HDFC Asset Management Company Ltd (HDFCAMC) Q2 FY22 Earnings Concall Transcript

HDFC Asset Management Company Ltd (NSE:HDFCAMC) Q2 2022 Earnings Concall dated Oct. 25, 2021

Corporate Participants:

Simal Kanuga — Chief Investor Relations Officer

Navneet Munot — Managing Director and Chief Executive Officer

Piyush Surana — Chief Financial Officer

Analysts:

Kunal Thanvi — Banyan Tree Advisors — Analyst

Shubhranshu Mishra — Systematix — Analyst

Abhishek Saraf — Jefferies — Analyst

Kaushik Agarwal — Haitong Securities — Analyst

Nitin Jain — Fairview Advisors — Analyst

Prayesh Jain — Motilal Oswal — Analyst

Aditya Jain — Citi — Analyst

Hiral Desai — Anived Portfolio Managers — Analyst

Anant Shankar — — Analyst

Mohit Surana — CLSA India — Analyst

Manjeet Buaria — Solidarity Investments — Analyst

Sameer Bhise — JM Financial — Analyst

Nikhil — — Analyst

Amit Nanavati — Nomura Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to 2Q FY ’22 Earnings Conference Call of HDFC Asset Management Company Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

From the management team, we have Mr. Navneet Munot, MD and CEO; Mr. Piyush Surana, Chief Financial Officer; and Mr. Simal Kanuga, Chief Investor Relations Officer. I now hand the conference over to Mr. Simal Kanuga who will give us a brief, following which we will proceed with the Q&A session. Thank you, and over to you, Simal.

Simal Kanuga — Chief Investor Relations Officer

Thanks, Nirav. Good evening everyone and thank you very much for joining this call. As always, I’ll start off with a quick take on the quarter/year that has gone by. Industry AUM has crossed INR36 trillion with INR16.8 trillion in equity oriented assets, INR10.7 trillion in debt and INR4.2 trillion in liquid/overnight funds. There is another INR5.1 trillion in what we kind of classify as others that is ETFs, arbitrage funds, and fund of funds investing overseas. To put things in perspective, if you look at our presentation of say September 2018, that is post our listing in August of 2018, AUM of the industry was INR22 trillion and equity oriented assets were at INR9.8 trillion. We, as an industry, have seen material growth over these three years.

In terms of equity flows, post losing approximately INR627 billion in FY ’21, the first six months of the current financial year has seen net positive flows, adding up to INR936 billion. The one thing that we need to point out in terms of equity flows is that INR459 billion or for that matter, 49% of the net new flows have come in through new fund offers, the NFOs. Majority of these NFOs have been offered at margins which are materially lower from the AMC perspective as compared to existing schemes. We have seen this happen in past too especially when the overall market sentiment tends to be positive.

In terms of debt and liquid schemes, flows have been more or less flat this year. That is debt has seen outflows of INR45 billion while liquid funds have seen inflows of INR26 billion. The so-called others category has seen healthy flows, adding up to INR778 billion, of which INR345 billion is in arbitrage funds and INR79 billion in international fund of funds while balancing number of INR354 billion is in ETF, which includes both equity as well as debt ETFs. SIPs, month of September saw SIP flows of INR104 billion as against INR92 billion for June of 2021.

Now we are moving to us. We closed the quarter with an AUM of INR4,357 billion, of which 46% is in equity oriented assets. Over and above this, we manage INR115 billion through our portfolio management services/separately managed account business. In terms of overall market share, based on quarterly average AUM, we closed the quarter at 12.1% and if one looks at the same excluding exchange traded funds or ETFs, our market share is at 13.3%. Our market share is at 12.2% when it comes to actively managed equity oriented assets, 14.6% in terms of debt, and 15.3% for liquid. All of these are based on quarterly average AUMs.

We continue to have a favorable asset mix as compared to that of the industry and at 12.8% are the highest market share in terms of individual AUM. Furthermore, we continue to be second highest in terms of B-30 market share. 58.8% of our total AUM is contributed to by individual investors. Comparable number for the industry is 54.5%. We processed over 3.22 million systematic transactions in month of September ’21 resulting in flows of INR10.8 billion. We have successfully built a top of the line digital infrastructure. We continue to invest further and enhance our digital capabilities.

Over the past few quarterly calls, we’ve been mentioning that we are working on filling up product gaps across categories. During the financial year, we launched a hybrid fund, that is an asset allocation fund of fund, a thematic fund that is banking and financial services fund, a passive/smart beta fund called Nifty50 Equal Weight fund. We recently concluded our first international fund, which is the HDFC Developed World Indexes Fund of Funds and are currently as we speak in midst of our NFO of another passive fund with the Nifty Next 50 fund. We have filed few more documents with the regulator and will launch those products once approvals are in place. Our team is also working on some products on fixed income side.

We have launched an aggressive investor awareness program where medium to long-term endeavor is to nudge people to change their old age habits and evaluate mutual funds as an option. I’m sure most of you would have seen this campaign with the tagline Barni Se Azadi. We are also running a parallel investor awareness program showcasing benefits of hybrid and asset allocation funds. We ran an aggressive marketing campaign for our Developed World Fund of Funds, which did see a very healthy response.

Now to financials. The company has shown improved performance during the quarter ended September ’21 as compared to the corresponding quarter in year 2020. Revenue from operations increased due to an increase in AUM as well as a more remunerative mix with higher percentage of equity AUM. However, this increase was tempered by a dilution in margin in some of the schemes. Other income for the quarter ending September ’21 is lower than quarter ended September ’20 since the comparative quarter had some amount of MTM gain on the Essel Group NCDs.

During the quarter, there has been an increase in business promotion expense as business moves towards normalization. Other expenses like travel, printing and stationery etc also have ticked upwards. As mentioned earlier, we are also in the process of expanding our product bouquet and consequently, there is an increase in expense on new fund offers.

In February of 2021, a grant of ESOPs was made to certain employees and the expense had employee benefit expenses including a pro rata amortization of the fair value of these ESOPs as required by the IND-AS accounting framework applicable to the company. This is a non-cash charge, which is not tax deductible and is book value neutral. In quarter two FY ’22, this non-cash charge amounted to INR167 million.

As communicated last quarter, employee benefit expenses have increased as the company resumed its practice of annual increments in employee remuneration this year after taking a break from the practice last year due to the COVID-19 pandemic. Financial highlights for the quarter ended September 2021. Operating profit for the quarter ended September ’21 was rupees INR3,954 million as compared to rupees INR3,491 million for September 2020, an increase of 13%. Profit before tax for the quarter ended September ’21 was down by 0.3% to INR4,615 million as compared to to INR4,628 million for September ’20. Profit after tax for the quarter ended September ’21 was INR3,445 million as compared to INR3,379 million for the quarter ended September ’20 resulting in an increase of 2%.

Financial highlights for the half year ended September 30, 2021. The operating profit part of the half year ended September ’21 was INR7,606 million as compared to INR6,497 million for September 2020, an increase of 17%. Profit before tax for the half year ended September ’21 was INR9,276 million as compared to INR8,432 million for September ’20, an increase of 10%. Profit after tax for the half year ended September 30, ’21 was up by 8% to INR6,899 million as compared to INR6,403 million for September 2020.

Our operating profit margin now stands at 36 basis points for the quarter ended September 30, 2021 as compared to 35 basis for the quarter ended June 30, 2021 and 36 basis for the year ended March 31, 2021. Thank you very much for a patient hearing. We’ll now open for questions. We have both Navneet and Piyush with us. So, Nirav, we can just start taking questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Amit Nanavati from Nomura Securities. Please go ahead.

Amit Nanavati — Nomura Securities — Analyst

Yeah, hi, just a question on market share, right, at least if I look at FY ’21 versus first half of this year, right, the market share loss that we are seeing is more at a faster pace at least in this first half especially where the industry flows have turned positive versus last year and this is coming despite performance improving, right. So if you can give some qualitative comments around last year versus this year, how has the flow market share for you. I understand you don’t give out numbers there, but at least from a trend perspective, how are you seeing things?

Navneet Munot — Managing Director and Chief Executive Officer

Hi, Amit, thanks for the question. Overall market share has fallen from 13.6% to 12.1% over the last one year and to get a better perspective, let’s talk of numbers asset class wise that is actively managed equity, passive equity, debt, and liquid. So partly [Phonetic], we have discussed reasons on actively managed equity over the past couple of quarters. We would like to mention couple of more things here. One that our redemption share has been more or less constant over the last, say, three years or so.

The impact that you see in market share is due to lower share in gross inflows and the lower share in gross inflows may be attributed to a couple of reasons. One is that a large part of inflows in recent past has been through, as you would know, NFOs. To put it in perspective during the quarter, net new flows were INR68,497 crores, of which INR42,591 crores came in through NFOs. So I’m sure you all have heard the margin at which this business is flowing in. There are times when one has to be more prudent rather than just to be part of what is happening in the market. We have been selective in terms of launching NFOs in diversified active equity space.

The couple of product gaps that we had in the category like dividend yield fund, which we launched in last quarter of calendar 2020, the other one is multi-cap and we have filed for the same with the regulator and we’ll progress with the launch post getting necessary approvals. Further if you look at total flows during the last one year, INR23,000 crores odd have flown into thematic sectoral funds as against total equity net flows of INR41,000 crores. So well over 50% and the feedback that we’re getting from our partners, RIAs or for that matter even the direct investors is that investors, MFDs, advisors, they want to take an active call on sector or a theme for a part of their portfolio.

Till recent past, we have abstained from launching sectoral or thematic funds, but based on the feedback received from our partners and also based on our belief in the theme, we launched a sector thematic fund during the quarter. That fund was BFSI, which saw very healthy response. We added very large number of new investors. It was very well participated by large number of our distributor partners and currently as we speak, our investment in the product teams are working on creating couple of other themes and you will hear more from us in this space.

So having said, we are going to be selective and we’ll be launching only those themes that we believe will create value for our investors over medium to longer-term. We have mentioned this in past and would like to reiterate that the decision of launching a new product at HDFC AMC is investment team’s prerogative and they work together with the product team to ensure that we don’t launch product for the sake of it unless we strongly believe that there is a segment of investors who would have a need for that product from a long-term perspective.

So unless we see a sustainability and longevity of a theme, we won’t be launching a product just for the sake of it. Another thing I would mention that it would be interesting for you to know that almost all the top four, five players, excluding SBI MF would have lost market share over the last year or two and the interesting thing that’s happening in the market is that the allocations are much broader based and of course there is some extra bit of performance chasing. If you analyze sales data AMC-wise, I’m sure you will get it what I’m trying to say.

When we are on the topic of equity oriented strategies, there is a market which is emerging which is international funds, investing internationally. A lot of domestic investors are now allocating money towards international funds. The size of the market is almost INR35,000 crores and growing. Industry has lined up number of new launches in this space. We didn’t have a product in that space earlier. We just did our first international fund recently, a passive fund of funds, which endeavors to track the MSCI World Index.

So we will look at couple of other strategies in this space over the next few quarters. The one other reason for fall in — when you look at overall our market share and I’m responding to that, so one other reason for fall in overall market share is mark-to-market increase in the ETF AUM and as you know, equity ETF business in India is dominated by one investor and ETF AUM overall has moved up from little over INR2 lakh crores to close to INR4 lakh crores now and I’m sure many of you have caught up on the recent news article which talked about HDFC AMC filing for nine ETFs.

We have also filed for couple of index funds. The idea is to offer a full bouquet of products and as mentioned over the last couple of quarters, looking at filling up product gaps across asset classes. So at the same time I must mention this, we are very mindful of the risk associated on passive side and hence have selected indices which pass our risk must have [Phonetic]. So that was [Technical Issues]. When it comes to the debt side, our market share has been constant quarter-on-quarter. In fact, it has actually moved up on YoY basis. So when you look at our market share on the debt side, 14.6%. It’s reasonably high, especially in a space, which is dominated by corporates and institutional investors. We are also evaluating debt index fund and will update you once we progress on that front.

The third component, the liquid fund, it’s been more or less constant QoQ, but has fallen YoY. Last September the share was at 18.7% and even at that time, we communicated that this was very high. In fact, it had actually had moved up sharply over the previous one year, so it has got, I would say, more normalized and we wouldn’t expect an increase in market — I mean a significant increase in market share in that space from where we are currently. I hope that answers your questions.

Amit Nanavati — Nomura Securities — Analyst

Understood. No, I think it almost seems like last year’s market share loss was more performance — underperformance-led market share loss, right, where say our performance would have been let’s say, for example, just hypothetically been 1 percentage point lower than the industry average and which is basically the market share loss, which was visible, but this half at least this year it seems more like a floor market share loss, especially now flows have come back for the industry. Now, even if I look at unique investors, we’ve not been growing in unique investor pool and should one look at SIP market share as a lead indicator for where our equity market share would trend towards.

Piyush Surana — Chief Financial Officer

So I mean I think you summarized it well when it comes to the market share movement over the last one year. Your point is right. I think when you look at the unique investor addition and the folio [Phonetic] addition over the last couple of quarters, the way folios have got added in the industry, particularly driven by the FinTechs and I think we have our work cut out on that front and we believe that over the next couple of quarters, I think this increased engagement with some of the other initiatives that Simal talked about earlier whether it was on the marketing side, whether it was on the digital offering side, I think hopefully over a bit of time, you would see us gaining market share in SIPs as well as all the new folio new addition.

You would appreciate that historically I mean HDFC AMC has always been a leader in SIPs. It’s been a leader in B-30 markets. That’s where the higher growth is there and we don’t see any reason given our performance, the long-term track record, and all the other initiatives that the team has taken, we won’t continue to remain a leader on that front.

Amit Nanavati — Nomura Securities — Analyst

Got it. Last thing, if you. I’m not too sure, but if you can share your market share in the FinTech space, what percentage of distribution comes to you?

Piyush Surana — Chief Financial Officer

So we won’t surely [Phonetic] give you that granularized data on distributor or segment wise, but as I said that, I think we’ll be — there is lot of scope for us to grow in that segment more than what we have been so far.

Navneet Munot — Managing Director and Chief Executive Officer

So, Amit, just think one thing I can add, if you look at industry as a whole, so can FinTech really distort the market share? Not beyond a point because the equity mutual fund industry is close to INR15 lakh crores, INR16 lakh crores. All FinTechs put together, the size of the market is somewhere around when we talk about equity oriented funds, it adds up to close to around INR35,000 crores, INR36,000 crores. So it is 2% of the size of the industry as we speak.

Amit Nanavati — Nomura Securities — Analyst

Understood, understood. That’s it from my side. Thank you.

Operator

Thank you. The next question is from the line of Kunal Thanvi from Banyan Tree Advisors. Please go ahead.

Kunal Thanvi — Banyan Tree Advisors — Analyst

Hi, thanks for the opportunity and congratulations on decent set of numbers. I had two questions, one was on the pipeline [Phonetic] side, as you had mentioned in your opening remarks that we’ve launched — we have a long pipeline for ETFs and index funds and wanted to understand the thought process in a bit detail from where the digression in terms of launching a significant number of NFO funds come about and as you also mentioned that the pricing for the NFOs has been very aggressive.

What’s our sense in the NFO that we are launching and given the fact that we will be launching so many NFOs and does it make sense to look at the historical margins with a letter eye [Phonetic] because like will it lead to softening of our overall premiums and margins over the next three to five years. And second — yeah you can answer this and I can ask the second question, sure.

Navneet Munot — Managing Director and Chief Executive Officer

So, I mean Piyush and team have been highlighting over a period of time that over a period of time margins will see some level of dilution. This of course depends on various factors, the assets which are going out, the assets which are coming in, mark-to-market component and then variety of things, so difficult to quantify. Also as you rightly mentioned that there is competitive pressure currently, the kind of NFO pricing which is happening and as we mentioned earlier that a large part of the flows are driven by the NFOs by the competition.

We have seen this in past too in our history of the company, but our experience says that it settles down over a period of time. At HDFC AMC, as we have always been saying, the three most important aspects for us building scale, building with a quality and profitability of business, not one at the cost of the other. We would always be very, very mindful of that. Market share of course is important, but profitability is also equally important for us over a period of time. So we will navigate through this period and we are hoping that this will settle down. Investors would appreciate the long-term performance track record of our funds. Money would come into the existing products, which have a much longer-term performance track record.

We would surely be filling the product gaps wherever we have. I mean we have mentioned in the past I think on the passive side both in equity and fixed income, both the core products as well as this smart beta product. We had our first smart beta product equal weight Nifty fund in this quarter. I mean, we had the product gap on the international side and we had a highly successful NFO on the sector and thematic side, which we talked about earlier, we had a BFSI fund. Again, this was a very highly successful NFO and fund of fund, the NFO that we did in April and it’s been getting positive flows since then.

So these are some of the categories where we had lesser presence which we are filling the product bouquet. In our core categories more or less, we have been there in all the categories given our long-term history. The one category, which has opened up is the multi-cap and maybe over the next couple of months, we would be launching that product apart from the categories that I just mentioned.

Kunal Thanvi — Banyan Tree Advisors — Analyst

Sure, thanks. And second question was related to the adoption and the technology. So what we understand is one or two quarters back, we had a appointed a [Indecipherable]. Can you help us understand in on a qualitative basis, what are the initiatives that are being taken in last few months in terms of bettering the entire ecosystem?

Navneet Munot — Managing Director and Chief Executive Officer

I mean it’s a journey. We always had best-in-class digital assets which need cost and upgrade, which we have been upgrading. As the world is changing, of course, the focus on technology has been increasing for every industry and asset management business is no different. With a new CTO and an excellent digital team that we have in place, we are working on various initiatives. In case you have not noticed, I would urge you to download our mobile app, HDFC Investor App. I think we have refreshed our mobile app. It’s simpler and more powerful and the feedback we are getting on the same is truly encouraging.

We continue our journey in creating a state-of-the-art digital infrastructure and leveraging on the same for enhancing the customer experience. We enabled voice search on our corporate website. We enabled API Gateway for third-party integration with some of the tech-savvy distributors. We’ve got an RM tool to build excess on mobile solution to partners and I think I’d go on, on this topic, but overall what we are trying to do is have this culture of automation, a culture of customer centricity, which is like the hallmark of the HDFC group and removing every possible friction in their journey, moving from as is we would say KYC to UIC I mean know your customer to understand your customer enabling our partners to scale up their business.

So how do we use data and analytics in every part of our business. How can we automate our processes? So digital is like going to be the backbone of everything we do, our entire ecosystem and so it’s about variety of things and all of this will help making the organisation future ready. So we have good digital assets. Over the years, we have been investing in all of them. We’ll be investing a lot more in that as we speak.

Kunal Thanvi — Banyan Tree Advisors — Analyst

Sure, I mean, thanks a lot. I’ll get back in the queue. All the very best.

Operator

Thank you. The next question is from the line of Shubhranshu Mishra from Systematix. Please go ahead.

Shubhranshu Mishra — Systematix — Analyst

Good evening. Thank you for the opportunity. First off, my sincere thank you to the exiting CFO Mr. Piyush Surana. He’s been a great strength here at HDFC AMC and I wish you all the best for your future endeavors. I’ve got two questions here. The first one is on the other income. Given the fact that most of the investment book is in debt and there hasn’t been much of hardening — there has been hardening of keysets [Phonetic] but not much. The drop in the other income has been a significant if I look at it on a DuPont model. And the other part is if I look at the market share, especially in the hybrid funds, we have dropped off significant market share in the hybrid funds versus maybe two years ago where we were around 21%, 22% to versus where we are we would be around 18% or 19%. So it’s a drop of almost 200 bps, 250 bps. So if you could dwell upon these two questions, that would be very helpful. Thank you.

Piyush Surana — Chief Financial Officer

Okay, I’ll take the one on the other income and then we Navneet can talk about the second question. So, on the other income, see, Shubhranshu because of the SL NCDs we’ve had this fluctuation in the other income over the last two years every once in a while. So for example, September 30th, 2020, the other income had a component of around INR56 crores of MTM gain in the SL NCDs. So that was why the other income in that quarter was so high.

And similarly, this year in June, as we talked about the disposal of the Dish [Phonetic] shares, which were the collateral for the NCDs, we had booked a gain of around INR14 crores on that. So that’s essentially the reason why there has been this up and down in other income and now that it’s out of the system, I think we’d probably see a more normalized number. If you go back to the transcript of the last quarter, I had actually mentioned this that please don’t take this number as a normalized number going forward.

Shubhranshu Mishra — Systematix — Analyst

Sure.

Navneet Munot — Managing Director and Chief Executive Officer

The question was on the market share in the hybrid funds?

Shubhranshu Mishra — Systematix — Analyst

Yes.

Piyush Surana — Chief Financial Officer

I think multiple reasons, one is obviously the recent NFO has been very, very large. The SBI did a NFO which crashed [Phonetic] as you are aware collected close to around INR15,000 crores odd, Shubhranshu, and I think Navneet kind of give a perspective earlier on loss on market shares. So the same set of things apply also for what has happened in the hybrid category.

Shubhranshu Mishra — Systematix — Analyst

Okay, thank you. Those were my questions.

Operator

Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.

Abhishek Saraf — Jefferies — Analyst

Hi, am I audible?

Simal Kanuga — Chief Investor Relations Officer

Yeah.

Abhishek Saraf — Jefferies — Analyst

Yeah, thanks for the opportunity. So I have two questions, one on the — so on our diversification strategy. So just wanted to know is how are we now proceeding on the diversification of styles in terms of new fund managers managing how much of our equity fund and if you can share some numbers on that that will be helpful and is it proceeding as per your expectation?

Secondly, on the cost to income side, I see that is the, obviously, we have seen lot of NFOs which are pushing up the cost, but on a more steady-state basis, what should one expect cost to income to be like. This quarter it was around 24%. Going forward, what would you kind of indicate one should be thinking about cost to income ratio? These are the two questions. Thanks.

Piyush Surana — Chief Financial Officer

So the cost to income ratio will more or less be the same as this. It might be — the cost might be a little bit higher because we are looking at some additional investments in technology. Also, this quarter probably has some part of the increase in travel and the other normal costs that go along with normalization of business. So that will intensify a little bit. So it will go up a little bit from here, but I think the ballpark that you are taking is more — probably add 4%, 5% to that. That should be it.

Navneet Munot — Managing Director and Chief Executive Officer

[Speech Overlap] I mean, your question on diversity is not only in terms of the core products, but also as I mentioned about launching newer products. So Anand who has been there with us for a long time now managing INR2,000 crores in the BFSI fund, other analysts [Phonetic] who manages infrastructure and the holding fund which — and then, of course, the other two fund managers. I think if you look at overall would be around 15% or so of the overall equity AUM.

Abhishek Saraf — Jefferies — Analyst

So Navneet, would this have increased now because now that lot of NFOs have happened under new fund managers or those who have — they are earlier analysts and now become fund managers. So, would this not have gone up because if I recall, like last quarter also we were almost in the similar ballpark?

Navneet Munot — Managing Director and Chief Executive Officer

Yeah, so I think over the last couple of quarters the trajectory would have been from around 10% to now 15% or so.

Piyush Surana — Chief Financial Officer

So, Abhishek, if you look at the data as of say March of 2020, the number between Prashant Jain and Chirag Setalvad was closer to around 87% and that number is now sub 85%. And you would appreciate, see what has also happened is the mark-to-market increase in the AUM has been very, very sharp over March 2020 and we are talking about a base of nearly like whatever INR1.80 lakh crores, INR1.90 lakh crores or for that matter even INR2 lakh crores. So 1%, 2% is a fair bit of delta.

Abhishek Saraf — Jefferies — Analyst

Sure. Thanks a lot. Thanks, Navneet and thanks, Piyush.

Piyush Surana — Chief Financial Officer

Thank you.

Operator

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

Kaushik Agarwal — Haitong Securities — Analyst

Yeah, hi, sir. Thank you for the opportunity. I hope I am audible to all?

Piyush Surana — Chief Financial Officer

Yeah.

Kaushik Agarwal — Haitong Securities — Analyst

Yes, sir, I have two set of questions. So firstly on the AUM mix for the company. So we are — since as highlighted during the call also, we have launched — like we have filed for nine ETFs. So is there anything from the more on the strategy level like, is there any cap on which we are going to see the AUM mix for the company in the medium to longer term. That is my first question.

And second question is more on the opex part for the company. So as we are seeing lot of ETFs, we are increasing basically the component of ETF in our overall AUM mix. So how are the operating expenses for the company going to move around over the period of time?

Navneet Munot — Managing Director and Chief Executive Officer

So first of all, I mean let me clarify and say this is very, very clearly while we have filed large number of passive products, there is no change in strategy. We are big believers of active fund management. In terms of active fund management, if it comes to it, we strongly believe we will be the last man standing. Our funds have created huge wealth over the past many years. In fact, very recently we celebrated HDFC Flexi Cap Fund NAV crossing INR1,000.

The capital has grown by 100 times over the last 25 years and that’s an alpha of like over 6% CAGR for 25 years. HDFC Top 100 Fund has delivered CAGR of over 19% for 25 years and that’s also an alpha of over 5%. Our Balanced Advantage Fund or for that matter, Hybrid Equity Aggressive, they’ve delivered 18% plus CAGR over 26 years, 27 years and the Hybrid Equity Aggressive has delivered 15.9% for over 21 years.

So, definitely we are a strong believer in active fund management and we believe, as I mentioned that we will be the last man standing. But in our dialog with the MFDs, with RIAs, with investors looking at the world what’s happening in the asset management industry, we see in India also that part of the equity allocation is now being allocated to passive strategies.

So an advisor who is allocating equity assets, does allocate both, both to active as well as passive and we want to be a full stop shop when it comes to offering investment management solutions or products. Keeping that in perspective, we have identified suitable site of indices and will be launching products based on these indices. In fact, I think I mentioned earlier that we do understand just surrounding certain set of indices, in terms of liquidity etc and hence have chosen those indexes where the risk is well contained.

So again, I’m going to reiterate, there is no change in strategy. We will leave no stone unturned in terms of resources, time, energy, when it comes to active fund management, there is enough and more these days being spoken about passive. In fact, not long back, in fact, if I remember year 2017 or so, alpha [Phonetic] was considered to be a given and now it is assumed that there is no alpha, but truth lies somewhere in between.

Look at the returns of some of our funds over the last one year and the amount of alpha that has got generated and in our opinion, an active manager will be able to add value over a period of time and the only way for going to add value is to go away from the benchmark and when you do so, you do risk some level of underperformance at times. It is worth taking that risk if you believe in fundamentals of businesses one has invested in.

So, in our opinion, Indian markets do offer reasonable opportunity to add value if one has time by their side. So, I mean if you exploit the time arbitrage and research arbitrage optimally, there is a still a lot of alpha to be captured for the next several years. So as I mentioned earlier that if you look at our HDFC Flexi Cap Fund has outperformed this benchmark by a significant amount in last one year and there is opportunity to generate alpha if one has time by their side.

As I mentioned that we have been a leading asset manager. I mean, scale is important for us and that’s why I want to provide all possible solutions to each segment of our partners as well as investors.

Kaushik Agarwal — Haitong Securities — Analyst

Okay and sir, around the second question of operating expenses like are we going to see — whatever would be the proportion of ETFs, how are we going to see the operating expenses part for the company over the period of time?

Piyush Surana — Chief Financial Officer

So the ETFs won’t really change the opex much because there would be probably some degree of expenditure on business promotion in terms of advertising, but we don’t really think it’s going to be a material number from here.

Kaushik Agarwal — Haitong Securities — Analyst

Okay. So, sir, can we expect a cost to income ratio which you are highlighting to the previous question. That would be mostly be remaining in these line only?

Piyush Surana — Chief Financial Officer

More or less here. I mean I can’t give you exact numbers, but it probably go up a few basis points here — a few percentage points from here given the factors that I mentioned earlier.

Kaushik Agarwal — Haitong Securities — Analyst

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

Operator

Thank you. The next question is from the line of Nitin Jain from Fairview Advisors. Please go ahead.

Nitin Jain — Fairview Advisors — Analyst

Yeah, thank you for the opportunity. So I’ll start with a little bit of historical perspective. So I’ve been an investor in the company since the IPO and I remember calls where the management would rule out the threat from passive investing stating that it is a very small part of the industry and fast forward to now, HDFC AMC has filed for nine new ETFs. So what kind of growth are we expecting from these new launches given that even our existing ETF products, they have lagged significantly in AUM with respect to the competition.

And my second question is our dividend yield is significantly lower than our listed peers. So do we have any plans to increase that in the future? If you can elaborate on that. And last question, if you can provide the amount raised in the recently concluded NFO for the International Index Fund. Thank you.

Navneet Munot — Managing Director and Chief Executive Officer

So the first question was on active versus passive. I mean markets evolve. Over the last 21 years, I mean HDFC AMC has been pioneer in various segments. The concept of SIP I would say didn’t exist or hardly existed 20 years back, but HDFC AMC took lead and became a large player in that segment and that’s why, I mean, our equity AUM is where it is.

Over the years, we would have launched products which were necessary to provide the right kind of solution to our partners and the investors and in line with that as markets evolve, as Indian markets have also been maturing, if there are needs for products which are suitable for set of investors, we believe we have the right kind of investment management capability, risk management capability and the product capability to manufacture those products and distribute it.

So I think the decision on whether it’s passive, whether in some of the other categories that we talked about has to be seen in that light. So till few years back, if you asked like whether you would be launching an international product, I think the answer would have been from our side that there is very little market in India and then investors are not looking at the global diversification, but at the beginning of the call as I mentioned that now there are a lot of investors who are looking at global diversification and we have the capability to provide that solution as well.

So as the passives have started finding their space in some of the portfolios, we believe that we would also be an active player in that segment, but again, I repeat what I mentioned earlier that we want to remain a dominant player when it comes to active equity, active fixed income, active money market, also to be a relevant player in the ETF space. We would never change I would say scale or market share at the cost of profitability and as I said, will never compromise that part for just gaining the market share.

The second question was on the —

Nitin Jain — Fairview Advisors — Analyst

Dividend yield.

Navneet Munot — Managing Director and Chief Executive Officer

So, of course, I think this year we have enhanced our payout ratio that something that Board keeps discussing in terms of the ideal payout ratio that we should be having. They look at everything including the cash on the balance sheet, the incremental flows and of course, what kind of ideal payout ratio that we should be having. So of course, I think they are fully aware [Phonetic] of that.

Nitin Jain — Fairview Advisors — Analyst

And the last question was the amount raised in the international fund NFO?

Navneet Munot — Managing Director and Chief Executive Officer

Over INR1,100 crores.

Operator

Nitin, do you have any follow-up question? Since there is no response, we move on to the next participant. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.

Prayesh Jain — Motilal Oswal — Analyst

Yeah, hi, good evening, sir. Just two questions. Firstly, when we talk about market share, when we mentioned that we had a relatively lower market share on the inflow side because of the kind of NFOs that the market had seen, but could you also throw some light with regards to outflows, how have HDFC AMC seeing trends vis-a-vis the industry. Have they seen a higher outflow compared to integrated to the industry. That is my first question.

Second is what kind of employee cost trends we can expect going ahead. And lastly, with the kind of ETF launches that we are planning, what kind of yield, net yields to the AMC that we can expect from these ETFs? Those are my three questions.

Navneet Munot — Managing Director and Chief Executive Officer

So the first question was on the inflow share versus the outflow share. The outflow share hasn’t really gone up in last two, three years, it is the lower share on the inflow side which has impacted the market share, which we hope to collect over a period of time. On the employee cost, it has gone up this year. Last year given the challenging time, there was a bit of a cut on that front. Part of it has been restored and you would see that maybe slightly going up as we have a mission to grow and the market is expanding.

On the ETF strategy, I think we have been clear that we want to have all the products and solutions that our partners and investors need. We want to be a one-stop solution shop and for that, whatever is needed we would be ensuring that we have that full product bouquet on the ETF side, both in equity as well as on the fixed income. Again I reiterate that there are — I mean we would keep in mind the liquidity risk with some of the indices may have. We’ll be very, very mindful of that and would look at the products where we believe we can match investors need with our capability and our risk management view and of course note the themes that our investment team believes in.

Prayesh Jain — Motilal Oswal — Analyst

Sir, my question was more on the yields that we are targeting to want from these ETFs, which would be like possibly in the range of about 20 bps or around what levels we can expect these yields for the —

Navneet Munot — Managing Director and Chief Executive Officer

So I think our four products in India has become highly competitive. In fact in some of their strategies, the TER in India is much lower than what you find even globally. You might have read this news item couple of weeks back, which is like the expectation that globally the fee on the passive side has bottomed and there are some signs of that inching up from a very low base. When we compare some of the index funds in India with the similar products outside India, we find that we actually in India is on the lower side.

Of course, this would be — I mean if the question is active versus passive; passive would be substantially lower, but we believe that I think there would be certain products where I think right kind of innovation would lead one to have slightly higher TER than the products which are I would say quite commodity kind of ETF products.

Prayesh Jain — Motilal Oswal — Analyst

All right, sir. Thank you so much.

Piyush Surana — Chief Financial Officer

On the employee cost, you had a question, so currently we are running at around 7.5 bps of AUM on the employee cost. So I guess it would be roughly around there, maybe inch up a little bit from there, but not very different from that.

Prayesh Jain — Motilal Oswal — Analyst

Okay.

Piyush Surana — Chief Financial Officer

And that includes the non-cash bit, which is — we keep talking about which is the cost on the ESOPs.

Prayesh Jain — Motilal Oswal — Analyst

Okay, all right, thank you so much.

Operator

Thank you. The next question is from the line of Aditya Jain from Equiry [Phonetic] Group. Please go ahead.

Aditya Jain — Citi — Analyst

Hi, this is from Citi. Could you clarify the impact of the NFO in the two areas. So one is on the opex for the AMC. And the second is on the yield. And secondly, the yield impact whatever impact is there, is it locked in for life or will there be a tapering of the yield impact in future years.

Navneet Munot — Managing Director and Chief Executive Officer

So, there would be a tapering over a period of time, but on the cost, it would be — every NFO depending on how you market it. Some of the NFOs may need more marketing expenses, some of the index products etc may not need that much of expense. I think that would differ from product to product and the kind of size that one is expecting, the kind of market segment that one is targeting. So it would depend on couple of factors. There is no standard I would say, an amount that we target to spend on every NFO, but you would have seen, you would have noticed in this quarter the overall expenses have gone up and part of that can be attributed to the NFOs that we had in the last few months.

Aditya Jain — Citi — Analyst

So on the yield side, there was a commission agreement with distributors during the NFO. So that had some built in declines in subsequent years. So there is certain commission payout [Indecipherable] in subsequent years.

Navneet Munot — Managing Director and Chief Executive Officer

Actually, Aditya, there are all sorts of structures. So I think different structures and then there are different other levers that gets used. So without getting into specifics, both yes and no.

Aditya Jain — Citi — Analyst

Okay, all right, thank you.

Operator

Thank you. The next question is from the line of Hiral Desai from Anived Portfolio Managers. Please go ahead.

Hiral Desai — Anived Portfolio Managers — Analyst

Hey Navneet, just had one question. You know, if I look at the operating profit growth for quarter two in the PBT that is at about 13% and if I look at the quarterly average AUM growth, we are at about 17% right now. So what will it take for sort of both of them to be in sync and how long before that is possible given the noise that we are currently having on the NFO side and plus the competitive intensity in general with so many new players coming in?

Navneet Munot — Managing Director and Chief Executive Officer

So variety of things Hiral as you mentioned earlier that there would be dilution because incremental money, particularly in the NFO if you were that’s coming at a higher cost than the book that we have today. So over a period of time, margins will see some level of dilution and it of course also depends as I mentioned earlier in terms of mix of assets, even within the equity, what kind of product getting more flows versus other. So it’s difficult to quantify, but as Piyush has been mentioning for some time that over a bit of time margins will see some bit of dilution.

And the current competitive intensity that we have discussed as part of like a couple of questions before, the competitive pressure, which has got intensified because of the money which is being raised in NFOs, I mean as a house, we have seen these these periods before and our experience has been that it settles down over a period of time. So we hope that over a period of time it settles down and the competitive intensity kind of reduces when it comes to the money raising through the NFOs.

Hiral Desai — Anived Portfolio Managers — Analyst

Okay and lastly on this Standard Life stake sale. Have you had a conversation after this 5% stake sale on their sort of road ahead?

Navneet Munot — Managing Director and Chief Executive Officer

So we have no information on Standard Life’s plans when it comes to diluting stake in the company or selling any stake in the company. As you would know, they sold 5% odd stake recently and currently own approximately 16% of the company. We will keep you posted if we get to hear anything further. The good news that I must share is that we got some high quality shareholders who acquired the stake and we really appreciate their faith and trust and their confidence in us.

Hiral Desai — Anived Portfolio Managers — Analyst

And Navneet, just on the website and mobile app, obviously, I am an investor with HDFC AMC, the website and the app has come out really well especially the smart statement bit is very good. So I think cheers to the team for that.

Navneet Munot — Managing Director and Chief Executive Officer

Thank you so much, Hiral. [Speech Overlap] The team is working very hard and hopefully we will keep improving your experience as an investor with HDFC AMC.

Hiral Desai — Anived Portfolio Managers — Analyst

Wish you guys all the best.

Navneet Munot — Managing Director and Chief Executive Officer

Thank you so much.

Hiral Desai — Anived Portfolio Managers — Analyst

And Happy Diwali to everyone.

Navneet Munot — Managing Director and Chief Executive Officer

Wish you also a very Happy Diwali.

Operator

Thank you. The next question is from the line of Anant Shankar [Phonetic], an individual investor. Please go ahead.

Anant Shankar — — Analyst

Hello, good evening, everyone. I have a question for Mr. Navneet. I attended the Finity GO Passive investor forum last Friday and it was very useful for retail investors like me and I also understand that our company is planning lot of ETFs now. So basically my question is like, what is our strategy for growing big in the passive funds market because it’s a low margin product for one. So the [Indecipherable] matters of a lot. And then second, there is a lot of competition.

Unlike active funds, it is quite difficult to differentiate ourselves with our competitors and especially the new-age fintech firms who have lot of funding coming in and they are not listed, so they don’t have so much of pressure on the profitability aspect. So they can introduce new fund and offer at a much lower cost, whereas it is little difficult for us to do the same because need to balance growth and profitability. So I just want to know what would be our strategy and way forward just on the passive side to grow big like BlackRock or Vanguard [Phonetic]. There, the market share is absolutely key because it’s low margin.

Navneet Munot — Managing Director and Chief Executive Officer

First of all, I mean because we filed a large number of passive products on one single day and it created a buzz, but one should keep in mind that HDFC AMC has actually been a pioneer even in the passive space. We launched our first index fund way back in 2003 and that’s like 18 years back when there was very little discussion around passive products in India. We were doing extremely well on the active side.

We had probably one of the best bouquet of active products, but also launched the index fund and it has one of the longest track record and over the years of course in last couple of years the growth that industry has witnessed we believe that there is and the distributor segment, there is an RIA segment, there is an investor segment which is looking at more allocation to passives and in line with our strategy of being a one-stop shop for anything related to Asset Management, we need to fill that product bouquet as well.

In terms of strategy, as you know, I mean this is like passively managed. Here it’s more about the right kind of — having the execution skill set, right kind of technology, the right kind of operational ecosystem and of course, the marketing and sales infrastructure is slightly different than what you have on the active side given the margins that are there on the passive side. We’ve taken couple of steps over the last few months without elaborating much on that, but we would be I would say, I think you’ll hear a lot of things from us even on the passive side given that our ambition has always been and will always be to remain a one-stop shop for everything related to asset management needs of any kind of investors.

Anant Shankar — — Analyst

Okay and second and last question is are we seriously looking into any acquisitions for [Technical Issues].

Navneet Munot — Managing Director and Chief Executive Officer

So during past and always open for any opportunity if it is earning value to all stakeholders, but can’t say more than that.

Anant Shankar — — Analyst

Okay, I just have figures happy for [Phonetic] the news, there are two companies which are on the block. Thank you. Thank you, sir and all the best.

Operator

Thank you. The next question is from the line of Mohit Surana from CLSA India. Please go ahead.

Mohit Surana — CLSA India — Analyst

Hi sir, good evening. Sir first question from my side is that of the market share offering active equity and the ones that we see, you know, especially in HNI it is a lot higher than maybe [Technical Issues].

Operator

Mohit, sorry to interrupt you, your voice is breaking. May I request you to come in a better reception area? [Technical Issues] Mohit, may I request you to rejoin the queue.

Mohit Surana — CLSA India — Analyst

Sure.

Operator

Thank you. The next question is from the line of Rohan from HDFC Asset Management. Please go ahead. Rohan, may I request you to unmute from your side and please go ahead with your question, please. Rohan, we are unable to hear you. May I request you to unmute your line from your side and go ahead with your question please.

Simal Kanuga — Chief Investor Relations Officer

No, I think this is a mistake because we don’t have any such person and you are saying HDFC Asset Management.

Operator

[Operator Instructions] The next question is from the line of Mohit Surana from CLSA India. Please go ahead.

Mohit Surana — CLSA India — Analyst

Is my line audible?

Simal Kanuga — Chief Investor Relations Officer

Go ahead, Mohit.

Mohit Surana — CLSA India — Analyst

My one [Technical Issues] AUMs have gone up from the previous quarter to this quarter. [Technical Issues].

Simal Kanuga — Chief Investor Relations Officer

Mohit, unfortunately, we can’t hear you. You are like really cracking.

Mohit Surana — CLSA India — Analyst

Sir, I will take it offline then.

Simal Kanuga — Chief Investor Relations Officer

Sure, sure, Mohit. Thanks.

Mohit Surana — CLSA India — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Manjeet Buaria from Solidarity Investments. Please go ahead.

Manjeet Buaria — Solidarity Investments — Analyst

Hi, thanks for taking my questions. My first question was, you know as you have seen some of the large distributors whether offline or online starting their own mutual funds, just wanted to get longer-term implications of things like these big distributors kind of start giving the product out themselves.

Piyush Surana — Chief Financial Officer

We always had — I mean our industry has always been very competitive and in past I remember the question that was asked of us was how will domestic player withstand the global majors because a lot of global majors were setting up AMCs. Now we have seen some of the people who started with the distribution franchise and now building a manufacturing franchise. I think given the growth in the industry over the next several years where the penetration of mutual fund is abysmally low.

The industry has grown so much in last few years, but still if you look at the unique investors, they are just 2.5 crores. So we have a long way to go and I’m sure the industry will attract all kinds of players and some of the people who have a large distribution franchise, if they are able to build a good investment capability and the infrastructure, I’m sure they will also bring interesting I would say dimension to the industry. So more the merrier given the growth potential in the industry.

Manjeet Buaria — Solidarity Investments — Analyst

Okay, the other question I had was you know if you know just crystal gazing a bit but from your vantage point, you know, if someone takes a very long-term view of this industry, 10-year, 15-year kind of view, would it be fair to have a hypothesis that the operating margins which the industry enjoys today would actually not sustain and compress one, because of more competition probably the newer brands build trust over the next decade who are not as well known as you know someone like us or SBI or ICICI and also the fact that the industry growth probably at some point starts have base effect, the competition further is incentivized to go down to lower pricing. So just some broad thoughts on very long-term operating margins of this industry, how defensible they are, not just for you, industry as well.

Piyush Surana — Chief Financial Officer

So passive becomes a much larger part of the overall pie, then of course, margins as you say they will get diluted. Having said that, I mean, if you’re talking about the recent competitive intensity because of the NFOs and the pricing in the NFOs, as we mentioned earlier, we have seen these kinds of times earlier and then of course it settled down over a period of time. Whether it is fair to say that operating margins would not sustain because of more competition, but as I said, this industry has always been very competitive.

I mean you go back and I mean India has a history of let’s say 30 years or so and if you see the last 30 years, three decades, at any point in time you had a good mix of large domestic financial services, who had their asset management company, a lot of global majors who have entered or exited this industry a lot of other players who entered and exited this industry. Competitive intensity has always been there. Now that I think everybody strongly believe that the penetration is likely to increase very substantially.

Some more players are entering the industry, but it will evolve over a bit of time. I think everybody has to work on their own competitive advantage. I think we believe we have an outstanding franchise when it comes to our investment management capability, our risk management capability, our product capability, the presence that we have both the physical presence across the country and the digital presence or the digital assets that we have created, the pedigree of our brand, I think the pedigree of our people. I think with all of those, I think the advantage is that we have, we believe, I think will continue to grow for a very long period of time and continue to grow very profitably.

Manjeet Buaria — Solidarity Investments — Analyst

Last two questions, I’ll just club them. One was, you know, I understand the necessity to maintain a strong balance sheet and certain amount of cash on balance sheet for volatile periods like last year, but just to know where we are in terms of our cost structures and the balance sheet already on cash, what’s stopping the Board from considering paying out incrementally almost all of the profit as dividends or whatever route, dividends, buyback, whatever it is, but you know what’s really stopping the Board over this because we throw out so much cash every year is one.

And second, the final question was in terms of these new regulations by SEBI for mutual fund employees in terms of their investments. Is there any risk of good talent not wanting to come into the industry or nothing on those aspects. Thank you. Those are my questions.

Piyush Surana — Chief Financial Officer

So on the first, I think the ideal lever of cash, I mean as I said that Board has seized of that that’s one of the specific discussions we have in almost every Board meeting and we increased the payout. I mean they increased the payout ratio this year and I’m sure that debate in terms of what is the ideal level of cash versus the payout ratio that we should have I think goes on.

On the second question was on new regulations for MF employees, any risk of good talent not coming to the industry. I think the regulators idea is that I think there should be more skin in the game, whether it comes to the investment team or the other leadership team and I think a similar regulation has also come on, on the high risk game by the asset management companies into their own funds. Over the years, several of these things have enhanced the trust and confidence of the investors in the asset management and we believe that I think given our franchise and given our brand, we shouldn’t have challenge in attracting the right kind of talent.

Manjeet Buaria — Solidarity Investments — Analyst

Thank you. Thanks a lot.

Operator

Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.

Sameer Bhise — JM Financial — Analyst

Yeah, hi, thanks for the opportunity. Just a quick question, where are these new age platforms classified as, as distributors or the direct route?

Navneet Munot — Managing Director and Chief Executive Officer

Sameer, they are both. So some of them have taken the MFD route, some of them have taken the RIA route, but if you look at the big names like your Zerodha, Paytm, ETMONEY, all of them have taken the direct route. So they basically invest in the direct plan that falls under the RIA.

Sameer Bhise — JM Financial — Analyst

Okay, so it’s their license-based classification.

Navneet Munot — Managing Director and Chief Executive Officer

That’s right. So people who want to do distribution, they opt for the MFT and thereby they take the ARN and they take that route.

Sameer Bhise — JM Financial — Analyst

Right. That’s all, thank you so much and all the best.

Navneet Munot — Managing Director and Chief Executive Officer

Thanks, Sameer.

Piyush Surana — Chief Financial Officer

Thank you, Sameer.

Operator

Thank you. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.

Abhishek Saraf — Jefferies — Analyst

Just one follow-up on the NFO side. So if you can just help us explain that obviously, we have also participated in NFOs, but it has been largely in lower yielding kind of NFO schemes. So if I can just understand what are the product gap in terms of product gaps on a higher yielding schemes. What will be those gaps will be. And secondly just means, I know it’s a difficult to say, but in your view how long can this NFO frenzy continue and what could be kind of will make it a more moderate trend to us?

Navneet Munot — Managing Director and Chief Executive Officer

So as I mentioned earlier that one of the product category, which we would be launching is the multi-cap and of course some of the thematic and sector fund over a period of time. The other products where we need to fill our product gap are there could be more innovation could be on the passive side, on the international investing, and of course, on the fund of fund side. By the by, from a core category, as per the SEBI classification, we are present across all categories, be it in equity weight and hybrid and fixed income, money market etc. So that was your question right?

Abhishek Saraf — Jefferies — Analyst

Yeah, Navneet. So just on multi-cap side it’s fine. On the thematic and sectoral side, probably is there more scope for doing any kind of coming out with more schemes so that actually means, again it will be — end up getting more TERs or the margins because multi-cap will be just a one category and once we do it, then it’s over and done with, but in thematic and sectoral, probably we can have much more scope to innovate and then come with newer schemes.

Navneet Munot — Managing Director and Chief Executive Officer

So I think there the intention would be to launch products where our investment team believes in the longevity of the theme, where we believe in sustainability of that product, both from the advisor, distributor or from the investors portfolio perspective. If there is a need for a product, we would be launching. Again as I’m being, I mean I want to reiterate, we won’t be doing a product for the sake of it because it’s selling currently. That has never been the case with HDFC AMC and we would never deviate from that.

Would there be more scope in thematic sectors? As I mentioned, we did BFSI fund. Our team has strongly believed in it. I mean I’m talking about our investment team has strongly believed in it. In terms of the sheer investment universe, which is available to invest in that category and given the high growth potential of that over a long period of time in India. We are looking at another theme, which is like MNCs and of course, over a period of time, there could be other opportunities as well.

Abhishek Saraf — Jefferies — Analyst

Yeah, that’s quite clear. Thanks a lot for the response. Secondly, just your sense in how much legs do you see this NFO — the frenzy, the NFO inflow that we have seen. How long will that — line of sight to that?

Navneet Munot — Managing Director and Chief Executive Officer

So I think we have seen these kind of periods. I think one needs to keep in mind the distribution dynamics, one has to keep in mind I mean some of the AMCs, which have kind of started recently. They need to fill their product bouquet. Of course, the newer AMCs will come in and they will be launching product. Having said that, we strongly believe that the products which have been around for a very long time.

I talked about our Flexi Cap Fund where we celebrated crossing the NAV of INR1,000, the money has got multiplied 100 times in last 25 years. Look at our Balanced Advantage Fund, our Top 100 Fund, our Hybrid Equity Fund, all of them have long-term track record. We strongly believe over a period of time investors would recognize that. They’ve always been recognizing it abd that’s why their size is where it is and I’m sure over a period of time investors would have faith in those funds which have displayed good amount of alpha over a long period of time.

And we have been putting lot of efforts on that. So while I mean you hear about the NFOs or even the NFOs that we have done. I mean we have done like four of them in last five, six months and another one is underway to fill the product gap that I said, but at the same time a larger campaign at our end has been val creation equal to STP and acts as sound investment plus time plus patients. I mean that’s the formula for wealth creation and not really buying the fad of the season.

Abhishek Saraf — Jefferies — Analyst

Sure, sure. Thanks a lot of for the response. Thanks.

Operator

Thank you very much. The next question is from the line of Nikhil [Phonetic] from [Indecipherable]. Please go ahead.

Nikhil — — Analyst

Yeah, hi, good evening. Am I audible?

Navneet Munot — Managing Director and Chief Executive Officer

Yes, Nikhil.

Nikhil — — Analyst

Yeah, hi, thanks for the opportunity. Just one question, it’s a continuation of a earlier participant had asked over the next five, 10 years and you mentioned that competition — there was competition from MNCs and [Technical Issues] the larger guys continued to grow, but sir, if we look at last 10 years from 2011 to to 2021, the guys who have cracked the model have taken incremental market share from the incumbent and this also goes with the theory that we have that generally as the funds become larger, outperformance becomes a lot more difficult.

Now if we look at over the next 10 years, what changes or what could be the learnings that you see can be brought in so that over the next 10 years if the industry grows at 10%, 12% maybe we being one of the largest incumbents and sustain that 10%, 12% and not grow lesser than the industry, what has been — what’s happened over the last 10 years?

Piyush Surana — Chief Financial Officer

So Nikhil, I mean around seven or eight years back when this bull market started, the overall equity assets that industry was managing was close to INR2 lakh crores. Today, we manage more than INR2 lakh crores of active equity. Even in those days, I remember the question used to be that your funds are very large, would you be able to deliver, but I think funds have delivered.

I think still, I mean if you look at the overall size of the industry versus the market cap in India and of course, over the next several years and large number of newer segments listed, newer businesses get listed, we have a very, very long way to go. Within that, the overall assets which are managed by the mutual funds in India is not as large as some of the other markets and I’m sure there would be opportunity to generate alpha. Was that the question?

And as you said that the newer players have gained market shares, but that’s been the case every few years, you would see some of the players growing faster than the other players, may be based on the performance and couple of other initiatives they would have taken, but over a long period, I think fund houses like us have grown reasonably well. Same way here ’99, 2000 when HDFC AMC got set up, this was exactly 21 years back, right? September 2000, we were the newer player, right?

I mean there was the industry with more than 30 players consisting of some of the largest global asset managers, consisting of some of the largest public sector banks, private sector banks, AMCs promoted by different players, but over the next several years, HDFC AMC continued to grow and became a market leader and even at the current size, as I mentioned that it looks like in absolute terms a large amount of money that we have been managing, but if you look at the size of the market cap versus the mutual fund AUM or you look at the size of the GDP and the growth that the country can have, I think still there is a long way to go.

Nikhil — — Analyst

Sure, where I’m coming from is sir, the benchmark, which we have set in terms of market share and what most of the discussion revolves around market share loss and all, considering we being a much larger player and the industry growth part being there and a smaller player having some edge over us in terms of growing faster.

Would the benchmark shift to the differential to the industry growth, which we have or would you say even with this size, we can continue grow at the market rate or even grow faster than the market rate. So is it like our growth over the next five, 10 years should be more in terms of what the markets that grow or the lag will always remain.

That’s what I’m trying to understand that because of our size and because of a new player being more agile and having a much smaller size, maybe he can attract more fund versus a larger fund. So that 1% or 2% incremental growth may go to him rather than coming to us. So that’s where I’m trying to understand.

Piyush Surana — Chief Financial Officer

Actually if we look at globally and look at the growth of some of the largest players, I think they have been growing faster than the overall industry and there has been a consolidation. Of course there is a long tail of players with niche categories but the larger players have been growing pretty well, those who have the right kind of product suite and then of course all the other capabilities to build the business and I think in India also we have seen that.

Our belief is that we have all the necessary ingredients in place which are required for growth of an asset management business, but at the same time, do we have a particular number in mind in terms of what should be the ideal market share. I think that has to take a lot of boxes. So scale is important for us, but quality of that scale or quality of that market share is also important for us, for profitability of that is also important for us and quality we define in terms of the money that we manage on the active equity, active fixed income side, the AUM that we gather from individuals, the AUM we gather from B-30s, the AUM that we gather from these segments and that’s very, very important for us. We, as I said, that we won’t chase a certain level of market share at any cost. There has not been the philosophy at HDFC AMC.

Nikhil — — Analyst

Sure just if I’m permitted one just question I had. Globally, if we are protected, I’m not very clear, but the concept, which I understand it’s a much more institutionalized business versus a larger retail business, which is in India. Would you agree with that because if it more institutionalized as we had seen during COVID, the institutions or the larger corporates will always move towards a safer name or would the construct of the global market be different from — would be similar to what it is in India. Just to understand how the construct differs?

Piyush Surana — Chief Financial Officer

So in India, when I look at the equity funds, the larger participation is from individuals. In fact, almost the entire market is from individuals when it comes to active equity. Of course, on the passive side, you have couple of institutions who have started investing in ETFs from 2015 onwards. On the fixed income side, a large part of the market is institutional, which is like corporate territories and some of the other institutions. We have a long way to go in terms of penetrating the individual market.

I mean — the fixed income market on the individual side and if you look at the overall size of the bank deposits, all the other investment that individuals would have said, their holdings of fixed income, which I think there is lot of growth potential on that side. On the equity, it is largely as I mentioned is more on the individuals than institutions. India doesn’t have those kind of like [Indecipherable] and the provident funds allocate huge amount of money to the equities and alternatives etc just evolving. I’m sure over a period of time that will also happen in India.

Nikhil — — Analyst

Thanks a lot.

Piyush Surana — Chief Financial Officer

Globally, even the insurance companies, the annuity providers, the pension funds and government [Phonetic] funds, all of them get money to the asset managers to manage that. In India, some of these are regulated by separate regulators and asset managers in India, like us, have not been able to tap into that market. Even retail investors in most foreign jurisdictions come through omnibus accounts. They don’t directly come to the fund house. In India actually, the regulations require the investor to come to — for the fund house to kind of do the whole KYC of each investor and deal directly with the investor. They may come through the distributor, but the transaction is with the fund house.

Nikhil — — Analyst

Yeah, thanks a lot, sir. Thanks for the explantion.

Operator

Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. Navneet Munot for closing comments.

Navneet Munot — Managing Director and Chief Executive Officer

Thank you so much once again and wish you all a very Happy Diwali and seasons greetings and wish you a very, very prosperous new year. Please take good care of yourself.

Operator

[Operator Closing Remarks]