Motilal Oswal Financial Services Limited (NSE: MOTILALOFS) Q2 2025 Earnings Call dated Oct. 29, 2024
Corporate Participants:
Navin Agarwal — Group Managing Director
Shalibhadra Shah — Chief Financial Officer
Sukesh Bhowal — Chief Executive Officer
Prateek Agrawal — Managing Director and Chief Executive Officer
Analysts:
Tanmay Gandhi — Analyst
Bhavin Pande — Analyst
Mahek Shah — Analyst
Chandrashekhar — Analyst
Lalit Deo — Analyst
Uday Pai — Analyst
Umang Shah — Analyst
Sanjaya Satapathy — Analyst
Presentation:
Operator
Good afternoon, ladies and gentlemen. I am Sejal, the moderator for this conference. Welcome to the Second Quarter FY ’25 Earnings Conference Call for Motilal Oswal Financial Services Limited. We have with us today Mr. Raamdeo Agrawal, Chairman; Mr. Motilal Oswal, Managing Director and CEO; Mr. Navin Agarwal, Group Managing Director; Mr. Ajay Menon, CEO, Wealth Management; Mr. Prateek Agrawal, CEO, AMC; Mr. Ashish Shanker, CEO, Private Wealth Management; Mr. Sukesh Bhowal, CEO, Housing Finance; Mr. Shalibhadra Shah, Chief Financial Officer; and Mr. Manish Kayal, Head, Investor Relations.
A short disclaimer before we start this call, this call will contain some forward-looking statements that are completely based upon the beliefs, opinions and expectations of the Company as of today. These statements are not a guarantee of future performance and will involve unfrozen risks and uncertainties. [Operator Instructions] Please note that this conference is being recorded. I would now like to invite Mr. Navin Agarwal to make his opening remarks. Thank you, and over to you, sir.
Navin Agarwal — Group Managing Director
Good afternoon everyone, and welcome to the Motilal Oswal earnings call for the second quarter and the half year ending September 2024. At the outset, I want to wish you all a very, very happy Diwali and a fabulous coming New Year. Let me start, as usual, by providing you a very quick snapshot of the quarter ending September ’24, at a group level and then highlighting to you segmental performances, concluding with a broader outlook as we see for our overall businesses.
The consolidated profit after tax, including the other comprehensive income for the second quarter was at INR1,242 crores, which is up by 123% year-on-year. We delivered an ROE of 48%. Consolidated operating net revenue for the second quarter was at INR1,366 crores, up by 46% year-on-year. Consolidated operating profit after tax, excluding the treasury income for the second quarter stood at INR541 crores, up by 53% year-on-year.
Our assets under advice crossed INR5.7 lakh crore mark, which is up by 82% year-on-year. Our net worth was a robust INR11,070 crores as of September ’24, which is up by 48% year-on-year. Both CRISIL and India Ratings have upgraded our rating outlook from AA stable to AA positive during the quarter. ICRA had similarly upgraded our rating in the first quarter of the year. Turning to the segmental performance and starting with the Wealth Management business, which was erstwhile [Phonetic] Broking and Distribution business. This business comprises of the retail broking, the distribution and the NII income. The net revenue for this business for the quarter stood at INR634 crores, up by 53% year-on-year, while profit after tax stood at INR225 crores, up by 71%.
We have a strong blend of 2,100-plus internal relationship manager in this business and 9,400-plus external wealth managers, covering 2,500-plus business locations. And our clients are present in 98% of all the PIN codes of the country. We acquired 200,000 clients during the quarter. Our retail broking, ADTO, has grown by 90% year-on-year, 7% quarter-on-quarter to INR4,461 crores. Our cash volume market share for the quarter was at 7.9%, up by 85 basis points year-on-year. As we’ve been highlighting, the market shares across the cash and the F&O business in each of the last 3 years have seen very strong uptake.
Our F&O Premium market share for the quarter stood at 9%, again, up by 150 basis points year-on-year. Our total assets under advice grew to INR2,94,000 crores [Phonetic], up by 88% year-on-year. Distribution AUM was at INR29,400 crores, up by 43% year-on-year. Distribution net flows stood at INR2,400 crores, once again, substantially higher compared to last year. And the net distribution revenues for this business stood at INR98 crores, up by 136% year-on-year. So near — across the board, whether it’s the market share, volumes, revenues, we’ve seen very strong uptick in all the metrics.
Turning to the Asset and Private Wealth business, which comprises of asset management, private equity and the private wealth business. The net revenues for these businesses were at INR490 crores, up by 52% year-on-year. Profit after tax stood at INR213 crores, up by 63% year-on-year. Starting with the Asset Management business, the AUM for this business crossed INR1 lakh crores in July of 2024. And we’ve ended September 2024 at an AUM of INR1,10,769 crores, which is up by 101% year-on-year.
The net revenues for the business stood at INR201 crores, up by 64% year-on-year. Profit after tax is at INR104 crores, up by 68% year-on-year. We’ve continued to see strong performances across the mutual fund, PMS and the AIF business. Almost the entire AUM of the asset management company continues to be not only outperforming the benchmark, but in the top quartile of performance. As a result, the gross flows for the second quarter stood at INR18,000-plus crores, up by 346% year-on-year. Net flows increased from INR413 crores in the same quarter of last year to INR13,238 crores in the current quarter.
Mutual fund AUM stood at INR80,000 crores plus, up by 124% year-on-year. We added nearly 14 lakh SIPs in the second quarter, and our SIP flows for the quarter alone stood at INR1,878 crores and the SIP AUM stood at INR17,641 crores. Our market share in the mutual fund business, on gross sales, rose from 1.4% in the second quarter of last year to 4.4% in the second quarter of the current year. Net sales market share increased from 1.2% in the same quarter last year to 7.5% in the current quarter. SIP market share increased from 1.4% to 2.6%. Our alternates AUM grew to INR30,646 crores, up by 60% year-on-year, and our AIF AUM within this crossed INR15,000 crores.
Turning to our Private Equity business. We had a fee-earning AUM of INR9,956 crores and a total earning AUM of INR13,675 crores across growth capital and real estate funds. The market value of the fund stands at INR17,000 crores. Substantial amount of carry is accrued, but will be realized at the time of the fund close. In second quarter, the net revenues for this segment stood at INR48 crores, up by 18% year-on-year.
Turning to the Private Wealth business. During the quarter, we strengthened our private wealth team with the addition of Anupam Guha and Akash Hariani. Anupam brings in a quarter century of experience of running India’s leading wealth platform that encompassed masses to mass affluent to HNI to family offices and will deploy that capability on our platform. Akash brings in a quarter century of experience, but very different and complementary to our Private Wealth business. He headed the family office vertical of the private wealth business of India’s largest wealth platform.
These recruitments, along with the various initiatives we have presented over the last 4 to 6 quarters, demonstrate the focus and the commitment of the Motilal Oswal Group to grow the wealth business to a leading position in India. The private wealth AUM stood at INR1,57,000 crores plus, up by 68% year-on-year. Net revenue stood at INR242 crores, up by 51% year-on-year. Profit after tax at INR90 crores, up by 66% year-on-year. Relationship manager base at INR585 crores [Phonetic], up by 28% year-on-year. 28% of the RMs have a vintage of more than three years, implying that over 70% of the RMs have been hired in the last three years.
Turning to the Capital Market businesses. These comprise of institutional equities and investment banking business. Here again, we had very strong traction. Revenues were at INR174 crores, up by 52% year-on-year. Profits at INR73 crores, up by 45% year-on-year. Our Investment Banking business has successfully completed 22 deals with an issue size of INR25,000 crores plus during the first half. The second half pipeline is a multiple of the first half, and we expect very strong outlook of this business for the second half.
Turning to the Housing Finance business. Our AUM stood at INR4,233 crores, up by 13% year-on-year. Disbursements for the first half stood at INR620 crores, up by 114%. For the second quarter stood at INR368 crores, up by 86% year-on-year. Yield on advances stood at 13.6%, cost of funds at 8.4%, spreads at 5.2%. The NII for the quarter was at INR81 crores and profit after tax at INR27 crores. The sales relationship manager base stood at 1,050, up by 68% year-on-year, leading to an increase in the cost-to-income ratio, as we are looking to grow the book strongly. Gross NPA stood at 1.3% and net NPA is at 70 basis points. Gearing stood at 1.9 times, capital adequacy stood at 45.6%. ROA was at 2.3% and ROE at 8%.
Turning to the Treasury Investments. Our total equity investments, including alternate funds grew to INR8,113 crores as of 30 September, up by 57%. The XIRR on all the investments that the treasury has made since inception stood at 20.8%.
To conclude, our businesses have demonstrated strong performance. We reported an all-time high quarterly profit and strengthened our market share nearly in every business that we are present in.
A study by our Co-Founder, Mr. Raamdeo Agrawal, shows that the cumulative household savings will rise from about $14 trillion in the last 25 years to $126 trillion in the next 25 years with higher share of financial savings, equities, alternates and greater concentration of wealth. This is a mega trend, which is driving nearly all of our businesses from Wealth Management to asset management, to private wealth, to alternatives, to capital markets. We aim to be a leader or a leading player in all our businesses. We have delivered a profit after tax compounded growth over the last 10 years of 42%, a net worth compounded growth of 24% for the last 10 years despite maintaining strong payouts, executing three buybacks and not raising any capital ever since our IPO back in 2007.
We expect the mega trend discussed, supported by our strong brand and balance sheet to help us deliver continued best-in-class earnings growth and return ratios without any dilution. We will now open the floor for Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Tanmay Gandhi from Investec.
Tanmay Gandhi
Hi Navin, congrats on a great set of numbers. I just have a couple of questions, which are split across all the segments. I’ll just put them across together. Firstly, on a group level, you’ve given ARR, TBR [Phonetic] split, and I can see that the ARR is constantly increasing. I just wanted to understand what all segments contribute to the ARR and TBR at a group level?
Then I wanted to understand in the Wealth Management segment, what is your direct broking and the sub-broking split for revenue, PAT and probably other line items, whatever you can help me with? And for even the NIMs, I wanted to understand why are they particularly high in the Wealth Management and Private Wealth Management segment? And then in Home Finance, could you just give some clarity on the mix of the loan book based on loan against property, unsecured loan, etc. And a bit on the yields, why are they slightly reducing over the quarter?
Navin Agarwal
Yes, Tanmay, you can hold for the rest of your questions. Let [Speech Overlap]
Tanmay Gandhi
Sure. Sure.
Navin Agarwal
I will answer all your questions, don’t worry.
Shalibhadra Shah
Tanmay, this is Shalibhadra here. So as far as the ARR mix is concerned, so overall, at the group level, the mix is coming from — largely from our Asset Management business, where the focus is to improve the ARRs given that our flows run rate has substantially improved, which is resulting in improvement in our overall ARR mix because if you look at our asset and private Wealth Management, the ARR mix is almost 75% in those assets. And followed with that, the ARR improvement is also happening on our distribution business in our Wealth Management, where the ARR flows are improving and the ARR mix is overall improving. So the ratio of brokerage, which is transaction-driven revenue in our wealth business is reducing and the distribution pie is improving our ARR mix along with the lending book, which is there. So these are the business segments where the ARR improvement is happening and is expected to happen given the strong trajectory of our ARR flows in these segments.
Coming to the next question on basically the NIMs. The NIMs in the Wealth Management, again, basically is a function of the funding book and the opportunity that we get in the Margin Trade Financing segment. And the NIMs have actually marginally gone up because our cost of funds have also come down because incrementally, our cost has actually come down in last six months by almost around 40 basis points. And in fact, yields have also improved marginally on our MTF book because that is also a more diversified book across retail and HNI segment. And that is one of the reasons where we’ll see marginal uptick in the NIMs have also happened YoY and even sequentially during the quarter. As far as the — could you repeat your other questions, please? Sorry?
Tanmay Gandhi
Yes. One question was on direct broking and sub-broking split in the Wealth Management segment.
Shalibhadra Shah
Yes. In the Wealth Management segment, the Direct Broking and — so revenue-wise, both are equal, the Direct Broking and the external Wealth Management segment. We are almost 50%-50%. In terms of the profit mix, the Indirect segment would be almost about 60%.
Tanmay Gandhi
Okay. Yes. And then later on, the other questions were on Home Finance and Treasury. So Home Finance was — I wanted to understand the mix of the loan book by secured, unsecured loan and property and why there was yield reduction in the loan — in the Home segment? And what is the other operating income? Because I can see it’s a good 10%, 15% of your entire [Speech Overlap]
Shalibhadra Shah
Yes. On the Home Finance thing, so basically, the mix is — the entire book is secured financing. There is no unsecured lending that we do. It’s a housing finance company where we are doing housing loans, which is retail affordable housing loans. We also have a portion of loan against property and also construction finance. So actually, overall, from the mix perspective, 78% of the book is housing loans, 9% of the book is lacs [Phonetic] and almost 13% of the book is construction finance in entire secured book.
As far as the yields are on this book is concerned, so yields are actually — from a mix perspective, the overall yield is lower because we are increasing the mix of retail housing book in the entire proportion. So if you look at our numbers on a year-on-year basis and even sequential basis, our retail housing loan book has gone up Y-o-Y by almost about 82% and that is resulting in the overall mix, is more towards the retail home loans where the yields are marginally lower than the segments of Loan Against Property and Construction Finance. So that is resulting in a bit of moderation on the overall yields on the housing book.
As far as the other operating revenue is concerned, you spoke about any particular business? Or it’s a general query?
Tanmay Gandhi
In HFC.
Shalibhadra Shah
In HFC, see, basically, that is a function of our normal recoveries that we do, which is basically the branding income or basically the recoveries — other ancillary recoveries that we levy to the customer. So that number would be slightly lumpier number on a quarter-on-quarter basis or Y-o-Y basis.
Tanmay Gandhi
Thank you so much. And just lastly, on the treasury, I just wanted to understand what comes under OCI because you disclosed it in the data book like a difference in OCI and PCI.
Shalibhadra Shah
Yes. So OCI is basically a recognition of mark-to-market on our equity shares investments. So we have investments in basically various buckets of equity. So equity mutual funds and alternate assets are done mark-to-market through the P&L, but the equity shares investments are then mark-to-market through the OCI. So that is as per the IND AS norms, where on the equity shares, we have opted it to do mark-to-market through the other comprehensive income. So that’s why we aggregate and report both of these profits as a treasury profit, which is a combination of both of these line items of mark-to-market movement on our entire treasury book of INR8,100 crores.
Tanmay Gandhi
Perfect. Thank you so much.
Operator
Thank you. [Operator Instructions] the next question is from the line of Bhavin from Athena Investment Fund.
Bhavin Pande
Congratulations on great set of numbers. So we can see a significant uptick in the SIP as well as gross sales market share in the AMC business. So what do you think have contributed to this? And what would be our distribution mix in the AMC business?
Navin Agarwal
So basically, as I mentioned, over 95% of the AUM is performing top tier across the mutual fund as well as the alternate assets. We have the widest range of passive funds. Our Quant Fund is also one of the best performing funds and has seen strong traction. So these are the four segments. As far as Distribution is concerned, almost all banks in India are now distributing our product. There’s a lot of headroom here in terms of the market share growth for us. This would be the smallest market share among all the distribution segments.
IFAs, we’ve seen very strong traction in the market share that is higher than the banking market share. Wealth firms, again, we’ve seen reasonable traction. But the Digital Channel is one of the best-performing segments for us. And the strong performance also has meant the strongest uptick in that segment. So we’ve seen the highest Y-o-Y growth within that segment. We were present — we were not present in a lot of categories within the mutual funds, as we have been explaining in the last few calls, over the last 15 months, we’ve seen the launch of our large-cap fund, the launch of our small-cap fund, multi-cap fund. With that, we have covered a lot of the broad-based categories.
In terms of the sectoral funds, we had no presence 15 months back. We already have three funds that are now live, and we filed for a few more important categories of sectoral funds there. So better coverage of just the various segments within the mutual fund business is an additional driver for the overall revenues.
We are also substantially increasing our distribution footprint and our sales team, right? As we have strong uptick in many cities where we are still not present, digital has already reached there ahead of our own physical reach. So that will be an important driver. So I think this is work in progress. We’ve seen very strong growth in the September quarter compared to the June quarter. Importantly, October has been a record month again in all the channels and in terms of the overall sales. I think in Alternates, we should be at nearly INR1,000 crore monthly gross sales for the month of October alone. So yes, we have — I think there’s still a lot of fuel in terms of the channels, in terms of the segments and the products and our own team manpower that we see playing out over the course of the next 12 months’ time.
Bhavin Pande
And sir, how has captive arm behaved in terms of distribution? Has the share improved over time?
Navin Agarwal
So we are very widely distributed across all the channels, as I explained to you, including distribution. Our own captive distribution accounts for less than 20% of the overall numbers. That too is growing very, very strongly, but there’s an even higher growth just by virtue of greater channel coverage that we are seeing. So the overall growth rates in both the channels are strong and the non-captive channel is even stronger than the captive channel.
Bhavin Pande
Okay. And sir, what would be our B30 mix?
Navin Agarwal
I’ll come back to you on the B30 mix during the course of this con call.
Bhavin Pande
Great. And sir, just one last thing. What would be the RM count that we would be looking to close specifically in the PWM business?
Navin Agarwal
So the RM count currently is at 545 — 585. We will close the year at about 700.
Bhavin Pande
Okay. Okay. Okay. Congratulations again and thank you.
Operator
Thank you. The next question is from the line of Mahek from Emkay Global. Please go ahead.
Mahek Shah
Hi thank you for the opportunity and congratulations on the great set of numbers. A few questions. So in the Wealth Management segment, there’s been a significant great performance. So I just wanted to know how do you see the volumes, I mean, for the H2? And any outlook on how do you see the business for H2?
Secondly, you mentioned for the Wealth Management business, the focus is kind of on strengthening the Distributions. So just wanted to know that any kind of color on what efforts the Company is making towards this initiative? And are you looking to add any new RMs, particularly for the Wealth Management segment?
Third would be on the Private Wealth Management segment. So you’ve added around 100 RMs in the last year, while you said that you will be adding over [Speech Overlap]
Navin Agarwal
Sir, you can hold on to your question. We will take the rest of the questions as well.
Mahek Shah
Sure, sure, sure.
Shalibhadra Shah
Thanks. So as far as the volume growth is concerned, so certainly, volume growth has been very strong on the cash side of the business. If you would have seen Y-o-Y, Q-o-Q, there has been a very, very strong uptick in the volume growth on the cash side. And in our case, our mix towards the cash volumes is pretty high. Our cash revenues are almost about 60% of the overall broking revenue. And we expect the cash volumes to continue the growth journey.
There could be a bit of moderation, which could happen as far as the F&O volumes are concerned, given that the new regulatory changes, which are going to come into effect from 20th of November, while the regulator has spread out the implications of that over the next few months. So we would see — we could see some bit of moderation coming on because of the reduction of the expiries, especially, because one of the expiries on the Nifty, which is the Nifty Bank — Bank Nifty, would actually go off. So to that extent, there could be some impact. Of course, again, it will be driven by how the retail behavior comes into play, whether other expiries would compensate or whether the retail volumes would grow on the other side, which is the cash pie. But we are seeing a good mix of our delivery revenues, which is resulting into higher revenue and profit growth for us in this business. Even market shares have continued to grow for us. So cash market share has grown by 80 basis and F&O market share has grown by 150 basis. So we continue to have a healthy part of the market share as well.
As far as the Distribution business is concerned, we have been investing in that business and the idea is to take the manpower count to double from here over the next two years. And we have currently a 400-member dedicated distribution team, which is going to scale up for — to garner more flows and assets. So distribution assets have grown to now INR30,000 crores, and we are seeing a healthy improvement of both our ARR and TBR revenues on this business. And if you see Y-o-Y and Q-o-Q basis, the revenues have grown by almost doubled on a Y-o-Y basis, more than double. And even sequentially, they have gone up significantly.
So we continue to invest on the distribution side. The pie of revenues is growing from — has already grown to 15% of our total wealth revenues and the pie of brokerage and NIIs are moderating versus the distribution on a mix basis. Sorry, you had further question?
Mahek Shah
Yes. I had just one last question, which was on the Private Wealth Management segment. So you’ve almost added around 100 RMs in last one year and you just said that you will be adding around 700 RMs for the full-year. So — I mean, you’ll be taking the total number to 700. So I just wanted to know how is the productivity of the recently added RMs? I mean, how is the performance being done? And kind of you also mentioned previously that you would be adding junior RMs and grooming them to senior RMs. So is there the strategy continuing?
Navin Agarwal
Yes, absolutely. So we are looking to go from 585 to 700 by the end of the year. And this addition will happen across HNI as well as ultra HNI. And the strategy of grooming RMs gradually to make them productive and make them bigger continues at the moment. In terms of productivity, we had mentioned that typically a relationship manager in the first year reaches one to one and a half times productivity. And by the third year, they are three-plus productivity. So that journey continues as it is.
And as we just explained [Indecipherable] of the RMs have a vintage of less than three years. So as the back book of RM vintage improves, we obviously have an investment of nearly 15% of the wealth management top line in these RMs in terms of a drag, which we expect to recoup over the course of the next couple of years.
Mahek Shah
Thank you. Thank you so much for answering the question.
Operator
The next question is from the line of Chandrashekhar [Phonetic] from PPFAS Mutual Fund.
Chandrashekhar
[Indecipherable]
Operator
Sorry to interrupt you sir, I would request you to please raise your handset.
Chandrashekhar
Is it better now?
Operator
Yes sir.
Chandrashekhar
Hi. So I had a few questions on the private wealth side. So I just wanted to clarify these INR1,57,000 crores of assets as on September, does this include custody assets? Or is this ex of custody assets?
Shalibhadra Shah
It includes custody assets. It includes.
Chandrashekhar
So I mean, if you could give an indication of how much is custody assets?
Shalibhadra Shah
That number is INR52,497 crores. On the base of INR1,57,000 crores, the custody assets are INR52,497 crores.
Chandrashekhar
Okay. And typically — I mean, do these assets yield anything? And how are the yields different from these non-custody assets, if you could give an idea about that?
Shalibhadra Shah
So custody assets don’t yield unless the client actually [Speech Overlap] yes, so as far as the broking revenues is concerned, when the client exits them and reinvest, the broking revenues comes into play. And as and when these assets are converted into other financial assets, we earn the trade income as well on those assets.
Chandrashekhar
Okay. And within Private Wealth, if you could split up the assets in terms of ARR and transaction banking assets, how would the split be?
Shalibhadra Shah
Yes, we already — so actually, our ARR — so from a revenue perspective, ARR asset is 50%. ARR is 50%, yes.
Chandrashekhar
And I think PCG is also included since the last two quarters on the private wealth. So can I get the number separately for the PCG as well?
Shalibhadra Shah
We can share those numbers separately.
Chandrashekhar
Sure, that would work. That’s it from my side. Thank you.
Operator
Thank you. The next question is from the line of Lalit Deo from Equirus Securities.
Lalit Deo
Yes, hi good afternoon sir. Sir, just two questions. Firstly, on the opex side. So when we mentioned that we want to increase the RM count to 700 in this — in the Private Wealth Management. So how should we — how should one look at the overall cost-income ratio over there in that segment as well as if you could give us some color on the segment-wise cost-income ratio for the next two years?
Navin Agarwal
Given the previous back book turning productive, we don’t see any further fall in the margins. In fact, we would — we think that the worst margin is already reflected in the first half. The second half margins should be better, despite these additions now compared to the first half, and then we should build on from there in terms of the improvement because remember that this process of the strong RM addition started just over two years back. So at least that part of the book will start contributing to the profits. And going forward, the pace of the addition is not really accelerating, but we are kind of maintaining the run rate of RM additions at a similar level. So you should assume that the 1H margins are at the bottom and the second half should be better than the first half and the next year should be better than the current year.
Lalit Deo
Sure, sir. And sir, on the net flow side, like how should one look at the overall net flows as a percentage of my overall AUM in both in the AMC as well as the Private Wealth Management for this year as well as the next year? Like any guidance or any color on that front?
Navin Agarwal
Given the strong performances of the asset management business, while we are not guiding for the numbers, but we’ve given you the market share numbers for mutual fund, for SIP, both gross sales and net sales and all of them in the second quarter are meaningfully higher than the first quarter, right? I mentioned to you that October is higher than the September quarter numbers also meaningfully. And with wider distribution network, wider product suite and very strong growth across captive and non-captive, I mean — I rather the net sales to divide it by the AUM growth. But I think in terms of the market share, you should expect continuous improvement in the September quarter market share for all these metrics in the coming quarters, as far as the Asset Management business is concerned. As far as the Wealth Management business is concerned, again, the — as the RM vintage improves, I think you should see a very strong uptick in the net sales, like we’ve reported in the first half. I think that trend of strong growth in both the TBR and the ARR should continue in the coming years for the productivity and the margins to go back to the previous highs. That is our plan.
Lalit Deo
Sure sir, [Indecipherable]. Thank you sir.
Operator
Thank you. The next question is from the line of Uday from Investec. Please go ahead.
Uday Pai
Thank you for the opportunity. Just two questions. Firstly, on the Home Finance side, as I can see, on a year-on-year basis, you have increased the RM count meaningfully. So is that exercise done? Or you further plan to increase the RM count in the Home Finance business from here on? Secondly, on the broad level, as you mentioned that you are completing the AMC bouquet of products by adding some sectoral funds that are left. Are there any further products or segments or anything that you want to further add to complete the whole Motilal suite of products, your thoughts on that?
Sukesh Bhowal
Yes. With respect to the RM count [Phonetic] for the HFC business, we have grown substantially over last year. And for the rest of the year also, we expect a good growth in the RM count. Does that answer your question?
Uday Pai
Yes, sure. And on the broad level of products?
Navin Agarwal
On the Asset Management side, the bouquet of products, I’ll let Prateek take that question. On the passive and active, we have a very healthy pipeline, I think, with the SEBI [Phonetic].
Prateek Agrawal
Yes. So as we go forward, one should expect to see us launch a product on the passive side or on the active side practically every month, one a month. So there are gaps in our product suite on the mutual fund side, that is what we are looking at filling. And on the passive side, we are looking to create some of the first-of-kind products in the country. So this activity will continue to be very strong for us going forward.
Uday Pai
Sure sir. Thank you. [Speech Overlap]
Operator
Thank you. The next question is from the line of Umang Shah from Kotak Mutual Fund. Please go ahead.
Umang Shah
Yes hi. Thanks for taking my questions. I just have a couple of them. One is, just wanted to understand a little bit on the Wealth Management business front, right? I mean I was just looking at the closing AUM breakup where the ARR revenue earning assets appear to be fairly small. But in terms of revenue contribution, clearly, the ARR revenue contribution appears slightly higher. So how should we read this? I mean, split between ARR, TBR AUM versus ARR, TBR revenues?
Shalibhadra Shah
Yes. So as far as the ARR revenues on Wealth Management is concerned, so I spoke about the improvement in the NII yields also, which has happened. And that is the reason if you see versus the AUM growth, the revenues growth on the ARR is higher, yes? And also on certain assets on the distribution side, there is a net flow improvement both Y-o-Y, sequentially as well, and that is also resulting in a higher ARR revenues for us. So versus the AUM, the ARR revenue uptick is higher because of these two reasons. Otherwise, largely, they will move in tandem with the growth in the assets.
Umang Shah
Understood. So basically, you’re saying that the way to look at it is the ARR revenue should be sort of correlated with ARR, AUMs, distribution assets and the lending book, all three put together, I think that would give a better picture. Is that the right way to look at it?
Shalibhadra Shah
Yes, that’s the right way to look at it. That’s right.
Umang Shah
Okay. Understood. Understood. The second one was on the treasury line item, right? Now clearly, I mean, our strategy of skin in the game has worked extremely well for us. And FY ’24 full year and first half of FY ’25, I mean, we have seen significant contribution coming through in terms of treasury profits as well. But just from a medium-term perspective, how should we again look at this? I mean, do we — should we see some sort of a linearity in this line item going forward? Or probably this will continue to remain a bit lumpy in line with how the markets perform?
Navin Agarwal
Umang, you should expect it to be lumpy in line with the markets because the share of fixed income within this is zero. So we have a mix of mutual funds, our alternative funds, including AIFs, PMS, private equity funds, real estate funds and a very small direct investment book. But all of these are equity instruments. There’s no fixed income in this by and large, barring the real estate fund, which is a very small part of the overall book.
So I think the reason why we give the XIRR number is to help you think about it longer term. That number was as poor as 18% when the markets were at a much lower level. That has gone up to 20.8% since inception XIRR now. I’ll be surprised if it dips below 18%, but you should take that 18% to 20% number and some alpha over whatever the benchmark performance longer term. There are two sources of this book growing, the INR8,000-plus crore treasury book.
The first is obviously this XIRR number, which could be, let’s say, 20%. And the second is the plowback of the profits after paying out dividends. And we have highlighted earlier that the 10-year treasury book, this INR8,300-crore book, the 10-year CAGR of that book is over 40%. Roughly half of that came from returns and the other half came from plowback of profits from the previous year post paying out dividends. So really, this book grows because of both. The second part, which is the plowback of profits will continue nevertheless. As far as the fund performance of the XIRR is concerned, there may be volatility in that on a year-on-year basis.
Umang Shah
Understood, no, I think this is quite helpful. And last one is on our private equity funds, right? So any planned exits? So I think in the presentation, we have provided a slide, which is Slide 30. Just wanted to understand that FY ’26 and FY ’28, so these are the planned exits that we are looking at. I’m sure the IRRs will change probably as and when the exits happen, but these — we should look at these numbers as the planned exits, right?
Navin Agarwal
Yes. So you should look at the private equity fund two [Phonetic] series exit in FY ’26. You should expect the real estate fund exit in the series two in FY ’28. And from there on, almost on an annual basis, every single year, you will have — because you’ll have the two series of growth and three series of real estate. So effectively five more series apart from these two that will mature in the following five years. So let’s say, FY ’26, one exit; FY ’28, next exit. In FY ’29 onwards, every single year for the following five years, you’ll see one exit each.
Umang Shah
Okay. So — okay. Understood. Understood. So I think that will also sort of become a bit more linear for us the way the exits have been planned?
Navin Agarwal
Yes. As we have more series outstanding, also going forward, the idea is to have faster DPI compared to what we have done in the past. So you will see some of these funds being carry sooner than the long duration that we’ve seen both in our growth capital and real estate funds in the past.
Umang Shah
Understood. Understood. And Navin, one last question was on the Housing Finance piece. Now I understand in the past, too, you guys have spoken about it that the growth is likely to be a bit more calibrated. The book seems to have stabilized quite a bit. But again, how should we look at this business given that I believe this is probably the slowest of the businesses in the overall scheme of things. But again, from a medium-term perspective, how should we look at this business?
Navin Agarwal
So this business, we are investing a lot. Our relationship manager base has gone up a lot. And as Sukesh just articulated, the strong RM growth pace will continue into the second half of the year. Our book — our disbursements have grown very strongly year-on-year. I think I’ll let Sukesh talk about how the trajectory of this business could be in the coming years.
Sukesh Bhowal
Yes. We invested a lot into our RM strength last year, and that’s showing a very good results in terms of our disbursal volume growth in this year. And we will continue to invest in our RM capacity for the coming four quarters at least and which should — for ’25, ’26, this should result in a very good momentum in terms of disbursal volume growth and which will then result into a good growth in our AUM because what’s happening now is that while our disbursal has grown quite well in the last — compared to the last year, the repayments on the book do not lead to a very strong growth in the AUM. So once we have the RM capacity coming in and the disbursement volume moves up along with that, we will also see a good growth in our AUM.
Umang Shah
Understood, understood. This is helpful. Thank you so much and wish you goodluck. Thanks.
Operator
Thakn you. The next question is from the line of Sanjaya from Ampersand Capital. Please go ahead.
Sanjaya Satapathy
Thanks a lot for the opportunity. Sir, one question is regarding your treasury income. Is it possible for you to explain how really you book those profits? And related question to that is that you have articulated that your dividend policy is 20% of your operating profit. And is it — does it mean that the profit of treasury is not really considered for dividend?
Navin Agarwal
So the treasury profit because of the new IND AS norms require us to show in the income statement the mark-to-market, and that is what is causing these big numbers to be reported because the denominator is big and the performance is also big. So big AUM into big performance is equal to the number that you see. That will only get bigger. As I explained to you, this book has been growing at a rate of over 40% per annum. But a lot of it is unrealized. Bulk of it — most of it is unrealized. And that is why when we look at dividends, we are looking at cash earnings and not notional mark-to-market earnings to distribute dividends to shareholders. So I think from what we earn out of operating profit, which is largely free cash flow, we are paying out at least 20% of the profits as dividend. We used to pay out higher earlier. But as you are aware, there have been meaningful regulatory changes in our core business in the last three years, which require us to invest a lot more capital. The free float of the business has come down meaningfully. And so the business, while fundamentally generates a lot of free cash flows also require a lot of capital and every rupee of our skin in the game that we talk about, this INR8,000-crore treasury book is actually supporting the agency businesses in terms of the margins to be able to do bigger and bigger transaction volumes and market share. So really — they are, really linked very closely to each other, point number one. Point number two, the treasury profits are mostly mark-to-market and hence, not distributable.
And finally, the treasury book, while it looks like excess cash on the balance sheet is actually no excess cash according to the Board’s understanding and estimate. It is all the backbone for the agency business, as we continue to grow our market share and the market size itself becomes larger.
Sanjaya Satapathy
So sir, does it mean that once you realize those profit, those will become part of your distributable [Indecipherable]
Navin Agarwal
I want to repeat that this pool serves as skin in the game for all our products, but importantly, the backbone for the agency business. So we need this capital. As you may have seen, a lot of our peers in the last two years have had one or multiple rounds of fundraise dilution to raise fresh capital to support this growth. We haven’t raised a penny of capital in this time period or ever since our listing despite the strong growth in market share and the market volumes.
So I think there are two options for us. We can deploy all of this INR8,000 crores in our bank deposit and serve that as a collateral to the bank for our — of the exchanges for our lines or we can deploy this in our funds and serve that as a collateral. Because we believe in the longer-term performance of the funds and the superior performance that this can give to the shareholders, we have chosen otherwise.
Sanjaya Satapathy
And my last question is that yesterday on TV, the Management explained that there will be some 5%, 10% impact of the new regulation on the brokerage business. But my general impression was that since yours is much bigger in terms of cash market and your futures — F&O market, your market share is much lesser. This makes you a lot more competitive with respect to your competitor, who are pure play F&O [Phonetic] derivatives. So are you going to see some kind of significant improvement in market share because of the changes? So how are you really approaching this new regulatory landscape?
Navin Agarwal
This obviously competitively is favorable to us, correct? As more than 50% of our revenues come from cash markets, correct? Point number one. Point number two, we do see some of the volumes from Bank Nifty moving to, let’s say, the other exchange or the other exchanges, correct? And you have already seen that — if you look at the last three months and the last four weeks of volumes on the other exchanges and the other indices, you have seen a meaningful pickup in that.
We also have significant investments in our distribution business and that income is growing. Our cash contribution is more than 50%. So if you analyze this, lower F&O contribution, higher distribution of income growth, correct? And improved competitive position. All these three are levers that put us in a better place, correct? So we — but having said that, there is going to be a near term, a short-term impact in terms of the volumes of this business. We think that the strong growth in the rest of the businesses, i.e. the asset and wealth three businesses and the two capital market businesses so the growth in those five — strong growth in those five businesses sequentially should more than offset any temporary drawdown in this business.
Sanjaya Satapathy
Understood. Thank you so much.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Shalibhadra Shah for closing comments.
Shalibhadra Shah
Yes. Just one point to answer about our share of B30 AUM, so that is 30% of our mutual fund AUM. So that’s it from our side. I would like to thank every participant for attending the quarter two FY ’25 con call. In case of any further queries, please do get in touch with Manish Kayal or with me. I wish you all a very happy Diwali and a prosperous New Year. Thank you, and have a great day.
Operator
On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.