23. And with this, our overall portfolio stood at 8 million customer base. Our investment performance has been steadily improving under the pro-investing concept where we are currently promoting such as Large Cap, Flexi Cap and Balanced Advantaged Fund would remain the core portfolio of every investors. In addition to this, we also had good performance tracker called thematic funds. At the same time, we still have some distance to cover in some of the other key funds, which hopefully should help in improving the flows in the coming period.

And fixed income dominance continued to remain focused area in current interest rate environment and we have launched products in the fixed income category to provide solution to the customers. In fact, we have an early more advantage of launching Target Maturity Fund during the year. Our continued efforts are in leveraging bouquet of existing products, while launching new products to build size and scale. We have been growing our retail franchise over the last few years with a special focus on increasing market share.

In B-30 Cities, we have seen a marginal improvement in our B-30 market share in this quarter. Building SIP book is our current constant endeavor to ensure customers stick in as a long-term value for investors. We are also creating awareness about the multiple SIP feature the eases the process of investing in multiple schemes as well as act as an FSD tool for goal-based investing. In order to further increase our SIP book, we have launched Turbo SIP linked to the market valuation. Sampark [Phonetic] SIP will target mid-sized corporate employees, [Indecipherable] SIP will target employees to employee and Sampoorna SIP on the lines of Freedom SIP. As a consequence of our monthly SIP — as a consequence of this, our monthly SIP book increased from INR892 crores to about INR940 as on December 2022. Currently, we have around 32.6 lakh live SIP account with Aditya.

Our multi-channel market nature will deepen our presence. Our market share [Indecipherable] positive results. Virtual Relationship Manager model has activated 2,200 our distributors and through Sampark, our distributor onboarding initiatives, we empaneled over 6,500 distributors. Customer loyalty and deeper engagement and service differentiation remains the cornerstone of our service to sales model. Currently around 230 dedicated time professionals have been deployed to act as a single point contact for guiding and servicing investor’s needs.

With respect to our overall mix between retail and institutional customers, 51% of our asset contribution comes from retail investors as of December 2022. In the same manner, the contribution from B-30 Cities also have grown to 17%. Our focus in building retail both in B-30 and T3 market remain integral part of our overall strategy. On the digital front, we continue to collaborate with the fintech partners to increase overall digital engagement and all these contributions. We have on boarded 70% of our new customers digitally. Currently, 85% of the overall transactions are done digitally and 89% of customers are now serviced by digital platform. We also empaneled 91% [Phonetic] of our new MFDs digitally in the last nine months ending December 2022.

Passive and alternate asset business. Our passive products offering grew by 4 times to INR21,619 crores as on December 2022. Our existing passive bouquet has grown over — to our 35 products and we have around five products in the pipeline to be launched and the customer base in this category has grown to around 4,70,000 folios. Also we are industry leader in debt index fund which grew by about 24% on quarter-on-quarter and around 5 times on a year-on-year basis. On the PMS and AIF front, we have raised commitment of about INR350 crores in India Equity Service-Oriented funds in Q3 FY ’23. And likely to close this fund by end of March this year. And we also have four products in pipeline under AIF to be launched in the next few quarters.

On the offshore front, we have granted approval by International Financial Services Authority, which is a GIFT City to act as a registered fund management entity in the non-retail side of GIFT City. Prospectus for ESG engagement fund has also been filed and we got the approval also for launching this fund very soon. On the real estate side, we are collaborating with BentallGreenOak, which is Sun Life arm based out of New York to conduct brochure for offshore and soon we’ll start seeing the impact of this coming in as we start the engagement at the ground level [Indecipherable].

Now moving on to the financial numbers, in Q3 FY ’23, the revenue from operations is at INR314 crores versus INR311 crores in Q3 FY ’23. In Q3 FY ’23, operating profit before tax is at INR174 crores versus INR173 crores in Q2 FY ’23. For nine months ending December 22, revenue from operation is at INR930 crores as compared to INR969 crores in the nine months FY 2022. Operating profit before tax, excluding extraordinary items for nine months ending December 2022 is at INR518 crores as compared to INR566 crores [Phonetic], the 9 month of FY ’22.

With this, I would like to conclude and open the floor for any questions that you may have.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead.

Swarnabha Mukherjee — B&K Securities — Analyst

Yeah. Thank you for the opportunity, sir and good morning. So, I have three, four questions. First one, if you could let us know whether like we had — there was a comment during last quarter’s call that because interest rates are hardening and we’ll get a higher rate on the debt products. So, are we able to now garner higher yields on the debt side? Or is the fact that our overall revenue level yields are holding up is primarily a change in the asset mix? So, I wanted your comment on that.

A. Balasubramanian — Managing Director & Chief Executive Officer

We’ll have Parag to answer this question.

Parag Joglekar — Chief Financial Officer

So, on the yields are holding up, as you rightly said, one of the reason is our asset base is slightly getting better towards equity and long duration fund. But it’s just starting, it will take a little time, a couple of quarters to see a big impact, which we are thinking that once the interest rate get hardened, the duration product will see flows in the — those schemes.

Swarnabha Mukherjee — B&K Securities — Analyst

Sure, sir. Sir, does this — yes, please go ahead.

A. Balasubramanian — Managing Director & Chief Executive Officer

Just to add to this Swarnabha, we have positioned some of our fixed income product. Our three products we already positioned both for retail as well as for institutional customers. And while we have been promoting it quite continuously, citing opportunity to build fixed income and asset class this financial year, the real flow is yet to start coming in, given the fact — only now we believe that rate cycle — a big rate cycle will come in soon. And portfolio yield will start reflecting the real outcome that can add to the customers. And also we see flow coming in from now onwards. Probably, we have kept ourselves positioned to have those products readily available. So that, the readiness will ensure that flows coming in. That’s the way we are positioned right now.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, sir, that’s great. So, a follow-up on this. So, does this mean that, say, for example, the general — I mean, general stance that we see, is that we expect in the industry because of the increase in assets as well as what had played out in terms of the commission for the newer flows on the growth-oriented side also that there will be dilution in the yields also going ahead, more a secular trend. But in the near term, so maybe over the next three, four quarters as this — what you said it plays out, then should we see some stability in yields for the next three, four quarters? Would that be a right assumption?

Parag Joglekar — Chief Financial Officer

Yeah. So currently, as you rightly said, equity, we may see some debt due to the new asset coming at slightly higher costs compared to the stock, but if the composition of equity goes up and the long duration product goes up in the overall equity AUM — overall AUM, then we may see a stability in that yield depending on the what mix it plays out over the period.

Swarnabha Mukherjee — B&K Securities — Analyst

Sure. So I mean, just to harp on that point a little bit. So, if equity also increases in the mix where it is much higher, even at a slightly lower rate than what we have seen earlier, but it is much higher than the blended yield that we have. And also, we are able to push in slightly higher yield in that side. Then I mean, ideally, it should stabilize, right? So, that’s what I wanted to confirm, because both these levers are free now.

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. I think your assumption is right. I think that should stabilize for the reason I already just explained. Even the fixed income, the capital managed fund plan also starts growing, that the incremental contribution could also come from there. So therefore, these two combinations put together and with the growing of Index Funds, which is lower margin assets. But still overall, we’ll be to maintain at least the near — immediate future.

Swarnabha Mukherjee — B&K Securities — Analyst

Great, sir. Bala sir, could you name the products that you mentioned that you have positioned for both retail and institution to capture this higher yield cycle?

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. One is the low duration fund on the 9 to 10-month kind of category. Dynamic Bond Fund is about two to three years duration period and medium-term plan, again with about two to three years duration and Credit Risk Fund, which, of course, goes down in terms of credit curve to AA, AA minus. These are the four funds we have positioned as a retail concerns. As for institutional customer concerns, at this point of time, most of the inflows have been coming in the Target Maturity Fund.

At the same time, we have positioned ourselves with the elevated yield on the one-year rate as well as about two-year rates, right from money market funds to the corporate bond fund we have positioned, including floating rate fund also we have positioned as far as the corporate concerns. And these are the funds which are identified clearly for both HNIs and retail and corporate. The sufficient push is being given around positioning point of view.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, sir. Very helpful. Sir, now a question on the channel side. So, what I see over the last two quarters. So of course, 1Q in terms of AUM if we look, it will anyways look like a blip because the market was down significantly. So, there is a MTM impact. But if I look at Q2 and Q3, what I can see is that a higher share of growth is being borne by the MFDs and the national distributors, while in the bank and the direct channel, there the numbers have been tepid. So I wanted to understand, so banks, I believe that there is also a lot of variables at play. But in direct why it has particularly in this quarter, they even gone down slightly. So, if you could comment on what is happening on this side?

A. Balasubramanian — Managing Director & Chief Executive Officer

Since direct is a combination of one, the reduction in the fixed income assets. I think we have seen net outflows as far as the actively managed debt funds concerns. I think most of the money have moved to the liquid fund, and some money, of course, which has moved out, I would assume would have gone to the deposits, deposits during last quarter, priced by banks are also pretty high. I think mainly this is on account of that. But the channel contribution from IFAs are also looking up. I wouldn’t think we can attribute to the real incremental growth income. It’s more of mix of assets, it would have also did that contribution coming from higher sales. But the direct is mainly the reason why I just mentioned.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, sir. So, even in the equity sourcing numbers that you provide in the presentation, I think there is a slight dip in direct this quarter. So that — that is why — that was my question.

Parag Joglekar — Chief Financial Officer

So it is not major. It’s a slight dip in direct compared to MFD because there may be some movement which has happened in the direct AUM and institutional customers. And there may be some movement on the MFD side of higher share of the sales, which has happened. But there is a very small movement which has happened.

Swarnabha Mukherjee — B&K Securities — Analyst

Got it, sir. Yes. Very, very helpful. Just two bookkeeping questions. One is if you could tell me the reason why the fees and commission expense was slightly higher this quarter. And second is, if you could share the SIP AUM number at the end of the quarter, sir? Thank you.

Parag Joglekar — Chief Financial Officer

SIP AUM is INR57,000.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay. And on the fee and commission, sir?

Parag Joglekar — Chief Financial Officer

Swarnabha, it’s INR53,000.

Swarnabha Mukherjee — B&K Securities — Analyst

INR53,000. Okay, sir.

Parag Joglekar — Chief Financial Officer

Swarnabha, the fees and commission has gone up slightly because we have launched a new AIF product in the current quarter for which we collected INR350-odd crore of commitment on which the brokerage, which we have given our commission, which we have paid out, that has been sitting in that line.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, sir. So this won’t be a recurring number, right? So, this is a one-off?

Parag Joglekar — Chief Financial Officer

No, no. It will be a recurring because it’s more of a trail which is paid.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay. Got it. Thank you so much, sir for the detailed explanations and all the very best.

Parag Joglekar — Chief Financial Officer

Thank you.

Operator

[Operator Instructions] We have the next question from the line of Lalit Deo from Equirus Securities. Please go ahead.

Lalit Deo — Equirus Securities — Analyst

Yeah. Good morning, sir. Thank you for the opportunity. So, sir, just I also have one question. So, while there has been an increase…

Operator

Mr. Deo, we are not able to understand what you’re speaking. I would request you to keep your mic a little bit farer from your mouth and speak please.

Lalit Deo — Equirus Securities — Analyst

Yes. Am I audible?

Operator

Yes. Please proceed.

Lalit Deo — Equirus Securities — Analyst

Yeah. So, I had a question on the SIP inflow. So, while there has been an increase in the absolute inflows but it seems like we have lost some market share also in the inflows as well as in the new registrations also. So, just wanted to understand like how are we positioning ourselves to recoup some of this lost market share? I wanted your comments on the same?

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. Thanks Lalit for the question. Now the SIP flows, what we have understood on the base of the analysis, the large SIPs incremental subscriptions have gone into the funds, which are, I would say, the Nifty and the Nifty 50. Basically, gone more towards small and mid-cap and to some extent on the large and mid-cap, which is what I think have seen net inflows. In other case, of course, these three funds generally not receive as much of flows that we should have received. But most of the flows for us, the registration have come into the our existing the flagship fund. But from an industry point of view, the large flows have — whatever the increment flows have come on to this. That’s the primary reason because of which the — our registration rates were marginally low.

Though industry also have seen a reduction in the registration and compared to the overall basis. In other case, this was the primary attribution. That’s something which I just mentioned in my speech as well that there are a few funds where we have to catch up with respect to the performance, we have to cover some distance. I think once we are done, then the positioning could also happen. And second, we also launched a few of the SIPs to like cargo SIP I just mentioned about. We also launched a few of their new SIPs as a product. And again, it’s being prevent the FDAs distribution community as well as the sales team to bring in some kind of traction. Some of newly launched features in the SIP side.

Lalit Deo — Equirus Securities — Analyst

Sure, sir. And sir, like in your earlier comment, you mentioned that there have been some outflows in the fixed income funds where the funds are being slightly moving towards the deposit sides due to the higher rates being offered by the bank. So, how long do you think that this trend will continue in the future? And like since when do we expect that we can get a high — good share of inflows in the debt side?

A. Balasubramanian — Managing Director & Chief Executive Officer

I think the way we see is while it will be difficult to actually predict how far the banks will be aggressive in terms of raising deposits. Given the high credit deposit ratio, which is more in the range of about — the growth is about 30% — 130%, sorry. That being the case and our own belief this may at least carry on for at least this year till March ending. At the same time, we also believe that as the credit demand continues to rise, we will probably see marginal uptick in the yields, especially for spreads widening and that’s the time the risk-reward ratio, including adjusted for back benefit, where mutual fund will become more attractive. Once the rate stabilizes, which is what we believe — that once the rate stabilizes I think there will be stability both in the deposit rates which is being offered by banks as well as lending rate and the market rate stabilizes, then mutual fund will become more attractive compared to the other fixed income instruments. So, that we believe that could happen in the 2023 second quarter onwards.

Lalit Deo — Equirus Securities — Analyst

Sure. Thank you, sir.

Operator

[Operator Instructions] We have the next question from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Yeah. Good morning, sir. Sir, just a few questions. Firstly, in December, the SEBI had come out with a press release with regards to reconsideration or the restructure and all the other expenses that the AMC charge. And I think additionally, yesterday, there were some media articles which have kind of outlined some contours, which the SEBI is kind of considering wherein they’re talking about capping the TERs at the scheme category level and also subsuming the GST and the brokerages, which are out of the TER currently into the TER. So, your thoughts there as to whether what kind of, what kind of things the SEBI is considering or how this could pan out and how could really this impact the yield for you guys if such things are being brought across? That would be my first question.

A. Balasubramanian — Managing Director & Chief Executive Officer

Yes, sure. Thanks. Thanks, Prayesh for this question. Of course, there is a deliberation within SEBI and there’s a — SEBI always drives this decision through with MF Advisory Council, which is setup for the development of mutual fund industry. In fact, I’m also part of the member of this MF Advisory Council. The deliberation has been how the investors can benefit as a form of reduction expenses, which basically are coming from the fact that industry has been growing steadily each year. Now it has reached about INR40 lakh crore [Phonetic] size.

Some bit of scale benefit should come to the investors and at the same time, the overall AMC growth should continue to be the driver of the Indian economy. And these two aspects, they have of course have in their mind. There is a deliberation and in order to relook at the current infrastructure and look at the merit whether it can be further reduced. At the same time, the industry continues to add more customer base and go to the next level of growth.

The way I see is and as it is basis assuming scenario that they go by what they are saying, then of course, there will be need to look at the cost of share on one side and an operating model on other side. At the same time, focused on volume. The way — so far, we have built in the last almost nine [Phonetic] years despite the fall in the expenses as you would have seen the life purchase given in the year 2018, have the AUM lower the expenses. And despite living in that kind of scenario, and AMCs have been able to adjust and continue to build a scale, continue to build the expansion. At the same time, generate absolute profit, which could be — which is a free cash flow generation that they do and also bring in absolute profit bringing in which is largely coming on the back of the scale benefit. So, that’s the way I will see it.

What extent the reduction in margins could come at this point of time, very difficult to gauge. Given the fact that whatever is being discussed, it is just deliberation and industry has been making a recommendation, the need for industry growth over the next level, the need for distribution expansion and increase in further growth in equity AUM, in order to give more stability to the capital market, given the fact the FPIs continue to remain a seller in the market, all these representations are being done. And till such time, the debate happens, the discussion happens, very difficult to come to any conclusion at this one point of time, how it could impact. Anyway that comes, of course, the operating model also need to be suitably looked at to ensure that they remain profitable in terms of absolute growth and absolute profit increase. Maybe the time will come we may have to actually measure the factor on the basis of the absolute profit that is being on the table rather than basis point contribution.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Bala sir, in this context, would we look at — so this is something of the sort is implemented, this would mean 2 things. One, reduction in distribution commissions. Secondly, this could also impact the AMC yield. So, in a way, doesn’t this kind of go against the philosophy of expanding the reach, especially in the current scenario where we want to enhance the reach in the B-30 and deeper penetration of financial products? Doesn’t — if distributor commissions are kind of impacted further, then why would the distributor be keen to distribute these products further?

And like especially on the competitive product, if you look at the insurance sector, we’ve seen that the expense of management ratio has kind of been completely getting deregulated wherein they just capping the 30% expense of management and the commissions could go higher as well going ahead. So in that sense, the competitive products will get better commissions. So, what incentivizes the distributor to sell mutual fund products over other products?

A. Balasubramanian — Managing Director & Chief Executive Officer

Sure. That is the representation, there’s the discussion is on Prayesh. As I rightly pointed out, industry still needs to grow bigger and mutual funds gained significant prominence and under which we have now grown to where are we today in terms of size, INR40 lakh crore [Phonetic] in size, the INR20 lakh core [Phonetic] in equity size. We still have a long way to go with respect to the penetration. I think the point of view, I exactly mentioned basis which the discussion is also happening. That’s why it’s too early to make an assumption that I think the regulation also would definitely respect the need for the growth and need for expansion of B-30 market or maybe deeper penetration in the country.

The need for distribution expansion all happened given the fact we as an industry body have gone and encouraged more and more people to join the distribution community. And we also encouraged under the guidance of regulator. So, keeping all this in mind, I’m sure the representation or the view point that is coming from people would also be taken into account before they come to any conclusion. So, that’s why too early to right now say that it will get pushed through. I’m only hoping that whatever the points that distributor mentioned which we also have echoed as industry players, hopefully, get listened and then they take suitable action accordingly.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

And sir, like if you can help us with some understanding as to segment-wise, what could be the EBITDA for us as an AMC, say broadly, it’s not very specific, but equity, what kind of EBITDA in terms of this you will be earning and debt and liquid and others, that would be helpful.

A. Balasubramanian — Managing Director & Chief Executive Officer

Sure. Parag, will address this question.

Parag Joglekar — Chief Financial Officer

Yes. So, Prayesh the contribution, we monitor and overall — at the asset class level. So equity, more or less in the range of 70 basis, liquid is in around 11, 12 basis and debt is in the range of around 25 to 28 basis.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Yes, that’s helpful. So, if we look at the salary expenses and the cost, what would be the EBIT — the respective EBITDA in the segment?

Parag Joglekar — Chief Financial Officer

So, we don’t disclose these numbers, but basically, equity is more of a retail-oriented products. So, it will have a lot of sales push, which will be allocated to that. But there is no specific number, which we disclose on this.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Yes, I understand. But then honestly, while most of the expenses will be sitting on the scheme. So, on for your — on the AMC books, it will be ideally the fund manager and the research team charges, right? So, can you just — even for the equity segment, what kind of EBITDA spread, EBITDA could you be making, could you give sir, that indicatively out of the…

Parag Joglekar — Chief Financial Officer

It will be more or less in the similar range for EBITDA, which we are currently generating in the proportion. So, it will be similar. I don’t have the numbers currently. It is more in the same range should be.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

All right. All right. Thank you so much and wish you guys all the best.

Operator

[Operator Instructions] We have the next question from the line of Dipanjan Ghosh from Citigroup. Please go ahead.

Dipanjan Ghosh — Citigroup — Analyst

Just two, three questions from my side. One, if you can just — one is a data keeping question. If you can just give your employee count for the quarter. Second, if you can split your revenues into domestic mutual fund revenues and PMS and others for the quarter and nine months. And third, in terms of your alternatives, now you have a strong product lined up, product pipeline. Just wanted to get some sense of the medium-term targets in terms of contribution in revenues or EBITDA level? And also, what kind of incremental cost that will be incurred in getting this part of the business up and going? Yes. I’ll just take the last question first, then I’ll just the number of employees, what, 1,400 is it?

Parag Joglekar — Chief Financial Officer

1,450.

A. Balasubramanian — Managing Director & Chief Executive Officer

1,450 is the total employee count. And I think with respect to the AIF pipeline, as we mentioned, Service Opportunity Fund, we have been running for the last almost 6 months, rather four months. We’ll be closing in the month of March ending this year, 2023. We’ve already done about INR350 crores and incremental collections are still awaited. Once this is closed, we have kept three more products on the pipeline. Again, on the equity-oriented funds and then we think we’ll launch those funds immediately after that.

We also kept one AIF on the fixed income space, mainly taking into account the opportunity that we see on the credit side on a customized product that also we intend to do. And then third, AIF is around the real estate. Having now raised about, current size about INR550 crores in real estate funds. We have been seeing deployment of money leading to a better result from an experience point of view. At the same time, we are also filling a pipeline for launching one more product on the real estate side. So, this is the pipeline that we have and put together, we’ll be launching it as we see opportune time for each of these segments that we are identifying.

What’s your second question?

Dipanjan Ghosh — Citigroup — Analyst

No, sir, just — so one was if you can split your revenues into PMS and mutual funds. And just a follow-up on this part. Would you like to give some color on your medium-term targets in terms of revenue and profitability coming from the alternatives, I mean, on non-mutual side of the business?

A. Balasubramanian — Managing Director & Chief Executive Officer

Sure. Revenue contribution. Yes.

Parag Joglekar — Chief Financial Officer

So Dipanjan, our revenue contribution from the PMS and other alternate assets is in the range of around INR50 crores, INR55 crores for nine months.

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. In terms of outlook on this segment, right now, having now launched — having had the team and having now launched, our idea would be to launch continuously to ensure the size that gets built. As you know, in the AIF space, the money is paid upfront, but the revenue comes as the time progress. So, that is we will do it. Therefore, as Parag mentioned earlier this thing to the extent we have to spend the money to build the future profitability. That’s the model in which we will be running it. Though, I don’t have right now number to give, but clear plan that we have is our product pipeline and the experience that we have created in existing product that has been launched, would help us in increasing our share and for which including fixed income schemes for which we have already getting our products in pipeline.

Dipanjan Ghosh — Citigroup — Analyst

Sure. Just one point, sir, if I had the employee number correctly, it was around 1,450, which seems almost addition of net ratio of around 100 employees quarter-on-quarter. So, where are these employees really getting deployed? Is it on the MF side or just building up on the alternative side of the business?

A. Balasubramanian — Managing Director & Chief Executive Officer

In fact, two, three areas. One is the direct HNIs model we are building in. We have almost about 20 member team. They built it only for Mumbai and Delhi, and we’ll expand this as we start seeing the success in this model. Second, we also added more people on the service side, customer service side, especially in the service to sales arm. And third is the VRM, we have set up a separate VRM cell to increase the number of connects to the people. And last, of course, is on the retail sales side, an increase number of customers. As for the investment concerns, we added about — our analysts, we added about two, three more analysts we have added, especially, the mid-cap, small cap analyst. But these are, of course, one or two member addition both in the AIF side as well as on the mutual fund side.

Dipanjan Ghosh — Citigroup — Analyst

Got it. Got it. Thank you and all the best.

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. Thank you.

Operator

[Operator Instructions] We have the next question from the line of Abhijit Sakhare from Kotak Securities. Please go ahead.

Abhijit Sakhare — Kotak Securities — Analyst

Hi, good morning. Bala sir, just going back to the question on regulation again. So, the last all we had the revision was like in 2019 itself, right. And the regulatory is now wanting to have a look at it again. And going by what we currently have, it’s already like the current framework itself builds some scale benefits to be passed on to the customer, right? So, like what is the regulator worried about that they have to kind of have a relook at it again? And secondly, from an industry point of view, like is there a way to sort of have a, let’s say, more fair distribution between the AMCs as well as the distributors going ahead? Is there a more permanent model that can be worked out, which kind of protects your margins as well on an ongoing basis?

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. Sure, Abhijit. I think the first your assumption that underway the normal review, I think when I go back in the history, to some 12 or the first circulars then they revisited in the 2015, then they revisited in 2018 and 2019, both the time they revisited. After every five years, or three years, I mean they seem to be thinking that there is a merit for them to revisit if there is a merit for them to consider any reduction expenses with respect to giving investors benefit. That’s the primary objective assumptions on which they are coming.

Second is, I think the last few years as is known for a variety of reasons, the active managed funds, would not fit on the benchmark, which is of course not just India scenario, even global scenario. And we also know, of course, for a variety of reasons, the money managers will not fit the benchmark more from the point of view of risk of warning certain stocks which are heavily over weighted in the index and so on and so forth for mismanagement perspectives and that’s something also is making them think is there any merit for that to be cut down. So, this is coming from these assumptions only. As I mentioned earlier, these are deliberations and not necessarily what is being currently assumed would come. Of course, we also cannot rule out any marginal changes also coming in at after multiple round of discussion. That’s what normally they do more of evaluation process that they have, evolving decisions in a consulting with industry. So, let us wait for that. As far as the cost concerns, naturally, if this is going to be continuous in terms of reduction of expenses, in terms of TER, then naturally, the cost structure also need to be re-looked at both at the distribution level as well as the — as well as other cost is involved. Alternatives to be revisited and that’s something my own belief is will evolve as we move ahead gradually. At the same time, keeping in mind the real need for distribution expansion to happen, more and more people should join the mutual fund industry to distribute mutual fund product, therefore, help industry to grow on one side. At the same time, build other alternates, such as the direct in order to reaching out to the customers also on the other side. So, I think all will have to go hand in hand and then keeping in mind the growth needs. At the same time, be conscious about the cost element that all of us as an AMC have to also pay attention to it. That’s I think that’s something which my own belief will evolve.

Abhijit Sakhare — Kotak Securities — Analyst

Got it, sir. Sir, this is helpful. Thanks a lot.

A. Balasubramanian — Managing Director & Chief Executive Officer

Yeah. Thanks, Abhijit.

Operator

We have the next follow-up question from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Yeah. Hi, thanks for this opportunity again. Sir, just on this regulation bit again. So, what are the current brokerage roughly being paid on the equity and the debt side and also the GST rates?

A. Balasubramanian — Managing Director & Chief Executive Officer

Talking about market transaction?

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Yes, for the transaction, what would be the brokerage that would be paying to the booking companies?

A. Balasubramanian — Managing Director & Chief Executive Officer

Roughly in the range of about — about roughly about 10 basis points. Yes, 8 basis.

Parag Joglekar — Chief Financial Officer

So, 8 basis points on the equity side and derivative in the range of 4 or 5 basis points.

A. Balasubramanian — Managing Director & Chief Executive Officer

Yes.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Okay. And what will be that cost on the debt side?

A. Balasubramanian — Managing Director & Chief Executive Officer

Debt is very minimal Prayesh. Debt is insignificant actually. It will not going to come into the fourth decimal [Phonetic] on basis points.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Okay. And what about the GST rate?

A. Balasubramanian — Managing Director & Chief Executive Officer

GST is as applicable, right? It’s not GST, STT is here.

Parag Joglekar — Chief Financial Officer

You’re talking about STT or GST?

Prayesh Jain — Motilal Oswal Financial Services — Analyst

GST.

Parag Joglekar — Chief Financial Officer

So, GST will be on the — depending on the scheme. So, 18% of the fee. So, if it’s 71 basis for this thing, it will be in the 18% of it.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

18% of sales. Okay. Okay. And secondly, sir if you think about the debt schemes, there has been a significant increase in close towards the passive category as well over the normal duration side, right? So, how do you see this? Eventually, even when the cycle picks up, do you think that the flows will be towards the passive categories only? Or do you think that — do you think that the active can see further improvement in both?

A. Balasubramanian — Managing Director & Chief Executive Officer

No, the way we see is there will be a switch from Target Maturity Funds, of course Target Maturity will continue to grow given the fact it has the element of certainty on written expectations. In fact, even Target Maturity Fund also, we all are aligned to the minimum expenses that we’re also charging. Therefore, it is not something non-profitable per se, like a liquid fund where you get about 20 basis points. The same thing that has been being followed in the Target Maturity Fund as well in order to be fair to both investors and even from AMC point of view.

While that’s been the case, we believe that some bit of more acceptance will come for the duration funds, one, in the duration funds written on the restriction in terms of we’ll buy only in [Indecipherable] whereas Target Maturity Fund large there will be restriction in terms of, we’ll mention only in the AAA names are PSUs and SDLs and GST effect. But that is not the case as far as the open and debt fund concern. Also keep in mind, as we go down the credit curve, even to AA, AA+, the pickup in yields has been ranging about 30, 40 basis points, which nobody would like to ignore given the fact a basis point add to the overall return as on fixed income concerns. That why we believe that more participation could come from the HNIs and retail and in the active managed duration funds in the range of about two to three years or two to four years.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

All right. That’s helpful. Thank you so much.

Operator

Thank you. As that was the last question for today, I would now like to hand the conference over to Mr. A. Balasubramanian for closing comments. Over to you, sir.

A. Balasubramanian — Managing Director & Chief Executive Officer

And thank you very much, ladies and gentlemen, for tuning in. And with this, we conclude our Q3 and nine months FY ’23 earnings call. Do feel free to reach out to our IR, Mr. Prakash Bhogale for any queries that you may have. And thank you, and have a nice weekend.

Operator

[Operator Closing Remarks]