Anand Rathi Wealth Limited (ANANDRATHI) Q2 FY23 Earnings Concall Transcript

Anand Rathi Wealth Limited (NSE: ANANDRATHI) Q2 FY23 earnings concall dated Oct. 14, 2022

Corporate Participants:

Feroze Azeez — Deputy Chief Executive Officer

Jugal Mantri — Group, Chief Financial Officer

Rajesh Bhutara — Chief Financial Officer

Analysts:

Rohan Mandora — Equirus Securities — Analyst

Amit Shah — Motilal Oswal Private Limited — Analyst

Mayank Agarwal — InCred Capital — Analyst

Devesh Agarwal — IIFL Securities — Analyst

Nirmal Bari — Sameeksha Capital — Analyst

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

Lalit Deo — Equirus Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Anand Rathi Limited Q2 H1 FY23 Earnings Conference Call.

This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company, as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

[Operator Instructions]

I now hand the conference over to Mr. Feroze Azeez, Deputy CEO. Thank you, and over to you, sir.

Feroze Azeez — Deputy Chief Executive Officer

Thank you, Rutuja. So, good evening, good afternoon everyone. Thanks to joining us for the earnings conference call of the quarter and the half-year ended 30th September, 2022. I’m joined with Mr. Jugal Mantri, our CFO, Group CFO; Rajesh Bhutara, who is our CFO; Vishal Sanghavi, who is our Head IR; Chethan Shenoy, Director and Head, Product and Research; and we’re also joined by the SGA team, which is our Investor Relation Advisors.

Let me begin with sharing a piece of good news from our perspective. In the recently published report by AMFI, for the financial year FY22, we were ranked among the Top 3 Non-bank Mutual Fund Distributor as per gross commission and over the previous financial year, the growth in the mutual fund trail revenues was almost about 72%. And in the B2C category, we were the highest if you exclude the aggregator B2B business models.

Now coming to the strong performance we’ve had in this financial — in this half year, not just on the flagship business, but on all three of the businesses, including the digital wealth and the omni financial channel vertical as well. Our flagship business Private Wealth grew by about 15% year-on-year on AUM, in spite of a very lackluster market and a 3% downtick on NIFTY over 30th September both years, and a 9% increase quarter-on-quarter on the AUM, on the back of huge penetration into the wallets, especially during sideways movement or bad markets and uncertainties, we were able to establish our credibility as a wealth outfit much better during bad times, so penetration has resulted in AUM increase.

And also clients refer you more clients when their friends are struggling with other managers. So that’s why our net mobilization numbers have doubled when compared to the same period previous year. So it gives us immense confidence during sideways movement and not such great times and more volatile times if you’re able to do well and during good times the AUMs has also increased because of the market movement and also due to the sentiment where people want to invest more money. So bad times, penetration, and references become higher and the other two growth verticals do very well during great times. So both all — two correlated variables help you during opposite times. So that’s why you see almost about a 111% jump in our net mobilization numbers for the first half year.

And of course you would have read that we had a great increase in our client base. In terms of year-on-year, we’ve had a growth of 19% in terms of client addition and we are inching towards our target of 10,000 families in a calibrated fashion and the pace of client addition is seeing a very sharp uptick as well. On the digital wealth vertical, the AUM has increased by about 23% to INR949 crores, which is a business, which helps us standardize and scale it using the help of technology, also helps us be abrased with the changes in technology, which can be there in our business on the private wealth side as well. And clients at June grown by about 14% year-on-year to 4,065 clients in the digital wealth vertical.

The OFA business is a strategic extension for capturing wealth management landscape to service retail clients through mutual fund distribution by using a SaaS platform of providing them technology platform. As on 30th of September we had close to about 5,500 mutual fund distributors associated with us, with assets under administration and reporting of about INR85,900 crores, which we currently only monetize as a subscription fee, but later in the life of this business, when we find appropriate could be a important monetizing tool.

So, I personally think that I will stop here and I’ll request Mr. Jugal Mantri to say a few words, and take us through the financial numbers as well.

Jugal Mantri — Group, Chief Financial Officer

Thank you very much, Feroze. Good afternoon to all. Let me also first begin with a happy note to say that the Board of Directors has declared an interim dividend of INR5 per equity share, which is 100% of the face value. This is in line with the company’s endeavor to regularly reward its shareholders.

Despite all the external challenges, the company and its subsidiaries have posted a strong performance for the quarter and half-year ended September 2022, backed by an overall improvement in operational efficiencies. Our consolidated AUM as on 30th September, 2022 stood at INR35,842 crores, which registered a growth of 16% Y-o-Y and 9% Q-on-Q. Our consolidated revenue for the quarter ended 30th September, 2022 stood at INR138 crores, as against INR104 crores in Q2 FY22, registering a growth of 33%, while revenue for first half in financial year ’23 stood at INR272 crores as compared to INR202 crore in the previous first half of financial year 2022, registering a growth of 34%.

Our PBT for the quarter stood at INR58 crores, registering a growth of 40%, whereas PBT for H1 FY23 stood at INR110 crores, registering a growth of 37%. Our PAT for the quarter stood at healthy INR43 crores, registering a growth of 41% as compared to INR30 crores in Q2 FY22. PAT for H1 FY23 registered a growth of 37% and stood at INR83 crores. PAT margin stood at 31.1% in Q2 FY23 and 30.4% in H1 FY23. EPS, earning per share for Q2 FY23 stood at INR10.3 per share and for first half FY23 stood at INR19.8 per share, registering a growth of 41% and 37% Y-o-Y respectively.

Return on equity for first half ended 30th September 2022 stood at a healthy 43%, which was 41.7% in financial year FY22. Another area where we witnessed a strong momentum was the addition in number of client families. We have added almost 1,250 client families compared to same period last year. Our total client families as on 30th September, 2020 stood at 7,928. In the last 12 months, we have added 37 Relationship Manager on a net basis. We continue to remain optimistic about the business potential and will drive towards our results, while assisting our clients achieve high quality experience in the journey of wealth solution.

With this, we will now open the floor for questions and answers. Thank you. Over to you, Rutuja.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]

The first question is from the line of Rohan Mandora from Equirus Securities. Please go ahead.

Rohan Mandora — Equirus Securities — Analyst

Yes, hi, good afternoon, sir. Thanks for the opportunity and congratulations on good set of numbers. Sir, the first question was on the gross inflows, if you could share what was the gross inflows for the quarter and split it across equity debt MF and the primary and secondary indications, sir.

Feroze Azeez — Deputy Chief Executive Officer

Okay, gross or net?

Rohan Mandora — Equirus Securities — Analyst

Gross and net, both essentially.

Feroze Azeez — Deputy Chief Executive Officer

See, we only look at net, because mutual funds when they exit one fund and then re-calibrating their portfolios to our model portfolio, there could be very large gross numbers, right. In a mutual fund if I have five schemes, when I’m changing three, then the gross number will be very deceptive, so the net number, I can give you some color on that. And gross number is very, very distorted. Does that answer? Yes, of course from the MLD standpoint, gross numbers and net numbers can be given to you and I’m sure Jugal and Rajesh, will be able to add there.

So now coming to the net number, which is almost about INR2,500 crores for the first half year, a large portion of that which is almost two-thirds of it goes into equity mutual funds, because we believe that when markets fall and if you’ve seasoned your investors to expect a market fall, because that’s the nature of the beast. They don’t look for reasons for the fall, but they’re in a hurry to actually take action. So last six months markets average have been lower than they were in the previous six months. Hence, we’ve had a net mobilization largely in the equity mutual fund side of almost about INR1,500 crores to INR1,600 crores.

And from an industry standpoint, if you leave SIPs out, the total net mobilization and the mutual fund — equity mutual fund has been INR79,000 crores for the first six months. And if you leave the SIP number of average INR12,300 crores, then the total net mobilization in terms of lump sum, which is the business we are in, unlike several other aggregators, was total about INR6,000 crores, INR7,000 crores, out of which INR1,400 crores, INR1,500 crores or even little more has been our market share in terms of net mobilization and it gives us immense pleasure, because we’re buying low and creating a potential for higher returns for our clients. Otherwise, it’s an academic statement to buy low.

Jugal, if you may want to add a few points and if there is some gross numbers which Rajesh will have on

Jugal Mantri — Group, Chief Financial Officer

No, no, you are bang on number, that in the first half we have added about INR1,650 crore equity mutual funds and there was some exit in debt of about INR200 crores, so net addition was about INR1,500 crores in equity mutual funds. And in case of MLD, there was addition of about INR725 crore and small addition was there in others products to the tune of INR300 crore. So all put together, we have — there was net accretion of INR2,500 crore in the first half.

Rohan Mandora — Equirus Securities — Analyst

Sure, sir. In the MLD gross —

Jugal Mantri — Group, Chief Financial Officer

The MLD gross issuance was about INR2,300 crore.

Rohan Mandora — Equirus Securities — Analyst

Okay. And the split between fresh and — primary and secondary, what is that?

Jugal Mantri — Group, Chief Financial Officer

It’s all primary. So out of INR2,300 crore is largely it is primary only.

Rohan Mandora — Equirus Securities — Analyst

Sure, sir. Just second question is on — yes, sir. Sir, the second question on, Mr. Amit Rathi has resigned from the Directorship. So just want to understand the reason for the same? And are we looking at any replacement for him on the Board?

Feroze Azeez — Deputy Chief Executive Officer

So Rohan, as you are aware, since you have been associated with us, so Mr. Amit Rathi since last three years he has been playing non-executive roles in Anand Rathi Wealth Limited, so he was Non-Executive Director on the Board. And having been decided to pursue his ventures in the financial services and to avoid any conflict of interest or overlapping, he has opted to be relieved from his position as Non-Executive Director. So, and there is no — we have got Independent Directors more — four Independent Directors, which are more adequate and as per requirement of the Companies Law. So, we don’t see that there’ll be any requirement to have any addition on account of any Non-Executive Director on the Board.

Rohan Mandora — Equirus Securities — Analyst

Sir, thirdly, if you can share, what will be the trail income coverage of the fixed cost for Q2?

Feroze Azeez — Deputy Chief Executive Officer

Rajesh?

Rajesh Bhutara — Chief Financial Officer

The trail income, in fact, see, we have seen good traction in the trail income also. And as of now that the trail income, which is getting covered, so this is largely about 85% of the fixed costs that gets covered by the trail income.

Feroze Azeez — Deputy Chief Executive Officer

I would like to add one thing.

Rajesh Bhutara — Chief Financial Officer

Yes, please.

Feroze Azeez — Deputy Chief Executive Officer

So we’ve had a 33% increase in trail income between the same periods of the first half year this year, so the increase is 33%, the overall revenue increase is about 35% in spite of markets not supportive, if they have supported then the ratios could have been far better. So our internal target of having 50% pre and 50% upfront revenues from different sources remains and we are inching towards that, is what is our stance internal targets of getting the 50-50. And of course like Jugal said, 85% to 90% of this trail revenue covers the fixed cost currently.

Rohan Mandora — Equirus Securities — Analyst

Sure, sir. Thanks. I’ll get back in the queue if I have more questions. Thank you.

Feroze Azeez — Deputy Chief Executive Officer

Thank you, Rohan.

Operator

Thank you. [Operator Instructions] The next question is from the line of Amit Shah from Motilal Oswal Private Limited. Please go ahead.

Amit Shah — Motilal Oswal Private Limited — Analyst

First question is, what is your growth outlook and clients with — within the INR50 lakh to INR10 crore bracket?

Feroze Azeez — Deputy Chief Executive Officer

Growth outlook in the INR50 lakh to INR10 crore bracket, is that what you said?

Amit Shah — Motilal Oswal Private Limited — Analyst

Yes.

Feroze Azeez — Deputy Chief Executive Officer

See, our focused segment is INR5 crores to INR50 crores of balance sheet size, okay. So we don’t look at INR50 lakhs to INR10 crores. If somebody has got, apart from the assets he currently consumes, the house he lives in is not counted, if the person has between INR5 crore to INR50 crore balance sheet size, putting all assets together, then he is my target segment. In that segment, we think our growth of 20%, 25% in client set is what is our projections from our business standpoint.

Of course, the pie is expanding at a similar pace from this segment perspective, so getting the similar growth numbers for our business should be possible, given the fact that now that we have been a listed company for close to a year, it creates the perception or at least creates a basic governance kind of a mindset and that helps you acquire more clients. So 20% to 25% growth in the target segment, which we currently operate.

Do we mandate a client to start with INR5 crores? The answer is no. We start them with INR50 lakhs to INR1 crore as well, because if we are able to deliver what the expectation we are creating in the minds of the client over a period of time, he gives us a larger wallet share, because we are very mathematical when it comes to giving our advice.

Amit Shah — Motilal Oswal Private Limited — Analyst

Right. And sir, what would be the cost of AUM acquisition in this bracket versus the above INR50 crore bracket?

Feroze Azeez — Deputy Chief Executive Officer

The cost of acquisition is — the cost of acquisition of AUM?

Amit Shah — Motilal Oswal Private Limited — Analyst

Cost of AUM acquisition, I’m not looking for a direct number, but whether this would be higher than the INR50 crore and above bracket of north, just if you could give some color on that?

Feroze Azeez — Deputy Chief Executive Officer

See the cost of acquisition and AUM addition is negligible. What it’s is, now if I have RMs who have — I don’t have a separate acquisition engine which acquires the clients. So, RMs are the persons who take references from existing clients and I don’t pay existing clients to refer me people. But over a period of time, every decision we take, we give mathematics for our clients better prudence in terms of decision-making. For example, now, if somebody said that he’s got 40% of his money in real estate, I would compute the per annum returns of his real estate portfolio, which you would have never computed, none of us as Indians compute what is the per annum return of a real estate portfolio and still have half our money there, quite a few HNIs do.

So when I compute and show him that he has got 8% compounded return in multiples of value, it will look larger, but when he sees 8%, then it is an eye-opener for him, then he is putting his property on an annual to sell, which I don’t pay any cost for and then when he sells those properties, he consolidates money with us. So if he says, I’m doing very well in mutual fund, then I take a transaction dumped from him and then tell them if you followed by model portfolio, you would be richer or poorer. If he is richer, then he sells this mutual funds from competition or transfers broker code to us. So everything is mathematical. So there’s no cost, which can be ascertained to asset acquisition.

For client acquisition, if you say what is the cost, I would say, there will be some costs, because I do physical events as well. Pre-COVID we used to do a lot of physical events in five-star hotels where you get 200 HNIs in the room and give them a presentation, those are now far and few between. But every event used to call us — cost us an average of INR5.6 lakhs, which in this financial year would be four, five such physical events, which could have gone up to almost 30, 40 events before COVID. So our cost remains low, because we do — we have done about 100 odd webinars where there are about 30, 40 participants each at an average and there is no cost to that currently.

Amit Shah — Motilal Oswal Private Limited — Analyst

Great. And lastly, sir. How do you see the Digital Wealth segments scaling up and what do you see are the key challenges?

Feroze Azeez — Deputy Chief Executive Officer

See, Digital Wealth, if you ask me, the key challenges there are to have a ever changing technology to make sure that we not just — coming to what market does in the digital space, because in the digital space people are focusing on reporting. We are looking at technology to create advice more than report, because reporting is one element of it, so — and execution. So technology for execution and reporting has reached the epitomes in the industry of fintech business, but advice, a creation mathematically and using technology for that is what I think is a challenge which the industry faces.

From our perspective, for us to have a Digital Wealth presence is to create a standardize often what we have. We just run four portfolios, in spite of having a private wealth outfit with 8,000 families approximately, I try and fit all the clients to core portfolios, which are centrally managed and implemented in different markets. So if you speak to a Delhi private banker of RMs, and speak to a Bangalore guy, he is going to give you very, very similar, if not identical advice. So if I have a standardized proposition in the private wealth business, it makes sense for me to see how I can power my RM to not manage 50 clients, but manage 200 clients with technology. So it’s always going to be a digital model, it’s not going to be a pure digital model, assuming U.S. as kind of an extrapolation to the Indian context, which is the behavioral patterns are very different.

U.S. has been investing in capital markets ancestrally, in India my dad never invested in equities. So extrapolating the technology strategies there to this side of the continent, world may not be as relevant. So coming back to your point of question on the technology side, the biggest challenges to use technology to create advice. Our key strengths has been standardization. In spite of standardization, not having a huge appeal in our HNI, it’s difficult to tell him that, sir, I will not customized, I will standardize. But Finance will reach clients only if you standardize, you can’t run 8,000 different portfolio and leave the judgment to 270 RMs and assume that he will get the best efficient portfolios, right. So that’s our strategy.

So if I have a standardized if I’ve been able to bring 270 RMs to the same pace that we all give away our individuality and create similar portfolios, RMs are best poised to use technology to scale, because the toughest part is to convince the clients that you don’t customization. Customization might sound fancy, it is more marketing, but finance will never reach you if you customize a portfolio, because the guys sitting there in Bangalore or in Coimbatore will not know the best finance to create risk rewards which are efficient, it’s like an asset management company saying the sales guy will be the fund manager.

Amit Shah — Motilal Oswal Private Limited — Analyst

Right, right. Thank you for the color, sir. That’s all from my side.

Feroze Azeez — Deputy Chief Executive Officer

Sorry a longish answer to a very pointed question, but couldn’t have articulated that in a fewer words from my perspective.

Amit Shah — Motilal Oswal Private Limited — Analyst

No, no, it’s the color here. Thank you.

Operator

Thank you. The next question is from the line of Mayank Agarwal from InCred Capital. Please go ahead.

Mayank Agarwal — InCred Capital — Analyst

Hi, thanks for the opportunity. Mayank from InCred. So my first question is regarding the RM additions, and you have not added RMs for last two, three quarters, so what is the strategy going ahead? And in this also, what we have learned is that, you also have AMs to RMs, so what was you plan moving ahead? How many AM would you be making RMs and how would your ratio between RM and AM? The AM who would be converted into RM going ahead?

And secondly — second question is a laid up point. Can I get a revenue breakup between mutual funds, other security and other, which you have newly gave for last quarter? Thank you.

Feroze Azeez — Deputy Chief Executive Officer

So I didn’t hear your second question though.

Mayank Agarwal — InCred Capital — Analyst

What is the revenue breakup between mutual funds, other security and IT members and others. So basically you gave the data at the last quarter.

Feroze Azeez — Deputy Chief Executive Officer

Yes, sure. So firstly, let me throw some light on the RM additions. Our RM addition strategy is going to be completely driven by how many people for whom we can currently absorb and make them sizable RMs. So over the last one year, given the uncertainty, we have gone little slow. We’re still added about 30 plus RMs from the AM fraternity largely, lateral hired also happened. Currently we continue to follow the principle of one Relationship Manager mentoring one AM, which has worked beautifully for us. And we have a small group of people who need to reach INR40 crores, INR50 crores of assets and 70 RMs is the limit we put.

So if those RMs cross the bridge, then I have more capacity to transmit the rest of them from the AM to the RM fraternity. So even if I delay an AMs promotion by three, four months, it just solidifies his — and increases his chance of success when he actually transform into an RM. So what will we currently look at? We think that this ratio, because we have not promoted as many, there is more right individuals who are currently potential RMs. So you might see an inversely — inverse correlation between the RMs promoted to what can be promoted, because the rest of them have created a larger pipeline in the interim period.

And from an AUM breakup standpoint. I can just tell you conceptually and Jugal is the best person to answer very, very pointed numbers. So when we look at our client strategy, we look at two-thirds of the money in mutual funds, one-third in MLD and some work in progress, which is raw material coming for alignment into these two products largely, as we recommend only these two, three products today, including debt, equity mutual funds and MLD. So you would see a very similar proportion. It’s not academic that these proportions are not being followed at the marketplace. So that’s why you will see almost about INR18,000 crores, INR20,000 crores of mutual fund assets about INR9,000 crores, INR10,000 crores of MLD and there is a lot of money, which is work in progress, which first moves to our DMAT account and then we align it to our strategy, where the client gets efficiency as the prime driver and decision-making criteria.

Jugal, if you may want to add a few things and just point any number?

Jugal Mantri — Group, Chief Financial Officer

Well, I think what you said is that, in terms of the relationship manager additions, one thing is, which is absolutely clear is that besides 271 Relationship Manager, we have got a strong force of 265 Account Manager. And as you have rightly said that the addition to the RM fraternity, that is graded process and these people are upgraded and added to the RM fraternity over a period of time. So just to answer what, Mayank has asked, to reaffirm that, that very — we have got a very, very strong force, which is up for elevated in next 18 to 36 months time. And that itself has got the potential to double our RM force to almost 500 plus number of RMs.

Mayank Agarwal — InCred Capital — Analyst

Okay, thanks.

Operator

Thank you. The next question is from the line of Devesh Agarwal from IIFL Securities. Please go ahead.

Devesh Agarwal — IIFL Securities — Analyst

Good afternoon everyone and many congratulations on a good set of numbers. Jugal ji, just I wanted to understand better the MLD gross inflows number that you shared. So you said INR2,300 crore is the number for the first half. And if I recollect rightly, in the first quarter it was INR1,500 crore. So, for the second quarter, are we talking about INR800 crores of gross inclusion in MLD?

Jugal Mantri — Group, Chief Financial Officer

In the first quarter the gross issuance was INR1,100 crore, okay. And in the second quarter, it is INR1,235 crore.

Devesh Agarwal — IIFL Securities — Analyst

So was this INR1,100 crores plus INR400 crores of secondary issues?

Jugal Mantri — Group, Chief Financial Officer

Out of INR1,100 crores, INR350 crores were secondary issues, right. And this quarter, the secondary number is INR180 crores.

Devesh Agarwal — IIFL Securities — Analyst

100 and —

Jugal Mantri — Group, Chief Financial Officer

INR180 crores.

Devesh Agarwal — IIFL Securities — Analyst

INR180 crore, okay. So broadly the yields that we’re getting this time is around 7.5% on the entire MLD portfolio?

Jugal Mantri — Group, Chief Financial Officer

Yes, around that.

Devesh Agarwal — IIFL Securities — Analyst

Around that, right, perfect. And sir, secondly, basically in the past you had said that that first half is generally weaker compared to —

Jugal Mantri — Group, Chief Financial Officer

Yes, you please continue, Devesh.

Devesh Agarwal — IIFL Securities — Analyst

No, no, sir, please continue.

Jugal Mantri — Group, Chief Financial Officer

No, no, the yield, which was about 7.5% in the first quarter, that is around 7% in the Q2.

Devesh Agarwal — IIFL Securities — Analyst

Okay. Sir, generally you had said in the past that our first half is relatively weaker and second half is much stronger. And we have already achieved INR83 crore of PAT in the first half versus our guidance of INR155 crores for FY23. So is it, at this time, you think that the two half will be equal or you are looking to upgrade or FY23 guidance?

Jugal Mantri — Group, Chief Financial Officer

So I don’t see any reason that second half will be equal. Historically what we have seen that will definitely — that goes through, and I’m sure that the second half will also move in the similar fashion as it has happened in the past also. And as far as guidance is concerned, we have already assumed 50%, 53% of the guidance, which have been given on the profitability front. So, but internally our belief is that, as long as your performance or the likely performance, if it is in the range of the 10% of the guidance given, though it can be like 5% to 10% of over achievement.

Let the guidance remain same, instead of keep on clicking number on every quarterly basis. So that is why we are sticking to the guidance which have been given at the beginning of the year. But then we had [Technical Issues] Hello. So just to reaffirm that the guidance which we have given, we are still holding that and we don’t see any reason to believe that this year second half will be — will not be in line with what has happened in the history.

Devesh Agarwal — IIFL Securities — Analyst

Understood, sir. Thank you so much and all the very best. Thank you.

Feroze Azeez — Deputy Chief Executive Officer

Devesh, I would like to clarify one thing. This is a very important thing. When you — yield is 7.5%, like Jugal ji said, yield is 7%. And yield is a number, which generally in our business is referred to the per annum income of a specific instrument, okay. So when you look at an upfront of something which is a 5-year instrument, if I calibrate the yield on the market — average market value of all the 1,000 odd products which had matured is about 1.17% per annum, okay. And that will be the yield, yield is always per annum generally.

Jugal Mantri — Group, Chief Financial Officer

Yes, annualized.

Feroze Azeez — Deputy Chief Executive Officer

All right. So, annualized yield. What happens in a mutual fund, like for example, on my 11 mutual fund model portfolio which I buy for myself and most of our clients end up buying the same 11 mutual funds. I make 1.11% post GST, okay. With that 7% number, it might make you believe that you’re earning more on mutual — on MLDs. If you — mutual funds commissions are on market value, face value recognition of 7% is on face value, right. If the product gives you a 13% IRR, then if you look at the market value, average market value, because 92% of our MLD, which have matured have given the desired coupon, none of them have ever lost capital, in spite of 1,024 maturities being done from December 2012, we have made issuances.

So point I’m trying to get to is, anybody looking at our business thinking that yield of MLD 7% may be looking at that is not the yield, yield has to — now, when I look at bond portfolio, bond is mean the per annum yield at the purchase price in secondary market. So that’s what I wanted to clarify. We, out of curiosity, work backwards to find out the 1,000 maturities. What did I end up making per annum? So if tomorrow if I don’t want to do an MLD, an equity mutual fund will give me the same yield, it’s only accounting difference from an upfront to a trail basis. Did you understand, Devesh?

Devesh Agarwal — IIFL Securities — Analyst

Yes, that is very clear. Just wanted to know one more thing. The average duration of our MLSs is now 5 years, what we are selling?

Feroze Azeez — Deputy Chief Executive Officer

Yes. So what we have is, we — all our decisions are driven by client objective. We, after COVID, and given where markets reached, we thought that an MLD which is a 3-year MLD has a lesser probability of success because the 2-year additional and that’s why August 2020 we did lot of mathematics and realized that even if one year gets wasted in a 5-year product, you still have 4 years to achieve your targets for NIFTY, because these are NIFTY linked MLDs. If I take a 3-year product and like you see the one-year got wasted, right. Last October to now market has not done anything. So if I buy a 3-year product, then I have to make up for the lost ground in two years. So the probabilities of success from client goes up as 5 years. That’s why 5 years. It might optically look at, I wanted to make more money upfront is why it is 5 years. So I’m clarifying it, everything in our company emanates from client objectives.

Devesh Agarwal — IIFL Securities — Analyst

Perfect. Thank you so much.

Operator

Thank you. The next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.

Nirmal Bari — Sameeksha Capital — Analyst

Yes, thanks for the opportunity and congrats on the very good numbers. Am I audible clearly?

Feroze Azeez — Deputy Chief Executive Officer

Very clearly.

Nirmal Bari — Sameeksha Capital — Analyst

Okay, thanks. So my first question is this, 11%, 12% of our AUM which sits in others. So what is that and what kind of revenue do we generate over there?

Feroze Azeez — Deputy Chief Executive Officer

The others could be PMS transfers, when we look at — we don’t recommend PMS, because we have mathematically seen efficiency, it doesn’t happen in PMSs because of the higher standard. So, but the client has PMSs, so I take a [Technical Issues] transfer, and then so if it is PMSs, there is revenue that comes to me. If it is tax free bonds, which are work-in progress, if it stock, which are work-in progress, those are the three large categories in the others, which we take as raw material to converge to our strategy. Because when I meet a client, he has a INR5 crore, INR7 crore balance sheet. He says, okay, I’ll give you INR1 crore, which is liquid. I have INR1 crore mutual funds, I’m transferring book code to you. But the other INR2 crores which is sitting in the DMAT account, take it, I have one PMS I can transfer it to you. I have insurance policies with different people, exit them over a period. So that’s what is my work in progress, WIP.

So coming back to your pointed question, what do I earn on it? There are three different categories largely, out of which direct equity and tax free bonds we don’t earn, in PMS transfers, we start earning from day one, unlike in mutual funds, COBs, change of brokers, don’t give commission from first day, PMSs do. So it’s reasonably different, but yes, that’s still work in progress and that goes back to my specific yields of 1%, 1.5%, which I make on these two products, plus the debt mutual funds, which gives us 40%, 50% trade.

Nirmal Bari — Sameeksha Capital — Analyst

Okay. And the second question was on the quantum of MLD. We did about INR2,300 crores of MLDs. Now If I look at our AUMs of roughly INR35,000 crores and 30% of that being in MLDs, that’s INR10,500 crores, now with a average 5-year kind of maturity, we would — I’m simply dividing it by the annual rollover just — just the rollover part of it would be about 2,000 — INR2,100 odd crores and then [Technical Issues] but in the H1 itself we have done in INR2,300 crores, so is there a risk that in H2 the quantum of MLDs would be significantly lower?

Feroze Azeez — Deputy Chief Executive Officer

In fact the maturities are very, very healthy. Let me not put a number here. So what happens is, that whatever you issued three years back is not coming back with as capital, it’s coming back with an appreciation. So if you ask me, how is our maturity pipelines over the next few years, very, very healthy. Second, what kind of proportions do clients rollover, when we had done it during IPOs, it was 78% of our clients are repeat buyers.

Does that continue or does it become stronger with credibility? We have improved credibility further, because we have been issuing for 10 years. So 10 years, to say that I’ve been issuing for 10 years, I’ve finished 1,000 maturities which is — might be the largest, I don’t know the number, but one of the largest issuances plus maturity, the credibility increases, so repeat buying becomes more and more solidified, unless I tell him to put 5% as a company into equity mutual fund, which we did last year, money get rolled over as per the gaps which are there in the products, which we do as the decision making criteria.

Somebody has given me INR100 or if you have a balance sheet of INR100, if you’ve decided INR55 goes into equity mutual funds, INR30 goes into MLDs, and INR20 goes into debt or INR10 goes into debt, anytime we ask fresh funds, the allocation happens as per the gap in the decided allocation. And that’s how it’s straight jacketed, advised in our company has gotten.

Nirmal Bari — Sameeksha Capital — Analyst

Okay, so I’m not looking at the [Technical Issues].

Feroze Azeez — Deputy Chief Executive Officer

Sorry, you were not audible at the last part. Jugal ji, please feel free to add whatever you what to add.

Jugal Mantri — Group, Chief Financial Officer

Feroze ji, perfect. I think Nirmal must have understood that when you are talking about the MLD value, whether it is INR9,000 crore, INR9,500 crore of — as of now the book which is there and as Feroze has told that even if you take a mean appreciation of 60% on the AUM in the next 5 years, your INR10,000 crores can become INR16,000 crore. And now if you divide by five, you will see that annual issuance, even if there is a rollover of 90% to 95% of INR3,200 crore annual maturities, which could be, that can translate into the Assured business of around INR3,000 crore new MLD issuance. Is it clear, Nirmal?

Nirmal Bari — Sameeksha Capital — Analyst

Yes, that’s [Technical Issues].

Jugal Mantri — Group, Chief Financial Officer

Okay, very good

Operator

Does that answers your question, Mr. Nirmal?

Nirmal Bari — Sameeksha Capital — Analyst

I’m not sure.

Operator

Hello.

Nirmal Bari — Sameeksha Capital — Analyst

Am I audible?

Operator

Mr. Nirmal, your voice is breaking, sir. As there is no response from the participant, we’ll move to the next question, which is from the line of Senthilkumar from Joindre Capital Services Limited. Please go ahead.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

Good afternoon, sir. Thanks for the opportunity. I want to understand the management’s outlook on AUM guidance of INR39,000 crores for FY23. Though in the first half of FY23 AUM increased by 16% to INR35,842 crores, I could see 17% drop in private wealth AUM inflow in second quarter, on a sequential basis. And another thing is only 13% incrementally AUM guidance is achieved in Q2 FY23 against the 27% first quarter. So on back of this, is the management confident of achieving AUM target in the second half of FY23?

Feroze Azeez — Deputy Chief Executive Officer

Let me take that. So, Jugal ji, you want to add something to this.

Jugal Mantri — Group, Chief Financial Officer

No, no, you can go ahead, I’ll agree with that, no issue on this.

Feroze Azeez — Deputy Chief Executive Officer

See our AUM addition comes from two sources, right. One is the new money you bring in and the change in the market value of the underlying INR35,000 crores approximately, right. So over the last one year, the mark-to-markets have not been a huge contributor, average day end up in Q2 over the long term of 10% to 12%. If we not got support from there is why you are at 16% AUM growth. Are we confident to achieve the guidance on the AUM bit? Very, very confident. Of course, not if the markets fell 20%, right, because it has two components. But are we confident to add similar numbers in terms of [Technical Issues] for the six months versus the next 10 years and growing.

So, because there is an element of external variables, which will dictate the AUM, net mobilization which is fresh money is we think will become better in the second half from the INR2,500 crores. So we — our internal target for the first six months was INR500 crores per month. Of course we marginally fell short to INR2,500 crores, the target continues to add. So, if the markets don’t disappoint extensively, we will surely meet — we should most likely meet our AUM guidance. Jugal sir?

Jugal Mantri — Group, Chief Financial Officer

No, I think you have very aptly answered that we should not look at the AUM, which is driven largely from the NIFTY performance, the reason being in case if you look at the AUM on the 17th August, when market is around, say, 17,900, you will find that the AUM is up, whatever we have been discussing, it is higher by another 4% to 5%. So as you rightly said, that the NIFTY which was, say, around 17,500 on 31st March, and it is almost 2.3%, 3% down compared to that.

In spite of that, in case if we have achieved the growth in AUM besides taking many credit on account of that average appreciation in the equity related portfolio, that is quite impressive and once that gets factored in, definitely we’ll be much more than the target or the guidance, which has been during the us. Is it clear Mr. Senthil?

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

No, to achieve a target of INR39,000 crores, we have achieved INR35,843 crores —

Jugal Mantri — Group, Chief Financial Officer

Your audio isn’t clear.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

Am I clear now?

Jugal Mantri — Group, Chief Financial Officer

Yes, if you could speak up a little, it will be very audible, sir.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

To achieve a AUM guidance of INR30,000 crores, in the first half we have achieved 35,843 crores, so remaining balance of second half we have to achieve INR3,157 crores of AUM. So in this 3,157 crores, how much were proportionate mix between the two components as you say, the new AUM inflow and the market movements, the breakup between the two components, how much the management is expecting from this figure?

Jugal Mantri — Group, Chief Financial Officer

See, like I told you, our internal target is to bring INR500 crores of new money every single month, okay. Market movements can sometimes give you a film. Unlike the last quarter, market didn’t give you a film, because we ended — because AUM is a picture, photographs, right, but the new money you bring is like a movie, it’s accounting is variable. So to answer your pointed question. I told you our internal target in terms of the fresh monies which need to come on a monthly basis, so if that six into INR500 crore, that’s INR3,000 crore. That’s our internal target to add new money.

Now whatever is the differential, we have to hope and pray that the market movement or the value of the MLDs also go up, debt also goes up. So overall, client portfolios, if they grew by 6%, 7%, 8% also this financial year, we’ll be able to meet that number. And anyways, AUM is the most fluid number. And as you look at a 5-year investing, 4-year investing, our AUMs are best poised, because we are now in the non-bank B2C category. We have the largest equity mutual fund holders, okay, with some — as of now. That’s what CAMS data tells me.

Now if we have a target of capturing in the next few years or even a decade, a 3% to 4% of the market share of the entire equity mutual funds in India, will we get it linearly? The answer is no, but today from whatever we have as a market share on the equity mutual funds, which is close to 1%, we want to take that to 3%, 4% because that’s what we want to master in, right. The equity mutual fund, because we don’t do PMSs, we don’t do AIFs, we don’t do private equity, we don’t do unlisted stock, we don’t do REIT, we don’t do InvITs, because all those, I don’t buy myself. So, I don’t give it to my client.

So our focus on AUM addition is going to be paramount. And of course the fluidity because of its mark-to-market nature is why I’m not giving you appointed answer, but I’ve definitely given you my internal target to achieve on the net mobilization.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

Okay, thank you. Thank you. That’s it from my side.

Operator

Thank you. The next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.

Lalit Deo — Equirus Securities — Analyst

Good afternoon, sir. Thank you for the opportunity. [Indecipherable]

Feroze Azeez — Deputy Chief Executive Officer

Not clear at all. So I’m not able to pick up. Jugal ji, are you able to hear the first question?

Jugal Mantri — Group, Chief Financial Officer

No, no, Lalit, it is a completely jumbled up voice which we are getting.

Lalit Deo — Equirus Securities — Analyst

One second, sir. Hello, Hello.

Feroze Azeez — Deputy Chief Executive Officer

Yes. There was an echo, now I think —

Operator

Mr. Lalit Deo, can you please speak little bit louder. We cannot hear you sir.

Lalit Deo — Equirus Securities — Analyst

Now, is it audible?

Feroze Azeez — Deputy Chief Executive Officer

Perfect.

Operator

Please go ahead.

Lalit Deo — Equirus Securities — Analyst

Yes, sir. So, sir, on switch we have, which we have done in this quarter, so could you break it down between the group company issuances and the Edelweiss issuances, like how much would be — would we have distributed?

Feroze Azeez — Deputy Chief Executive Officer

Yes. Rajesh ji, can give us the split, and Jugal ji, if you can add something as well. Yes. So, the ratios are — Lalit ji, we can give the precise numbers. Hello?

Okay. So let me tell you. Whenever we launch the product, we approved them in October, November last year. So in few months where we had the product 5, 7, 8 months, we have done one or two months, we have not done their issuance, because there is a name change from Edelweiss to the PAD entity and we are waiting for that whole thing to happen.

We are very selective about which issuer we take, that’s why for the last 3, 4 years we had no issuer [Indecipherable] sister company, which is ARGFL. So, the ratios were as much as one-third, two-third; two-third internal, one-third external, that’s the approximate weightage between the two issuers which we had. So from zero external to one-third external or even 40% in a few months is what the conceptually the order of magnitude number as well.

Lalit Deo — Equirus Securities — Analyst

Sure sir. And sir, in last quarter we had highlighted that the employee expenses were typically — would typically range about 45% of the overall revenues, but however in this quarter, it has further improved to about 43%. So just wanted to understand from the trajectory from here on. So would we see that this could — this number could further improve like what could be the outlook on this front, on employee expenses front?

Feroze Azeez — Deputy Chief Executive Officer

Jugal sir?

Jugal Mantri — Group, Chief Financial Officer

We are working on a operating leverage ratio of about 1.8, okay. So wherever you see that the revenue goes up, the cost will have — will have the positive effect on the cost. So this number was — but the broad range will remain, say, between 42% to 45% that would be the employee cost range, okay. So you can — in case if we have the similar quantum jump in the revenue, definitely there could be some improvement on that cost front, but that would be very, very marginal.

Lalit Deo — Equirus Securities — Analyst

Sure sir. Thank you, sir.

Operator

Thank you. The next question is from the line of Pallavi Deshpande an Individual investors. [Technical Issues] As there is no response from the participant, we’ll move to the next question, which is from the line of Rohan Mandora from Equirus Securities. Please go ahead.

Rohan Mandora — Equirus Securities — Analyst

Sir, thanks for taking the follow-up question. In terms of new flows that we had got, what proportion of that was coming from new clients that were acquired during the quarter?

Feroze Azeez — Deputy Chief Executive Officer

Yes, sure, I can tell you the approximate number. When we acquired close to 150 clients a month, the average ticket size which people start with is INR80 lakhs to INR90 lakhs. So I’m just telling you approximate numbers. So, maybe one-third from new clients and two-thirds from existing one. Does that answer Rohan?

Rohan Mandora — Equirus Securities — Analyst

Yes, sir. Yes, sir. Thanks a lot.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Jugal Mantri, Group CFO for closing comments.

Jugal Mantri — Group, Chief Financial Officer

Thanks Rutuja, and all the participants for your active participation. I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with our IR Head, Mr. Vishal Sanghavi or our CFO, Mr. Rajesh Bhutara, or Strategic Growth Advisors or Investor Relationship — Relations Advisor.

Lastly, on behalf of the management, I would like to wish everyone a very happy Diwali and a prosperous New Samvat [Phonetic] Year to each one of you in advance. Thank you very much.

Feroze Azeez — Deputy Chief Executive Officer

Thanks Jugal ji. Thanks Rajesh ji, Vishal ji, and Chethan. Bye.

Operator

[Operator Closing Remarks]