IIFL Wealth Management Ltd. (NSE: IIFLWAM) Q4 FY22 Earnings Concall dated May. 05, 2022
Corporate Participants:
Sanjay Wadhwa — Chief Finance Officer
Anshuman Maheshwary — Chief Operating Officer
Karan Bhagat — Managing Director and Chief Executive Officer
Analysts:
Mohit Mangal — Bank of Baroda Capital — Analyst
Sarthak Shah — Prabhudas Lilladher — Analyst
Aejas Lakhani — Unifi Capital — Analyst
Shivani Mittal — Dalmia Securities Private Limited — Analyst
Ashish — — Analyst
Subrata Sarkar — Mount Intra Finance — Analyst
Ritika Dua — — Analyst
Preethi — UTI Asset Management — Analyst
Nilesh Jethani — BOI Mutual Fund — Analyst
Presentation:
Operator
Good afternoon, ladies and gentlemen. Welcome to IIFL Wealth and Asset Management’s Q4 FY ’22 Earnings Call. [Operator Instructions]We have with us today, Mr. Karan Bhagat, the Managing Director and CEO; Mr. Anshuman Maheshwary, the Chief Operating Officer; Mr. Sanjay Wadhwa, Chief Financial Officer; and Mr. Pavan Manghnani, Head Strategy and Investor Relations.
I now hand over to Mr. Sanjay Wadhwa to walk us through the results.
Sanjay Wadhwa — Chief Finance Officer
Thank you, Anil, and a very good afternoon to everyone on the call today. The financial markets have witnessed lots of ups and downs during the last financial year. Amidst all of that, we are happy to report another exciting quarter. We have steadily grown quarter-on-quarter through the last financial year across all the key metrics in the form of growth in AUMs, net flows, revenue, steady retentions and profitability. Let me start with a brief overview on the financial performance of the company for the quarter and full year ended March 31, 2022. Starting with assets under management. Our total AUMs are now more than INR327,000 crores, up 33% over FY ’21 levels.
Excluding custody, our overall AUM have increased 26% year-on-year to INR261,000 crores with Wealth Management AUM at INR207,000 crores and Asset Management AUM at over INR55,500 crores. Importantly, our ARR assets increased 4% quarter-on-quarter and over 42% year-on-year to INR144,000 crores. With this, the share of ARR assets in total AUM now stands at almost 55% as we continue our journey towards steadily increasing the pie of ARR assets. Happy to share that our net flows have also been relatively strong, both for the quarter and the full year. We clocked INR7,000-odd crores for the quarter and more than INR31,400 crores for the full year.
Our loan book has also increased 19% over FY ’21 levels to INR4,318 crores. Now coming to revenues and retentions. Our total revenues increased 7% quarter-on-quarter and 57% year-on-year to INR449 crores as compared to FY ’21, we were up 46%. Our revenue from operations were up 12% quarter-on-quarter and 59% year-on-year to INR423 crores. Importantly, our recurring revenues have increased 3% Q-o-Q and 57% Y-o-Y at INR252 crores. Our FY ’22 numbers are at INR912 crores, up 56% over FY ’21. Further, the growth in ARR revenues has come from both Wealth as well as Asset Management business, both seeing a very healthy uptick over the last quarter.
This quarter has also seen strong transactional revenues at INR170 crores, up 28% quarter-on-quarter and 63% Y-o-Y, reflecting the market opportunities. Total retentions have held strong, increasing by five basis points to 63 basis points over last quarter and seven basis points overall for FY ’22 over FY ’21. Most importantly, retentions on ARR assets have also been steady with a slight increase to 74 basis points. Now coming to expenses. Our total expenses for the quarter increased 6% quarter-on-quarter to INR235 crores. Of this, total employee costs increased by 4%, while admin and other expenses were up 11% over last quarter.
On the overall FY ’22 numbers, we see costs up 38% from FY ’21 levels with full year cost to income at 51%. As per guidance provided last quarter, we expect annual costs to remain steady for FY ’23 with full year cost-to-income ratio improving to about 45%. And now coming to profitability. Operating profits before taxes increased 21% quarter-on-quarter and 66% over last year to INR188 crores and INR614 crores for FY ’22. We achieved highest ever quarterly PAT at INR168 crores, an increase of 8% over last quarter and 64% Y-o-Y and 58% from FY ’21 levels. Importantly, our tangible return on equity, which is return on equity excluding goodwill and intangibles, has increased to 28% for the quarter. For the full year FY ’22, our tangible ROE stands at 25%, up from 15% levels in FY ’21.
We are on course to further improve profitability and capital efficiency, as committed earlier. In the current financial year, which is FY ’23, we expect to see further improvement in all the key financial parameters, mainly in contribution of ARR revenues to total revenues and bringing in better operating efficiencies, thereby improving the cost-to-income ratios. The internal restructurings, which are currently underway on the asset management side as well as the distribution front are expected to improve operating efficiencies. With that, we come to the end of the financial highlights.
I’ll hand it over to Anshuman to cover key business and strategic highlights.
Anshuman Maheshwary — Chief Operating Officer
Thanks, Sanjay. Good afternoon, everyone. The last few months have been dominated by geopolitical events and macro environment changes, specifically given high inflation and increasing interest rates. While there are questions on the near-term outlook and higher volatility across asset classes, we remain confident on the medium to long term. It is specifically in these uncertain times that we wanted to reemphasize on the three core tenets of our strategy: growth, resilience and agility. The impact of these are increasingly visible through our business performance that Sanjay just spoke about, and we continue to work hard on each of these every day.
As you would have seen, we have also provided a detailed strategy update section in the investor presentation. Speaking through the three tenets in a little more detail. The first strategic tenet is growth. We are in the fortunate position of being a part of one of the greatest wealth creation cycles this country has seen, one that we expect will continue for the foreseeable future. Ultra-HNI and HNI wealth continues to grow at an unprecedented pace and the market size, therefore, continues to grow exponentially for us. Further, a large part of this new wealth creation is happening in Tier two and Tier three cities, where access to high-quality advice is usually not available. Given the strength of our platform, our people, our expanding geographical spread and our understanding of the requirements of our core client segments, we are well positioned to capture a larger share of this new wealth creation.
With significant focus on digital, we are also well placed to extend our unique wealth management proposition to newer client segments. On the alternate asset side, the Indian market is still nascent, and if developed countries are any indicator, then we have huge head space for growth. Worldwide alternate assets continue to attract the lion’s share of revenues, almost 46% of asset management revenues, even though it accounts for only 15% of AUM. With our diversified strategies on the alternate side, our platform and leadership position in this space, we again see significant opportunity for growth through the various macroeconomic cycles. The second strategic tenet is resilience. We have worked hard over the last few years to make our business increasingly resilient to a variety of shocks, market-driven or event-based.
And this continues to be a key focus area for us. Specifically, we have successfully transitioned a large part of our AUM and revenues to the recurring fee model. We have spoken extensively about this transition over the last few quarters. So I’m not getting into further detail on this today. But I just want to highlight, as we had shared earlier, we’re close to the end of this transition and a steady-state model going forward. In addition, assets under management for our Wealth clients remains well balanced across equity, which is at about 54% and debt at 46%, providing for significant resilience to market movements. In addition, our leadership position across multiple alternate strategies provides for a natural diversification. On continuing on resilience, most importantly, our client and employee base continues to see high retentions. 42% of our clients have been with us for over five years, highlighting the balance between onboarding new clients each year, while ensuring high continuity on existing ones.
For the year, our client attrition, both in numbers and AUM, remains very low at approximately 2% and 1%, respectively. On the other side, this has been enabled by high continuity of our senior relationship managers. 78% of our team leaders have been with the company for over five years. Not only does this drive client continuity, but it also allows for significant improvement in productivity and AUMs. The third, and again, a critical tenet of our strategic pillars is agility. We have historically, as a business, been at the forefront of product innovation, structuring products for our clients across various market cycles, both up and down. Our full-service platform, including wealth and alternate asset management ensures that our clients are constantly engaged with us.
A variety of engagement types also ensures that we are able to serve the differentiated needs of each client effectively. We are constantly upgrading our digital and technology platform to better serve the needs of our clients with the aim to make transactions seamless and enhancing productivity across the entire spectrum of the organization. Overall, these levers put us in a position where we believe we are best placed to grow and create value for all our stakeholders and provide the best outcome for our clients, employees and investors alike.
With that, I would like to hand over to Karan and open the session for Q&A.
Questions and Answers:
Operator
[Operator Instructions] First on the line, we have Mr. Mohit Mangal. Kindly unmute yourself and introduce where you’re from and ask your question.
Mohit Mangal — Bank of Baroda Capital — Analyst
[Indecipherable] Bank of Baroda Capital. So my first question is in terms of the nonrecurring revenue, so we saw a huge jump to INR170 crores, which is not usual. So can you just explain as to what the deals for this? And what was the quantum?
Karan Bhagat — Managing Director and Chief Executive Officer
Thanks, Mohit, for the question. So I think quarter two, quarter three, quarter four, in some senses last year, have seen a fairly large jump on the transactional income side. Some of these transactions are also included as — largely, some of the transactions are one-off transactions, which may or may not get repeated. But we had the site of these transactions through quarter three and quarter four. Some of them are transactions on the unlisted side, some transactions include some placements on National Stock Exchange. And therefore, we had the ability to balance and expedite the cost transition for the next two quarters in the third and the fourth quarter.
So some of the transaction income, broadly round about, give or take, INR80 crores to INR100 crores per quarter, stays constant. The incremental amount for last quarter is something which is largely a function of the way the capital markets have been for the last nine to 12 months. And being conscious of that, we’ve kind of, in our projections for the next year, factored in round about the constant number of INR80 crores to INR100 crores as transaction.
Mohit Mangal — Bank of Baroda Capital — Analyst
Perfect. Perfect. Now the second question is on IIFL One. So we saw positive net flows of around INR1,500 crores this quarter, which was the highest in the fourth — in the last four quarters. So should we assume that the clients have started taking interest in this product, and we’re seeing this upturn going forward?
Karan Bhagat — Managing Director and Chief Executive Officer
So, Mohit, I continue to be very positive about IIFL One. I think a slightly tepid market environment will actually spur the growth of IIFL One even more. I think generally speaking, in very, very active capital markets, plans are slightly a bit more focused on transactions. In slightly more flattish markets or slightly more challenging markets, clients and relationship managers and the firm focuses on the platform as much, if not more, than on transactions. So I’m quite positive in the year we see coming by. Generally speaking, IIFL One will see much more growth. And therefore, transaction incomes with the — a little bit of the muting on the transaction income will be more than offset by the increase in IIFL One.
Mohit Mangal — Bank of Baroda Capital — Analyst
Perfect. My last question is on custody assets. So we saw custody assets growing from around, say, INR39,000 crores to INR65,000 crores this year. So is there any plan in which you can monetize or take benefit out of it? Because now, at present, we are not getting anything from custody assets.
Karan Bhagat — Managing Director and Chief Executive Officer
So custody assets are really, in some senses, promoters’ stock lying in the Demat account, right? So some of these are strategic in nature because some of these include unlisted stocks. Therefore, at some part or the other, when they get monetized or the IPO comes, in some way, having custody of these stocks gives us the first site. So I would say it is of no advantage or no use. In the long term of three to five to seven years, more often than not, they either lead to some kind of monetization, either through dividends or through sales. But — and therefore, the ability to have that obviously allows you to have the first site. But on the immediate basis of next three to six, nine months, obviously, monetization on the pure custody assets is difficult.
Mohit Mangal — Bank of Baroda Capital — Analyst
Perfect. That is all from my side and all the best.
Karan Bhagat — Managing Director and Chief Executive Officer
Thank you, Mohit.
Operator
[Operator Instructions] Next on line, we have Sarthak Shah. Sathak, kindly introduce where you’re from and ask your question
Sarthak Shah — Prabhudas Lilladher — Analyst
Sarthak Shah from Prabhudas Lilladher. And you have mentioned restructuring on the asset management side of the business. What impact would this have on the margins in the company?
Karan Bhagat — Managing Director and Chief Executive Officer
Sorry, can you just repeat the question?
Sarthak Shah — Prabhudas Lilladher — Analyst
Yes. You had said that you all are doing some restructuring on the asset management side of the business.
Karan Bhagat — Managing Director and Chief Executive Officer
No, honestly, I think from a restructuring perspective, just maybe a combination of the alternate assets and the mutual fund being in two separate entities. It has no impact on the business itself. We have, in fact, kind of expanded our investment team on the alternate side. We’ve got a team led by Akash, who just joined us on the fixed income side, complementing our team on the listed/unlisted, long/short as well as on the real estate side. So I think from a strategy perspective, for us, credit over the next 12 months, there will be a good fuel for growth in a similar way where listed and unlisted equity assets have got added over the last one year. The restructuring is only limited to really an entity reorganization. It has really no impact on the business itself.
Sarthak Shah — Prabhudas Lilladher — Analyst
All right. Thank you. That’s all.
Operator
Thank you. Next in line, we have Aejas Lakhani. Aejas. Kindly unmute yourself and ask your question.
Aejas Lakhani — Unifi Capital — Analyst
Karan, congratulations on the result. This is Aejas Lakhani from Unifi Capital. So Karan, a couple of questions. The first is that in the guidance that you have called out for the coming year, the employee costs are down to 33%, which we closed here at 39%, and that has a fixed and a variable component. So could you just speak a little bit about how these line items [Indecipherable]?
Karan Bhagat — Managing Director and Chief Executive Officer
Yes. So I think that’s a good point. I think I kind of explained it a bit last quarter, but I’ll do it again. So I think even in this year, honestly, the current year cost on a normalized basis would be in the region of 33%, 34%, somewhere in the region of 32% to 34%. So broadly on — if you look at the costs, it would be largely round about INR75 crores to INR80 crores of fixed salary costs on a quarter-on-quarter basis, and another INR150 crores to INR170 crores of variable cost. So broadly, on a revenue stream of INR1,500-odd crores, it would be in the region of INR450 crores to INR500 crores. The current cost, which is being reflected over the last four quarters, effectively includes a onetime cost, which was — which we’ve kind of run for the last two years and would have extended for the next six months, next — in the next financial year, largely on account of the revenue transition from upfront to trail. So on the last 30-odd months, we’ve continued to pay our relationship managers on an upfront basis, whereas the firm is largely booking the revenue on trail.
So in some senses, for the last two years, we’ve had round about INR75 crores to INR100 crores incremental employee cost, which effectively stops from April of this year. So it would have, in normal circumstances, continued as we had guided to September of 2022. But we’ve kind of — given the velocity of transaction income over the last two quarters, we were able to digest the next two quarters’ incremental salary cost in the last two quarters itself. So effectively, from next year onwards — next financial year onwards, we are back to status quo with our fixed cost being in the region of INR75 crores to INR80 crores to INR85 crores a quarter, which is round about INR340 crores, INR350 crores. And the remaining INR150 crores largely being the variable cost, representing round about 32% to 34% of our guided info.
Aejas Lakhani — Unifi Capital — Analyst
Got it. And this variable payout, it means to the team leaders and the RMs that support the team leader, right?
Karan Bhagat — Managing Director and Chief Executive Officer
So it’s across the board. Largely, if you see, it’s in three big buckets, right? So the first bucket really, as you pointed out, is on the Wealth side of the business, which in turn is kind of broken up into four parts. It’s the wealth relationship managers and the sales team and the investment advisory team and the product team, all four of which are front-facing with the clients. We then have large pillars supporting the Wealth business on the NBFC side and the trust side, which are also kind of chipped in. Then you obviously got the investment team on the asset management side of the business. And you’ve got a small sales team on the asset management side. And then you have the corporate functions, which are largely nine or 10 in broad nature, starting from, let’s say, the finance function, all the way to legal compliance and so on and so forth. So if you really see it from an employee pool perspective, it’s largely a sum total of these three big heads.
Aejas Lakhani — Unifi Capital — Analyst
Got it. That’s helpful. And just on the cost side, you mentioned, I think, last call, that you will be investing in digital and a few other expenses. So this quarter, we had admin and other expenses of about INR57 crores. So is that the new run rate that we should be sort of thinking because this number has been closer to INR35 crores, INR40 crores earlier? So is that…
Karan Bhagat — Managing Director and Chief Executive Officer
No, so I think that’s not the new normal. I think the new normal is around the INR50 crore number as we’ve kind of guided. Broadly, the INR50 crore includes an incremental INR4 crores to INR5 crores largely a quarter coming out of the digital spend. I think we are at a steady INR40 crores, INR45 crores for the rest of the admin expenses. What we’ve ended up doing in the last quarter is, obviously, we’ve got a lot of accumulated employee benefit, in the sense, employee training programs, a little bit of client entertainment programs, largely over — in a sense, the direct marketing efforts over the last two quarters, given the accumulated nonengagement over the last 2.5 years, we pushed that out a bit over the last two quarters, which has led to the incremental 5% first quarter — last two quarters’ marketing and admin cost being extra, but we don’t see that repeating itself. We see our regular admin cost being in the region of INR40 crores to INR45 crores and a further INR5 crores to INR7 crores coming on account of digital.
Aejas Lakhani — Unifi Capital — Analyst
Got it. And sir, going into next year, what would be some of the areas that would give you some worries in terms of — if any?
Karan Bhagat — Managing Director and Chief Executive Officer
So I think from a worry perspective, obviously, I think three things in our business and it’s not only next year, I think it’s in every year, to be fair. I think first, obviously, I think from a market perspective, obviously, though the business is phenomenally resilient in a way where we’ve been able to get 70% to 80% of our revenues as ARR, yet having said that, obviously, there is a slight mark-to-market impact in case of very choppy markets as we head into the next year. Last quarter, obviously, we’ve had a 3% to 4% maybe mark-to-market negative on the AUM, but that’s been more than offset by the net flows.
So obviously, I think going into next year, where mark-to-market might be a bit choppy, we’ll have to ensure that net flows continue to be adequate to ensure that if there are any surprises on the mark-to-market side that can be well balanced. On the second side, obviously, extreme movements in the market can make markets a little bit fluttery. And therefore, transactional income can become a little bit more difficult than normal. And even though it’s 20%, it can cause a little bit of pluses and minuses in case of extreme market situations.
I think, broadly, Market conditions with plus/minus 10%, 15% of the market is very well tolerated by a firm like us purely on account of the diversification of our asset classes. Even today, we would be 50-50 broadly in fixed income and equity across all our businesses. So a little bit of movement in markets really doesn’t impact client sentiment in that way, but absolute big, big volatility can have a little bit of impact. And third continues to be talent. So I think, while we continue to attract a lot of talent into the firm, it’s pretty much order of the day that one out of 25, 30 or one out of 40 people would also kind of move out.
So I think the continuous balancing act of attracting new talent and balancing it with, let’s say, some people who move on is something which is a continuous challenge. So I would honestly put these three. And obviously, all these three things are not binary. There’s a thin line. There is no one-zero situation in all of these three things. And really, it’s a function of our ability to kind of handle these three in a particular way, if extreme things happen, to ensure that the quality of the business keeps us going.
Aejas Lakhani — Unifi Capital — Analyst
All right. That’s helpful. And just one last one is that, you’ve spoken about mid-market expansion where you’re now targeting a different client base, which is between the INR5 crore to INR15 crore category. Is that behavior any different from the existing client base? What is the nature of these clients? And are you able to push them with different kind of a platform or a product?
Karan Bhagat — Managing Director and Chief Executive Officer
That’s a great question. I think we’ve been kind of thinking through that idea over the last couple of years. And I think we’ve reached a place where we are sure we want to get into it. I think it’s really difficult to define it as 15 or 20. But I think in our minds, we are clear that outside the top three, four cities, we are broadly looking at, let’s say, the INR5 crore to INR20 crore market as, let’s say, the second segment we want to attack, and in the top cities, broadly the INR10 crore to INR25 crore market. These — from a behavior perspective, I think these clients behave fairly similarly to the Ultra-HNI clients. So from a product behavior perspective, there’s a huge amount of match. From a delivery perspective is where we need to make some changes. Obviously, in the ultra-high network category, it’s a phenomenally high cost touch — high-touch model. And therefore, from a cost perspective, even having a cost-to-serve ratio of somewhere between 25, 30 clients works. But on the INR5 crore to INR20 crore and the INR10 crore to INR25 crore, we’ll have to push the cost-to-serve to round about 45, 50 clients.
And that’s really where we’re investing a lot of our time on ensuring that we are building the right digital tools, and we are in a position to kind of go live to market in the first quarter of next year. So from a proposition perspective, I think it will lead us to do two things. It will allow us to expand a bit in the mid-market as we launch, but it will also need us to make a proposition on the Ultra-HNI space much sharper. When I say much sharper, I think we’ll be able to make it substantially more focused and maybe get a better platform out to our clients who are more than INR25 crores with us. So I think it’s an ongoing exercise. We are fairly excited with it. We’ve got our — we believe we need — like we have 11, 12 blocks on the ultra-high net worth side from a platform perspective to succeed. We need similar 11, 12 blocks on the mid-market side to succeed. And we are in the process of building out those 11, 12 blocks as we speak. And from a time line perspective, either first quarter, calendar year next year or first quarter financial year next year is really when we should be able to position ourselves for that launch.
Aejas Lakhani — Unifi Capital — Analyst
That’s very helpful. Just one last thing again. You — out of the INR31,000 crores that you raised, roughly 1/3 was in the Asset Management bucket and 2/3 on Wealth. Do you see a similar kind of proportion for 2023?
Karan Bhagat — Managing Director and Chief Executive Officer
Yes. I think that’s the right proportion. I think obviously, 60-40, 65-35, 70-30, that’s broadly the proportion it’s going to be in.
Aejas Lakhani — Unifi Capital — Analyst
Got it. Thanks a lot for the color.
Karan Bhagat — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you. [Operator Instructions] Next on line, we have Ms. Shivani Mittal. Kindly unmute yourself and introduce where you’re from.
Shivani Mittal — Dalmia Securities Private Limited — Analyst
This is Shivani Mittal from Dalmia Securities Private Limited. I had just one question. I believe you have removed the guidance slide in the current quarter. So I just wanted to ask if the guidance as of quarter three still holds in terms of all parameter because I think you have been giving guidance for many quarters right now.
Karan Bhagat — Managing Director and Chief Executive Officer
No, Shivani, I think we’ve typically given guidance at the end of quarter three. And if there is pre-change then we update it, otherwise, the guidance stands.
Shivani Mittal — Dalmia Securities Private Limited — Analyst
Okay. Okay. Thank you so much. That’s it.
Operator
[Operator Instructions] Next in line, we have Ashish. Kindly unmute yourself and introduce where you’re from. Thank you.
Ashish — — Analyst
Just a quick data question. How much is the performance fee income that we have booked in this quarter? And what is the approved number that we are carrying on private equity funds?
Karan Bhagat — Managing Director and Chief Executive Officer
So Ashish, there’s practically 0 performance fee booked in the last quarter. Most of the performance fees is carried forward. We’ve got our first fund, which we raised in 2016, maturing in the current financial year. So that will become carriable from the first quarter of the current year. From an estimation perspective, I think, just on a mark-to-market basis across all our private equity funds put together, the performance fee would be around somewhere in the region of INR350 crores to INR400 crores across all our funds. But that number itself is fairly — if I can put it this way, fairly closely linked to the movement in the markets. So the movement of that from INR350 crores, INR400 crores to INR500 crores back to INR300 crores is fairly fast. So more often than not, we don’t end up calculating it on a quarterly basis. But having said that, the last we did it, approximately a couple of months back, it’s in that region of INR350 crores to INR450 crores, which we are carrying into this year.
Ashish — — Analyst
And I presume that’s not built into your guidance that you’ve given for next year?
Karan Bhagat — Managing Director and Chief Executive Officer
Not really, not really.
Ashish — — Analyst
Okay. Thanks. Thanks a lot. Wish you all the best.
Karan Bhagat — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you. Next in line, we have Subrata Sarkar. Kindly unmute yourself and introduce where you’re from and ask your question.
Subrata Sarkar — Mount Intra Finance — Analyst
This is Subrata Sarkar from Mount Intra Finance. So I have two questions. First, on the strategy. From a strategy level, Karan, are we thinking of — like there are a lot of financial institutions and banks who don’t have a asset strong wealth management network. So are we thinking of officially doing some tie-up with them so that we can have like mutual relationship with them? So it’s on a broader strategic aspect, but any thought on that?
Karan Bhagat — Managing Director and Chief Executive Officer
No. So I think — Subrata, thanks for that question. So I think I’d like to answer that in two parts. I think we would love to do tie-ups with banks on the asset management side. And I think the team has been working hard. And today, it’s fair to say that maybe 60% to 65% of the banks we’ve tied up for our asset management products. I think that’s the path of least conflict and ensures us to be able to kind of give out all our innovative products from the asset management side to the banks. On the Wealth Management side, I think I believe unless and until we have a strong tool on the mid-market side — on the ultra-high net worth side, we would not really want to approach our clients for an intermediary. We would like to approach our ultra-high net worth clients directly.
Because if you approach them through an intermediary, we would need to sign — pretty much give up those clients for our entire lives and share a large portion with the intermediary. We believe we have the product strength and platform to be able to reach out to most of the ultra-high net worth clients over the next five to 10 years ourselves. So on the ultra-high net worth side, I think our current strategy remains more B2C, where we would like to engage with clients directly. On the mutual fund side and the alternate asset management side is where we would like to really strengthen and deepen our relationships with all partners and banks to see how we can reach our [Indecipherable] clients.
Subrata Sarkar — Mount Intra Finance — Analyst
Okay. Now since you maintain on the mid-segment, basically, so there are a few companies which are aggressively like getting into — they are into mid-segment basically, including one of the listed player. So what I mean to say, Karan, like how serious — on a strategic point of view, how — what is our view? Like, can — first, number one, are we serious about the mid-market segment? Because it requires a different tech platform, it requires a low touch, more kind of a digital platform and all those things. So number one, are we serious? Does it make sense for us? Because strategy will be a little bit different for us. So — and do you foresee that segment to be a very big segment in next 10 years, let’s say?
Karan Bhagat — Managing Director and Chief Executive Officer
The answer to the last part of the question is, yes. I think the segment is growing disproportionately in size, especially the INR5 crore to INR20 crore and INR10 crore to INR25 crore segment. I think as newer companies are getting listed, the number of individuals, employees in every MNC, large domestic Indian company, as well as the new companies which are getting listed, having a financial net worth of INR5 crores to INR20 crores to invest is becoming disproportionately larger and larger. So from a size of the market perspective, there’s no question about it. From a capability and a cost-to-serve ratio perspective, I agree with you fully. I think the biggest advantage and commonality we have is our commercial understanding of what the client would want and our product expertise. On the flip side, what we need to build out extremely well, as you rightly said, is a technology stack, which allows us to give a phygital experience to the client.
Do remember, we are not focusing on the INR1 lakh to INR1 crore client, which is going to be a very, very different transaction [Technical Issues] experience, now which we are not really looking to do. We are still — when you are talking about the INR5 crore to INR20 crore or the INR10 crore to INR25 crore segment, pretty much for most banks and most other players, that would be really the private wealth segment in that sense. So we are really not going down to the retail or the mass affluent segment, which I think would require a very different approach. In our case, I think it’s a phygital approach somewhere. It requires a better technology stack for sure. But it also equally requires a strong platform and good product expertise. So I think we have a right to win there. The size of the market is very large. At the same point of time, are we ready to implement it today from a platform perspective? The answer is no. Are we investing some of our time and resources to build the platform? The answer is yes.
Subrata Sarkar — Mount Intra Finance — Analyst
Last question, from a market business perspective, Karan, just we have seen unprecedented new account opening in last two, three years. And a significant part of that, they want to trade of their own without help of — let’s put it like this, it’s like discount brokerage led upside. So now only thing what I’m trying to understand, once this market settle a little bit, making easy money doesn’t — it doesn’t become so easy to make money from this market directly without a help. In that circumstances, are we envisaging that a lot of these clients will gradually move to a wealth management platform like us or, let’s say, to the mid-segment also? So from a market perspective, is that a better — will be a sweet point for us, like already a lot of clients exposed to equity and investing, but they will struggle at some point of time, then market will not give that kind of a disproportionate return.
Karan Bhagat — Managing Director and Chief Executive Officer
Well, I think it’s a really tough one to foresee as such. But from my thought process, I think there will be a place for all three kinds of clients in the market. There will be always a set of clients who are always operating on a DIY basis, do-it-yourself basis, who will have the inclination and the time to do it themselves. There will be a second segment of clients who want to be knowledgeable to engage and be responsible for the decision they are making. They don’t want to do it themselves. They want to engage, discuss, but obviously have the right to say in [Indecipherable].
And there’s always a third set of clients who will look at solutions in either a discretionary format or a packaged format, where once they’ve decided on a broad headline goal, they would ideally like to kind of come into more discretionary packaged kind of solution. So I think across all segments, and this, I think, will remain true, whether the client is an ultra-high net worth client or a mid-market client, it really doesn’t matter. I think from a client behavior perspective, there will always be three segments. Last two, three years, just given the way the capital markets have behaved, you’ve rightly pointed out, I think there might be a disproportionate number of people in the first category. But over a period of time, you’ll see kind of an equal split between all three.
Subrata Sarkar — Mount Intra Finance — Analyst
Thanks. Thanks a lot.
Operator
Thank you. Next in line, we have Ritika Dua. Kindly unmute yourself and introduce where you’re from.
Ritika Dua — — Analyst
My apologies. My questions have been answered. Thank you.
Operator
Thank you. [Operator Instructions] Mohit Mangal I think you have another question.
Mohit Mangal — Bank of Baroda Capital — Analyst
Yes, yes. So just one question. Can I — I wanted your views on the growth opportunities or the potential of the wealth management industry. And how does our company intends to exploit these opportunities vis-a-vis the competition?
Karan Bhagat — Managing Director and Chief Executive Officer
Sorry, for some reason, I couldn’t hear you.
Mohit Mangal — Bank of Baroda Capital — Analyst
Growth opportunities or potential of the wealth management industry. And how does IIFL Wealth intends to do vis-a-vis the competition? What are the — I mean, strategies per se?
Karan Bhagat — Managing Director and Chief Executive Officer
No, so I think growth is a very — I guess, the most important word in our industry, right? Because from a wealth management perspective, from an India perspective, we are sitting at the cusp of a phenomenal amount of growth. So if you just take the question backwards for a minute, I think the stock of wealth in India, obviously, is growing at maybe 1.5 times to two times the GDP growth rate, right? So the GDP is growing at 7.5%, 8%, where the stock of wealth growing at somewhere between the 10% to 12%. The stock of wealth, again, is disproportionately growing for the high net worth individuals and the ultra-high net worth individuals. So there’s a disproportionate growth happening there. Between that, today, nearly 50%, 55% of the assets is still in nonfinancial assets, 45% is in financial assets.
That itself will again change. You will see nearly 65%, 70% of the assets over the longer term move towards financial assets as compared to nonfinancial assets. So if you just see the first three legs itself, the stock of wealth, the growth of wealth for high net worth individuals and ultra-high net worth individuals and the growth between financial assets and nonfinancial assets, you just put these three things together, it points at a fairly heady number of growth in terms of size of market for the industry itself.
Out of this, obviously, then there is a certain amount of money, which are managed professionally, certain portion of money where clients continue to invest in fixed deposits and so on and so forth. We believe that money is less than 20% of it is managed professionally today. That itself is going to cause a — that itself will be a fairly large change. And post that, obviously, comes our market share, which we kind of hope to improve. So if you look at the business itself, I think the growth levers are across the space.
All these five, six things are massive growth levers in the business and both on the Wealth Management side and the alternate asset management side, I think, for the next 10 to 15 years. I think really, it’s a battle for us to lose because the size of the market is really going to grow. And as long as we can keep our head straight and not make too many mistakes, I think we’ll be an active participant of the growth in this industry.
Mohit Mangal — Bank of Baroda Capital — Analyst
That’s it from my side. Thank you.
Operator
May I request, Preethi, kindly unmute yourself and ask your question. Please introduce where you’re from.
Preethi — UTI Asset Management — Analyst
Karan, this is Preethi from UTI Asset Management. So my question is more topical. So we have seen a merger happening in the banking industry, Citi going out of India, and they do have a large wealth business, I think, INR50,000 crore or something specifically to Citi Private, and there’s another INR50,000 crores, so total of 1 trillion. So is that client pool something of our interest or is that a target segment? And are these conversations happening on — from the Citi wealth clients?
Karan Bhagat — Managing Director and Chief Executive Officer
No, absolutely. I think Citi has historically got a phenomenal business on the wealth management side. I think they’ve been operating at all segments of the business, the Citi Select, Citi Private client as well as the Citi Private Bank, they’ve built a very strong franchise across all three segments. Obviously, we’ve been in some ways, lucky to recruit people from Citi all the way back from 2012 to 2013. And some of them have really been successful in our platform and have led us to an ample period of growth. So from a Citi perspective, I think there are obviously two sides of the business. One is the platform and second is the people.
We’ve — from our perspective, obviously, we would love to see if we can attract some people as we go along. I think with that, we should be able to complement our platform along with the people and potentially look at expanding in that market base. Having said that, I think banks, obviously, including Axis, ICICI, HDFC, so on and so forth are also working hard to improve their wealth management proposition. So we’ll have to kind of keep that in mind while we try and increase our market share.
Preethi — UTI Asset Management — Analyst
Okay. So there was one feedback that we got in some surveys that Citi wealth client, they look at it as a holistic one, so not the whole banking plus wealth banking effort. So how do you — if at all it comes to that, so how do you address that kind of…
Karan Bhagat — Managing Director and Chief Executive Officer
So I think that’s a fair question. I think the entire banking holistic platform comes with a little bit of plus and minus. I think some clients would like to look at that as the total safety. On the flip side, a relationship manager of the bank, more often than not, his balance scorecard becomes equally split between banking products and wealth management. So sometimes it also leads to a slightly diluted proposition for the client. So while there are certain set of benefits of being able to give a full service platform, sometimes there are also certain set of challenges and paradoxes, which kind of come in while servicing a wealth management client from a banking perspective.
From our perspective, obviously, we work closely with two or three banks, where clients open their bank accounts. And we are able to, to the best of our ability and the best of our tie-ups, at least from an investment perspective and immediate needs, be able to service 70% to 80% of the clients’ banking needs. So I think it will be a mix of both. We’ll have to manage both. We’ll have to be able to do at least a large part of this minimum banking proposition, which is then required from an investment perspective, and ensure that we are able to benefit from not having the same paradoxes from a balanced scorecard perspective, which a normal priority banker would face.
Preethi — UTI Asset Management — Analyst
All right. So just last question on this. This is a very softer aspect of it, that most of these clients want to be managed, want their wealth to be managed by foreign outfits. I think historically, that was one of the aspects. We have seen massive consolidation happening on the domestic front. So because there is a change right now, do you think that mindset is changing? I think we got this in survey, so if it’s not Citi, probably I’ll go back…
Karan Bhagat — Managing Director and Chief Executive Officer
I’m not sure about that survey, but I’ve been managing money with clients for 20 years, I’ve never heard a client tell me that I prefer my money managed with a foreign outfit as such. I honestly don’t think it’s between a foreign and domestic. A foreign outfit could do equally well and domestic outfit could do equally well. It’s a function of getting people, platform and processes together. I think after that, it really doesn’t matter whether you’re a domestic bank or a foreign bank. It’s all about getting all those three things together. And I think if you have those three things together, you’re good to go.
Preethi — UTI Asset Management — Analyst
Definitely, the numbers do suggest that, I think, in the last five to 10 years, the domestics have definitely consolidated. But I was just trying to understand from the customer point of view, since they have to make a decision now.
Karan Bhagat — Managing Director and Chief Executive Officer
Yes, I think if a foreign bank gets a private banking platform together with all of these three things working in conjunction, I think they would also be able to get the same amount of market share. I don’t — I honestly don’t think it’s about a foreign or a domestic. It’s just about getting the pieces of business together.
Preethi — UTI Asset Management — Analyst
Thanks for patiently answering my question.
Karan Bhagat — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you. Next in line, we have Sanjay Kumar. Kindly unmute and ask your question.
Sanjay Wadhwa — Chief Finance Officer
First question is on the numbers. So we did INR7,000 crores of flows. If we were to maintain our FY 2023 guidance and to compensate for the MTM losses, will the current run rate be enough or will it be kind of a linear growth towards INR8,000 crore, INR9,000 crore mark or one quarter somewhere we’ll have a lumpy one and then we’ll continue at INR7,000 crore. How will this pan out the flows?
Karan Bhagat — Managing Director and Chief Executive Officer
That’s really difficult to predict. I wish I had an exact answer for you. But obviously, we would want it to be as linear as possible. But in reality, it doesn’t happen that way. But I think I’ve seen some minimums and some maximums, right? So I think it’s fair to say, typically, you don’t see quarters with less than INR3,500 crores, INR4,000 crores of net flows at the lowest and you would typically not see quarters at more than INR14,000 crores, INR15,000 crores. So I think I can give a minimum-maximum kind of range. I’m not sure whether I’ll be able to exactly give you a linear-nonlinear kind of answer. But yes, it would be very surprising if the numbers are below INR4,000 crore, INR4,500 crore for a quarter and very surprising if it’s more than INR14,000 crore, INR15,000 crore for a quarter.
Sanjay Wadhwa — Chief Finance Officer
Okay. Thank you. Second, on strategy. The Vintage is good, we’ll continue to gain wallet share from existing clients. But I wanted to understand your strategy and your funneling process for new millionaires, given that the time to become a millionaire has come down, given the recent IT salaries, IPOs and private equity money. Say when there is a liquidity event, say, a promoter is exiting or there is an IPO, how do you approach, how do you identify such prospective clients? How do you onboard or generate leads for newer millionaires?
Karan Bhagat — Managing Director and Chief Executive Officer
So I think newer millionaires for us can be divided broadly, let’s say, in two or three categories. But let me first talk a minute about our clients’ children, right? So effectively, let me call them young adults in some ways, and they’re kind of broken into three age brackets from our perspective, 13 to 18, 18 to 23 and 23 to 32. So over the last seven to eight years, we’ve kind of engaged with our clients’ young adults in a very, very organized way. We have a program for all three age books between 13 to 18, 18 to 23 and 23 to 32. The first program is really called an entrepreneurship academy, and the second one is a young leadership program, which involves an internship at our office, and the 23 to 32 is an event called DIVE which we have at Goa every year. So we make it a point to ensure that we are in constant touch with our new millennial — young adults of our clients. In terms of the new to the firm itself in terms of millennials, I think what we’ve seen at least in terms of the younger tech monetization events, I think our ability to reach out to those set of clients has pretty much been fairly there. I think there, the behavior change has not really been in terms of saying, “I want to do it myself.”
But the behavioral change has been in terms of the profile of the client in terms of how he wants to go about building his portfolio because he has a larger number of years left to build out wealth as opposed to, let’s say, some of our older clients. There, I think we’ve been fairly adaptive and flexible to be able to enlarge and innovate on our product platform so as to be able to adapt to these newer millennials also. The third set, which is what you spoke about, which is where there are individuals who are maybe in the late-30s or even in the early-30s and maybe late-20s, who ended up with that INR5 crore to INR15 crore category in a lot of the tech companies. That’s the segment which we are not really targeting today, but we are hoping to kind of be ready for them over the next 24 months. So these are the three broad subsegments. And the fourth one, which is really the segment which is maybe trading a bit between the INR0 crore to INR5 crores category, that’s not something which we are kind of currently kind of focused on in that sense.
Sanjay Wadhwa — Chief Finance Officer
Okay. If I can squeeze in a last question. So you spoke about the Accenture platform that you’re building. So any update on that? And I also asked a related question to one of your colleagues in another platform. I’ll just post it here again. So say, take BlackRock, for example, they have their own platform, and they started to build their own platform. And then they started selling it as a service to others. So are we thinking along those lines to use — to build our own platform and then to sell that platform as a service to others?
Karan Bhagat — Managing Director and Chief Executive Officer
Sorry, I’m not sure what exactly do you mean by sell your platform to others.
Sanjay Wadhwa — Chief Finance Officer
A wealth management platform where you can onboard clients who will then have their own set of clients.
Karan Bhagat — Managing Director and Chief Executive Officer
Yes. So as I said earlier, I think the Indian market itself is not large and mature enough for us to look at an external asset management platform yet, which is what has become a global norm. I think, as of now, we would prefer to deal with our ultra-high net worth clients on a B2C basis, which means have a direct relationship with them. As the market grows to become sizable and more mature, maybe after, it’s a strategy which we can look at after five years or maybe even 10 years. We’re always open to that. But in the current context of things where our ability to reach a large set of clients continues to remain high, we are unlikely to launch an external asset management platform.
Sanjay Wadhwa — Chief Finance Officer
Okay. On the Accenture platform that you’re…
Karan Bhagat — Managing Director and Chief Executive Officer
On the Accenture platform, I think as we’ve kind of spoken about, we’re moving into the implementation phase, and we will have multiple implementation partners. And it’s not going to be a binary outcome after 12 to 18 months. We will have interim outcomes every three to six months. And we’ve taken out a budget of, as I indicated earlier, INR5 crores to INR7 crores a quarter for the implementation over the next 12 to 18 months.
Sanjay Wadhwa — Chief Finance Officer
Okay. Thank you. That’s it from my side.
Operator
Thank you. The last question coming in we have from Nilesh Jethani. Kindly unmute and ask your question.
Nilesh Jethani — BOI Mutual Fund — Analyst
This is Nilesh here from BOI Mutual Fund. My question was on the managed account front. So we were able to increase our AUM, say, from FY 2020 levels from around INR3,000 crore, INR4,000 crore-odd levels to around INR19,000 crores now. So I wanted to understand, say, three, four years before, the IIFL and the large distributors were the first port of call for large PMS and AIFs. So what has been the change in the market share of the total AIF distributed assets versus our share? Is the trend changing? Any outlook on this? Because that’s one of the high-yielding assets for us.
Karan Bhagat — Managing Director and Chief Executive Officer
Sorry, in that, you’ll have to just — from a market share perspective, you’ll also have to add the managed accounts not earning a trail because earlier it was reported under two categories because pre-2019, we were taking it as an upfront. So the size of the market was — size of the pie for us was much larger, but it was coming in the line saying managed accounts received upfront earlier.
Nilesh Jethani — BOI Mutual Fund — Analyst
Okay. Got it. So today — the recurring fees, whatever the report, INR19-odd-thousand crores…
Karan Bhagat — Managing Director and Chief Executive Officer
That will increase substantially because earlier we were reporting it as upfront. So the 2017, 2918, 2019, our managed accounts were taking upfront fees, which is now what changed to trail. So therefore, the — you’re seeing — earlier, there were only, let’s say, INR1,000 crores, INR1,500 crores of managed accounts where we were getting trail. Now that number is increasing steadily because of the fact that we moved it to the trail mode.
Nilesh Jethani — BOI Mutual Fund — Analyst
So any growth outlook on just where we see these fees going for next, say, three to five years?
Karan Bhagat — Managing Director and Chief Executive Officer
No, so I think it will be an important part. So I think everything which does not come on the advisory side of the business in the form of IIFL One effectively remains on the distribution side. And part of the distribution ends up happening on the direct and part of it on the regular. And this really represents the regular part of the distribution business. So I would not believe it would, for any reason, grow lesser than the rest of the parts of the business.
Nilesh Jethani — BOI Mutual Fund — Analyst
Got it. That’s the only question I have.
Operator
Thank you. Ladies and gentlemen, this brings us to the end of the conference call. Please feel free to reach out to our Investor Relations team in case you have any further queries. We look forward to your participation next quarter. Thank you, once again.
Karan Bhagat — Managing Director and Chief Executive Officer
Thank you, everybody. Thank you.