Nippon Life India Asset Management Ltd (NAM-INDIA) Q2 FY23 Earnings Concall Transcript

Nippon Life India Asset Management Ltd (NSE:NAM-INDIA) Q2 FY23 Earnings Concall dated Oct. 19, 2022

Corporate Participants:

Jignesh Shial — Investor Relations

Sundeep Sikka — Executive Director & Chief Executive Officer

Aashwin Dugal — Co-Chief Business Officer

Prateek Jain — Chief Financial Officer

Analysts:

Kunal Thanvi — Banyan Tree Advisors Private Limited — Analyst

Lalit Deo — Equirus Securities — Analyst

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Manjeet Buaria — Solidarity Investment — Analyst

Unidentified Participant — — Analyst

Sahej Mittal — HDFC Securities — Analyst

Dipanjan Ghosh — Citigroup — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Nippon Life India Asset Management Limited Earnings Conference Call for 2Q FY ’23, hosted by InCred Equities. As a reminder, all participant lines will be in the listen-only mode and, there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jignesh Shial from InCred Equities. Thank you and, over to you sir.

Jignesh Shial — Investor Relations

Thank you [Indecipherable] and good evening everyone. On behalf of InCred Equities, I welcome all to Nippon Life India Asset Management 2Q FY23 earnings conference call. We have along with us Mr. Sundeep Sikka, ED and CEO along with the top management team of Nippon Life India Asset Management. I would like to hand over to Mr. Sikka for his opening remarks, over to you sir.

Sundeep Sikka — Executive Director & Chief Executive Officer

Thanks, Jignesh. I think, good evening, everyone and welcome to our Q2 FY ’23 earnings conference call. We have with us, our Chief Financial Officer, Prateek Jain; Chief Business Officers, Saugata Chatterjee and Aashwin Dugal; Chief Digital Officer, Arpanarghya Saha; and [Indecipherable] representative from Nippon Life. Our detailed investor presentation and press release have been uploaded on the exchanges as well as our website. Before we take your questions, let me share some comments on the recent industry trends and our quarterly performance.

In Q2, equity markets rebound from the lows of June ’22. However, it ended on a volatile note due to the ongoing geopolitical concerns, global inflation, inflation trends, and weaker INR to USD moment. Despite the mixed overall outflow [Technical issue] asset management industry, maintained its growth momentum, driven by higher retail awareness. The industry assets rose by 3% this quarter mainly driven by higher equity and ETF assets. However, as we look back the industry assets have grown 4x — have seen 4x growth in last 10 years. Yet we believe a significant growth potential still remains underlined.

Currently less than 3% of the population invest in mutal funds. In the last 24 months alone the base of unique investors grew to 36 million, an increase of 69%. Monthly SIP flows touched, an all-time high of INR130 billion, an increase of 67%. While SIP folios, increased to INR58 million, a rise of 75%[Phonetic]. The growth in investor base and consistently higher SIP flows clearly indicate investors’ preference for mutual funds to achieve their long-term goals. Formalization of the economy, digitalization, and higher share of mutual funds and housing [Phonetic] savings are expected to the — expected to be the key drivers for the growth of industry going forward.

At Nippon India Mutual Fund our priority is to be future-ready and capture this long-term opportunity. In Q2 our industry ranking moved to fourth position on quarterly EBIT AUM basis. AUM increased by 7% to INR2,851 billion. At Nippon India Mutual Funds investors interest remains our only constant. We added 1.6 million folios in H1 and continued to have the largest space base — and continued to have the largest base in mutual fund industry. Our share of industries unique investors was stable at 37% with the base of more than 13 million investors. Systematic flows are stable and the key driver for the industries long-term equity flows.

Nippon India Mutual Fund annualized systematic transaction book is at INR108 billion. Quarterly flows[Phonetic] increased by 36% to INR26 billion. On a gross basis over 481,000 systematic folios were added in Q2. Our systematic AUM rose by 11% to INR555 billion. 53% of a SIP AUM has continued for over five years vis-a-vis 22% for the industry. Also in volatile markets folios with lower-ticket size have demonstrated longer vintage and better stickiness. 14% of our SIP folios have continued for more than five years as against in every industry average of 10%. Today Nippon India mutual fund offers industries best use in passive category also.

With strong growth in industries passive assets our ETF ecosystem is already in-place and far ahead of peers in terms of investor — investor base and mind share. In this segment, we manage an AUM of INR638 billion and have a market-share of 14%. Excluding the EPFO allocation, which goes to two specific AMCs we have the largest — we would be the largest ETF player in the country. The gold ETF is the biggest one in the category, so that’s having INR66 million under — assets under management. Our share in industry ETF folios rose by 260%[Phonetic]. In Q2 we added 108,000[Phonetic] investors and accounted for 92% of the total industry — industry ETF additions. We have 71% share of ETF volumes on NSE and BSE.

Our ETF average daily volumes across key funds remain far higher than the rest of the industry. Our digital centric strategy is also one of the keystones of our long-term growth and sustainability. We continue to enable new-age and experienced investors as well as partners with cutting-edge digital solution. In Q2, digital platforms contribute to 56% of our total new purchase transactions. Over 766,000 purchases were executed through our digital assets, an increase of 4%. Nippon India Mutual Fund has a well-diversified and a nimble distribution base and wide presence to 275 locations across the country.

As on September 22, we have over 87,200 distributors in panel with us. The MFT base rose to 87,000 with the addition of nearly 1,700 distributors in this quarter. Now on the financial performance, for this quarter ended September 30, 2022, profit-after-tax was INR2.1 billion, an increase of 81% from Q1 FY23. Operating profit was at INR1.9 billion, operating profit as the ratio of average assets in the management was 26 basis-points in Q2 FY23 as compared to 25 basis-points in Q1 FY23. In the past, company has followed consistent dividend policy. In FY22 NAM India distributed its highest-ever dividend with a payout ratio of 96%. Over the last eight financial years, NAM India has distributed a cumulative dividend of INR34 billion.

In today’s meeting, Board has approved an interim dividend of INR4 per share. As we grow organically through physical and online channels we remain open to evaluate investments in strategic opportunities that add to the profitability or complement our existing business and ultimately are in interest of our minority shareholders. As a signatory to UN-PRI, we have already begun to integrate ESG aspects into our area of strategy, business operation, investment management, and governance. We have chosen to prioritize issues such as climate action, diversity, inclusion, corporate governance, business ethics, and responsible investment for immediate strategy formulation, execution, and disclosure purpose.

Through a combination of responsible investment approaches of screening ESG integration and active ownership we remain — we aim to build a resilient portfolio that will not only provide sustainable returns to our investors but will also provide a positive environment and social impact. To sum-up, I would like to reiterate at NAM India investor centricity remains the key theme. We strive to deliver a superior experience and sustainable returns to our investors and in the process, add value to all our stakeholders. We are confident to continue our trend of profitable growth in coming quarters. With these comments, we are happy to take your questions. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen we will wait for a moment while the question queue assembles. The first question is from the line of Kunal Thanvi from Banyan Tree Advisors Private Limited. Please go-ahead.

Kunal Thanvi — Banyan Tree Advisors Private Limited — Analyst

Hi, thanks for the opportunity. So, I have two questions. First was on the debt side of the business. So if you look at the entire industry and even for NAM India, that has been degrowing for last two quarters, wanted to understand what’s happening there, is it due to performance or is it because shift from active debt to passive debt, what are the factors that are driving the decline in the debt AUM for the industry and NAM India. And secondly, if we see sequentially our realizations have improved on an overall basis and that has resulted into improvement in our core operating areas as well, also can you throw some light, what are the factors that help us improve the realization, like is it that the competition is easing out or the distribution margins are softening up or it is just one quarter wherein we saw higher share of equity and the realizations improved. Yeah, these are my two questions.

Sundeep Sikka — Executive Director & Chief Executive Officer

I think I will request my colleague, Aashwin Dugal, our Chief Business Officer to take the first question and then after that I’ll request Prateek to take second question.

Aashwin Dugal — Co-Chief Business Officer

So thanks Sundeep and thanks for your question. As to your question regarding the debt flows that have reduced first at the industry level and that is quite evident because of the overall deteriorating macros whereas the Central Bank action worldwide and also being followed by the Central Bank in India which is to increase interest rates and the yields across the curve at both short-term and long-term have gone up quite substantially, especially at the shorter and hence we have seen outflows from the debt funds into overnight and liquid schemes. So if you see the trend, you would see that in the last six months our debt funds have lost money but money has come back into either overnight funds or liquid funds. At NAM India, there has been a marginal decline, yes, mainly because our growth over the last two years was on the back of fixed-income flows and partially from some corporate and we have seen one or two institution — institutional investors who exited for the time-being who had a higher share with us and from the industry as well we had a slightly higher share and seen some dip in share for us.

Sundeep Sikka — Executive Director & Chief Executive Officer

Realization, Prateek you want to take that one.

Prateek Jain — Chief Financial Officer

Yeah. Hi, Kunal. So in terms of realization, there are mix of factors. It is not one-off. I think we have been maintaining that, look, it would be hovering around these levels unless there is a drastic change in the — what is going to be asset mix. Here I think two or three things played out for the quarter; one, we have actually — we are a better share of equity that was, one; secondly in terms of flows and in terms of our fixed-income realization there has been a marginally increase out there. We’ve been — we have mentioned in the past as well as the yield keeps growing in the fixed-income scheme so, dissect this from the fact that the assets are going out, but more importantly, yields in these fixed income schemes are going up. As the yield goes up in these categories our propensity to charge slightly higher improves and so we have rationalized some of our TERs into the debt schemes and we have been able to improve our realization out there.

Besides on the ETF side, we have seen slight improvement in the realization marginally due to some regulatory interventions, requiring only one — one basis-point to be kept aside for the investor education. So these are the couple of factors which are I would say — these are not one-off, but these are sustainable ones which has helped us in this quarter to improve our realization.

Kunal Thanvi — Banyan Tree Advisors Private Limited — Analyst

Sure, sure, noted. Like historically they have been suggesting that over the — over the medium-to-long term the realization could see some tapering off because of the new assets coming in, that continues to be the case, right?

Prateek Jain — Chief Financial Officer

That’s right. So as and when we will see as the old asset [indecipherable] the change happens, then obviously we will see some decline but as I mentioned in this call that look as you see money coming into the fixed-income assets. And the realization at the elevated level is what we’re seeing right now, you know our propensity to charge higher and also when the cycle will turn. When you will see returns, which is in the range 8.5% to 9% at that point of time our propensity to charge will be even higher so we would already — we will have the AUMs in-place because money would have moved into these categories which has gone out now and also the yield will be higher and, therefore you will get the double impact and I’m sure that, we’ll be able to offset. You know the realization dip in the equity assets.

Kunal Thanvi — Banyan Tree Advisors Private Limited — Analyst

Sure, got it. No, just one more if I can squeeze in, so if you look at our asset mix and our market segments and so overall renewal[Phonetic] last two to three years what we’ve seen is that we — on overall basis our market-share is quite stable now like between 7.2% to 7.4% but within that segments like equity and debt has like not gained market-share or have been losing market-share for example and that we like we gained some market share last year and now we are again losing it back, but two segments have been gaining market-share are liquid and others like that’s where we have gained market-share and we continue to gain this. But from overall profitability business point-of-view these are low-yielding assets now like what — how do we look at this from a longer-term perspective because this will mean like increasing market-share in the category which are lower yielding will result into a first lower profitability for us.

Sundeep Sikka — Executive Director & Chief Executive Officer

Well, the way I see it is I think I don’t — would not read too much into the fixed-income. I think that’s more because overall environment we have seen investors have been changing to shorter end-of-the curve and this will keep happening so I don’t see any loss because I think this is fungible. I think short-term, long-term. You know, investors will keep changing across different cycles so, I’m not too worried about that. I think as far the equity is concerned, clearly I think from our perspective the, green shoots are already there. Yes, I think as you are aware we had certain challenge in equity couple of years back.

At this point of time the majority of our funds if you were to see and one year perspective are in quartile one or quartile two and even we are just in August and some of our funds are already in three-year basis also rolling basis moving to the quartile one and the fact that the increase in SIP numbers tells you that I think the new investors and the flows have already started come into equity, so maybe couple of quarters down the line. I think you’ll start also seeing the lag effect of this positive activity that is happening on-ground and liquidity market-share also should move-up.

Kunal Thanvi — Banyan Tree Advisors Private Limited — Analyst

Sure sir. Thank you, I’ll get back in the queue. All the best.

Operator

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

Lalit Deo — Equirus Securities — Analyst

Yeah. Good evening, sir. Thank you for the opportunity. Sir, my question was on the distribution side. Sir like if we see the banking channel so about like one year-ago the share of AUM which was coming through the bank channel was about 10% however, it has declined to about like 8.5% to 8.7% in this quarter. Now with majority of our scheme now performing back to quartile one and quartile two so what is like the outlook over there and like how are — how is the response are we getting from the banking channel.

Sundeep Sikka — Executive Director & Chief Executive Officer

So, from our perspective banks, any which way for us were about 9% in overall scheme of things and if I take the direct out, it was about 18% to 20% so from our perspective even if that decline you know it doesn’t really means much for us however in order to talk about how we see flows going-forward. So in case of the banking channel what was our handicap earlier were the approvals like you did mention now since the equity performance has come back good part is that in most of the channels and the banks we have the approvals in-place, the approvals are now getting converted into business volume for us on the equity side. We have a bit of catch-up on the debt side — in the debt side in some of the banks but most of the banks if you see are either equity players or SIP players where the approvals which have come in in the last two or three quarters are going to help us. We have now — majority of our funds are approved in the — in most of the retail and the wealth bank. The numbers will start reflecting as we go-ahead because you know equity comes with a lag. SIP numbers have started coming in, the net sales is improving, hopefully this ratio will start improving in the next two quarters from here on.

Lalit Deo — Equirus Securities — Analyst

Sure sir. Thank you, sir.

Operator

Thank you. The next question is from the line of Dhvanil Shah from Motilal Oswal Financial Services. Please go-ahead.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Hi. This is Prayesh Jain. Just three questions. Firstly, if you look at how the redemptions have shaped up on the equity side for the industry, those have been kind of increasing in the last couple of months. Any early trends to be catched[Phonetic] there is some profit taking or some issues out there where there are increased redemptions. Secondly, on the fee and commission expenses we’ve seen an increase. What is that pertaining to? And thirdly from an other income perspective do you think that the current run-rate that what you have achieved in this quarter given if the yields remain where they are and possibly even the equity markets kind of see steady returns, do you see these kind of other income sustainable? They will be my three questions.

Sundeep Sikka — Executive Director & Chief Executive Officer

If you could take the second and third. Fee realization and another then I will take the redemption.

Prateek Jain — Chief Financial Officer

So I mentioned in the past that this fees and commission expenses are pertaining to our AIF and PMS businesses so in AIFs still we have — we pay upfront commissions so that’s where you know there if you get a larger amount of asset raise in the quarter you will see some marginal increase out there in terms of it but obviously the corresponding revenue will come with a lag effect so that is the expenses in fee and commission side of it. In terms of realization as I mentioned that look this is — these are more sustainable at this point of time. If we see the interest-rate picking-up from here then a lot of money will come into the fixed-income category all the money which has gone out will come back to the fixed-income category from the corporates and institutional investors and, then they will write-down[Phonetic] to the fact that look when the interest rates goes down as part of the cycle then there will be an higher yields will be made into these products and when there are high yields our propensity to charge will be higher. So if you see overall on the fixed-income side, two things have happened. One if you see last one — last two-and-half years one lot of money has gone out from the longer duration and credit funds and come into the shorter end-of-the curve and into liquid and other money market fund and the second part is that look in these funds also the returns were fairly low. They were sub 5.5% and therefore our propensity was to charge, expenses were lower but our average yield on these products are likely to go up in the coming quarters.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Prateek just my question was more on the other income that we’ve reported in this quarter whether that is sustainable given the way the yields are moving and equity markets return.

Prateek Jain — Chief Financial Officer

See, these are all mark-to-market and as said in the past total — of the total investment of total cash-flow available 82% of those assets have been invested into our own scheme into mutual funds and of that barring the seed capital investment which we made into equity remaining are into our fixed-income schemes only across the categories and so obviously as the yields goes up our realization will increase from here on but we do not give any kind of forward guidance on our other income but there are no major assets which are into the risk categories at this point of time, which I can tell you.

Sundeep Sikka — Executive Director & Chief Executive Officer

As far as the redemptions are concerned if you were to look at the net equity flows I think in the industry ex of arbitrage for the full quarters have been 28,000; 20,000; 23,000 so I think it’s broadly in the same range. Yes, I think from our perspective I think one thing is very critical is I think now is there any early trend of redemptions. Clearly whenever the markets are volatile, it’s the H&I investors the bulk money which goes out moves fast and comes in. I mean the movement is faster. That’s exactly the reason we try to phase, we focus more on granular business, retail business, and SIPs which is a lot more sticky. So, I think from our perspective I think we are not trying to not witness any kind of, redemption at this point of time and I think for us I think the trend could be a little different from the industry because our business is very, very retail.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Just just, one more question there on. So from a flow perspective I know you don’t give any data as such what flows are? Is there a trend of increasing flow market-share for Nippon India on the equity side in the last couple of quarters? Can you at least give that indication?

Sundeep Sikka — Executive Director & Chief Executive Officer

Over many last quarters I think we have seen the trend getting positive. I think if I was to look over our trend-line over last 36 months from a net negative we have moved to net positive.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

But the market-share has obviously been going up but, is it there in-line with the overall equity market-share or is it lower than that?

Sundeep Sikka — Executive Director & Chief Executive Officer

So the net sales market-share is inching up towards the equity market shares so that is the reason why you’ll find month-on month our equity market-share is also now improving.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

All right. Thank you so much.

Operator

Thank you. [Operator Instructions] Next question is from the line of Manjeet Buaria from Solidarity Investment. Please go-ahead.

Manjeet Buaria — Solidarity Investment — Analyst

Thank you for taking my question. I wanted to understand as the competitive intensity in the industry goes out and different players may have to pay more commissions to the distribution partners as we have seen in some NFOs, how easy is it to claw-back these commission levels, so once the higher levels are given it stays that way permanently.

Sundeep Sikka — Executive Director & Chief Executive Officer

Manjeet I think from our perspective the way we see we have always been very clear that long-term bussiness models cannot be paid — can be made by paying higher brokerages so we’ve been very conscious on it. I think so. I think, whatever is sustainable we will not like to do something which is not sustainable from a long-term point-of-view. So, I think from our perspective. I think we have never have gone overboard and wherein we will have to do undo things later.

Manjeet Buaria — Solidarity Investment — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of [Indecipherable] from Metaverse Equity Fund. Please go-ahead.

Unidentified Participant — — Analyst

Thank you, ma’am. My question is NAM is collaborated with DWS Group to provide portfolio management and advisory services in European market market for Indian government bond ETFs, so as far as the current situation is concerned the recession part so what would be the upcoming plan from Nippon and as Indian business is showing the stable-growth as compared to the European market. So that is my question.

Sundeep Sikka — Executive Director & Chief Executive Officer

Our launch of product in DWS is in-line with our strategy to grow our non-mutual fund business and offshore business as we have mentioned in past I think we closely work with Nippon Life team globally to look at opportunities where we can collaborate with the various group companies of Nippon Life. There are many more such initiatives where work is in-progress. This fund was launched just about a month back. I think at this point of time it has just started and I think we clearly see I mean there will be couple of other products which will be launched across the globe but the focus will remain to get more money into India.

Unidentified Participant — — Analyst

Okay, thank you. Thank you, sir.

Operator

Thank you. The next question is from line of Dhvanil Shah from Motilal Oswal. Please go-ahead.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Yeah, hi this is Prayesh here again. Just thoughts on the hybrid segment the industry has seen a lot of outflows in the past few months and is there any clear reason for that? Why that has kind of picked-up in the last few months?

Sundeep Sikka — Executive Director & Chief Executive Officer

Yeah. So the hybrid section, hybrid category prior to the volatility in the market there was more flows coming into the large cap, mid cap, those categories like you are rightly saying last six months we have started seeing more flows in hybrid, more so it is more as the volatility increases, the trend shift towards balanced fund — hybrid funds so we are seeing that trend happening today. I think if the volatility continues for the next six to 12 months this category will start growing. And that should be a good thing for the industry because these are stable, long-term assets which come in balance funds.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay. See my question was they were actually dictating outflows, not inflows.

Sundeep Sikka — Executive Director & Chief Executive Officer

No outflows in hybrids are not happening this time. In the last, three months, four months rather the net sales is positive. It can be due to some NFO, which has come in, which might lead to outflow in certain particular part of the quarter but the trend is still positive. You have to add hybrid category. It includes the equity hybrid funds. It includes balance advantage fund, it includes asset allocation funds. So the category is very large, it’s not only one particular category, which comes under hybrids.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

And what are the plans for future launches with regards to all the scheme categories?

Sundeep Sikka — Executive Director & Chief Executive Officer

Well. I think from our perspective. I think we broadly feel our portfolio is complete. I think we will not be launching any funds under this to come up with new NFOs. I think where you will see more launches will be I think whether it could be domestic[Phonetic], international, or passives.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

All right thank you so much.

Operator

Thank you the next question is from the line of Sahej Mittal from HDFC Securities. Please go-ahead.

Sahej Mittal — HDFC Securities — Analyst

Hi good evening everyone.

Operator

Sahej, sorry to interrupt. Sir can you please speak a little bit louder. Your voice is very low.

Sahej Mittal — HDFC Securities — Analyst

Is it better now.

Operator

Yes, better now.

Sahej Mittal — HDFC Securities — Analyst

Hi. Good evening everyone. Sorry. First of all my three questions are, so there is some improvement in the equity yields rate so is this something structural? Are these yields — is this an improvement structural in nature? And can this be — is this sustainable? Second was around, there’s some dip in the staff cost. So any color on this? And thirdly was on your channel mix, so there’s some sharp dip in the share of banks. If you could throw some color out there as well? I’m sorry if you have already answered these questions, I joined the call a bit late.

Prateek Jain — Chief Financial Officer

No issues. In terms of yields the overall yeilds is slightly marginally up as compared to the previous quarter and as I explained in the past that this is predominantly because we have improved our realization on the fixed-income schemes and I’ve given a detailed explanation to that and also our asset mix has marginally improved in terms of overall longer-term, high-yielding assets and these are pretty sustainable and not one-off. Also as Sundeep was mentioning that look we’ll keep working in terms of our product offering the distribution commission, which are sustainable and will not go overboard in terms of you know extending higher distribution commission for faster growth so that is one. In terms of staff cost this is marginally lower and these are related to certain provisions et-cetera and there is no structural thing which I can see up in here[Phonetic] and with regards to the channel mix again. If I see the last, few quarters. It used to be in terms of overall share including the sector it used to contribute about 10% and now, they’re 9% so again there I see a very marginally decline there and that is because banks. If you see overall from an industry perspective also the bank share has come down.

Sundeep Sikka — Executive Director & Chief Executive Officer

So there just like to add to what Prateek mentioned. It’s the fact that in the last few months we’ve seen some bit of institutional money that from wealth counters et-cetera had been mobilized some of that has moved out at the industry level. But you the SIP business and [Indecipherable] continues to — continues to come in.

Sahej Mittal — HDFC Securities — Analyst

And one thing was so I mean on the [Indecipherable] there this dip sequentially so different reversal in this line-item.

Sundeep Sikka — Executive Director & Chief Executive Officer

Sorry.

Sahej Mittal — HDFC Securities — Analyst

Is there some reversal in the staff cost.

Sundeep Sikka — Executive Director & Chief Executive Officer

No, no, no. See like in the first-quarter there were certain, you know like incentives et cetera which got PLI got paid out and if you see the standalone results there is nothing but it has to do with our subsidiaries so certain PLA expenses which got booked into the first-quarter and therefore there is a marginally I would say, staff cost decline.

Sahej Mittal — HDFC Securities — Analyst

Right. And in terms of lease on the debt so the lease on the debt has — in the debt schemes have improved right so is there change in the mix towards the credit risk on those sorts.

Sundeep Sikka — Executive Director & Chief Executive Officer

Again, I am telling you see what you have to understand is that look while assets may change what we have done is we have gone and improved our realization by changing TR so which we dynamically keep evaluating what is the return which an investor or what is the return which fund is generating and based on that what is the expenses what competition is charging what is vis-a-vis our performance is our competition based on all these factors we keep evaluating what is the expense we should charge in our debt schemes and there what we’ve done is we have changed realization in some of our schemes, which have resulted in a better realization. Now this is not to be seen but look in these categories monies have come in normal. These are completely — these are two different strategies so while money may [Technical issues] but overall yields have gone up because of the underlying returns generated by the papers and therefore we’ve been able to increase our expenses.

Sahej Mittal — HDFC Securities — Analyst

And any color on the yield, how they’re shaping up on the equity side.

Sundeep Sikka — Executive Director & Chief Executive Officer

So again we, have not seen significant change-out there. Our sharing remains pretty much the same as what we were paying earlier and obviously as I mentioned that looked the more-and-more new money replaces the old assets then obviously we’ll see some decline so over a period of time we may see two to three basis-point of decline. If this money get replaced by the new assets.

Sahej Mittal — HDFC Securities — Analyst

Okay but the trend is still and equity users still depleting that’s circa recognition, rigth.

Sundeep Sikka — Executive Director & Chief Executive Officer

So on the existing assume it would not but if the new AUM comes and the old asset keeps going down, then obviously you will see some decline in the equity yields.

Sahej Mittal — HDFC Securities — Analyst

And for us in Q2 and given that the flows in the equity schemes for the industry were a bit soft so for us how have the flows been. Maybe if witness net outflows or net inflows.

Sundeep Sikka — Executive Director & Chief Executive Officer

No, no, we were net positive in terms of inflows and this was broadly in the range of our quarter one only.

Sahej Mittal — HDFC Securities — Analyst

And any color on the markets in terms of net flows.

Sundeep Sikka — Executive Director & Chief Executive Officer

We don’t disclose those numbers.

Sahej Mittal — HDFC Securities — Analyst

Okay. Those are my questions. Thank you.

Operator

Thank you the next question is from the line of Dipanjan Ghosh from Citigroup. Please go-ahead.

Dipanjan Ghosh — Citigroup — Analyst

Hi, good evening. Just three questions from my side. One, strengthening the previous discussion. Would you like to quantify the differential between your existing and new business from [Indecipherable]. My second question would be on the SIP business if you can give some color on what is the distribution channel of origination channel for the SIP is it more direct[Phonetic] laid-off with the distributors and third question from an industry perspective what we have witnessed is that there have been significant amount of loans that is going into NSO where the incumbents are already present but for those they are not able to garner those similar to that of [Indecipherable] so how do you see the particular — how do you want to give kind of see this for more from medium-term perspective given that a lot of agencies also book pipeline. That is all from my side.

Sundeep Sikka — Executive Director & Chief Executive Officer

Dipanjan, if you can just repeat your first question?

Dipanjan Ghosh — Citigroup — Analyst

My first question was just on this in the previous discussion you mentioned that the new yields continue to be lower than the existing yields from the equity business, so would you like to kind of quantify what is the differential out there?

Sundeep Sikka — Executive Director & Chief Executive Officer

Yeah, so in the past again on the cost of repeating you see on the old assets our average, you know distribution commission paid was for 3 to 60 basis-point however if you see it now it is more on a TR sharing basis, so obviously for different distributors we share different amount of fees and it ranges between 55% to 70% of our TR, we share our DTR we share with our distributor so that is a difference because in the past all assets we have paid higher upfront commission and which are no longer allowed and therefore it is not entirely on-trade and therefore the sharing mechanism has come in and we share almost 55% to 70% to our various categories of distributors.

Prateek Jain — Chief Financial Officer

Yeah, on the other question on SIP mix, yeah, so the mix of business as we have seen in the last two to three quarters the digital and FinTech partners have started contributing decent to our overall mix. Right now as I speak 60% of the business is coming from MFDs is, which are primarily IFAs for us and some of the banking channel partners have started giving us money, they’re giving us SIPs and the remaining around 35% to 40% is coming through the FinTech partners so that is broadly the mix of SIP numbers which are coming to us and what are we witnessing is we are also increasing the absolute count on a month-on month basis so right from ratio point-of-view and as well as absolute numbers both are seeing a growth — both the categories are growing for us when you consider SIPs.

The third question was on NFO, right. You asked something on the NFO what was that exactly.

Dipanjan Ghosh — Citigroup — Analyst

Basically, from an industry perspective what we see is that, let’s say — let’s say the incumbent have particular in lets say Mid-Cap, large cap, Flexitouch but then you see and of course coming in from the smaller players in similar categories where the flows are probably a bit higher than even the combined of what the incremental garnering in the particular month or quarters, so from that standpoint given that a lot of newer E&P have loopholes in terms of things that they introduce and there are also new E&P in the pipeline so how would you kind of think of opportunity loss is kind of new flows [Indecipherable]

Sundeep Sikka — Executive Director & Chief Executive Officer

I think broadly the way I see this is something to say. Any new or old AMC I think any new fund launched been till the time it adds value to the portfolio long-run investors will keep investing. I think any new and therefore becoming whether it be there is higher brokerage or capability to pay. From a long-term point-of-view that is not sustainable. I mean, ultimately these are all open in their schemes, one can garner but for NFO but for these assets to be sticky is to add value to the investor from a performance point-of-view and to be and the more important thing is it has to be a very-very granular and sticky because we have seen when the bulk money comes it goes out also at the same speed. So, I think from our perspective our focus is not to get distracted with the new NFOs which are coming in the industry. I think and we’ll continue focusing on our existing schemes and wherever we see any vacuum for us to — an opportunity for us to launch new products which can add value to the investors, we do that, otherwise our focus will only on the open and existing schemes.

Dipanjan Ghosh — Citigroup — Analyst

Sir, just a small follow-up on the second answer. You mentioned that on the [Indecipherable] 40% of SIP was coming [indecipherable] could you shed some color on the quality of customers in terms of potential and average tenure or in terms of redemption for SIP or ticket size. I mean if you can or maybe more from a geography or reach perspective if you can shed some color on that particular portion of the SIP business that is coming in.

Sundeep Sikka — Executive Director & Chief Executive Officer

I think it will be very difficult to give these kind of detail but I think we continue evolving. I think we continue to evaluate. I think whether it’s coming from an offline channel even if coming from distributors IFAs or whether banking or anything we continually evaluate the stickiness of the assets. I think which distributors which channel will promote more. I think and again from a geography point-of-view but again will be very difficult to pinpoint how a particular pockets of either geographically or channel-wise it works but I think our endeavor is I think as we mentioned earlier. I think these sticky assets of 50% of things that as I mentioned in my opening address also today if you look at the stickiness of the things that we have the majority of about 53% of assets are there for more than five years so I mean that is the thing I focus.

I think we are using a lot of artificial intelligence and business analytics to continue both to upsell as well as continued to increase the logical duty of the SIPs.

Dipanjan Ghosh — Citigroup — Analyst

Thanks for the answers and all the best.

Sundeep Sikka — Executive Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of [Indecipherable] please go-ahead.

Unidentified Participant — — Analyst

Yeah thanks for the opportunity sir. I just wanted a couple of data points. What is your current blended yield on your equity book and what is the yield on the new flows that you are getting?

Sundeep Sikka — Executive Director & Chief Executive Officer

So we don’t give product-wise yields on this one and what was your second question?

Unidentified Participant — — Analyst

The second question was I wanted the yield on the new flows but if you can’t give specific yields even if you can give out the differential between your current book and the new units that will also be fine.

Sundeep Sikka — Executive Director & Chief Executive Officer

No, I just explained you. That look on the old assets the average distribution commission paid out would be in the range of 50 to 60 basis-point. And on the new money which we are receiving post the change in the regulation what we said that look we share almost 55% to 70% on average to to various distributors and different categories.

Unidentified Participant — — Analyst

Okay and this 55% to 70% in terms of basis-points, how much would that be?

Sundeep Sikka — Executive Director & Chief Executive Officer

Each different scheme has a different TER[Phonetic] so nowadays from a SEBI perspective there is a calculation of the TER post that we remove the scheme related expenses to arrive at distributable TER. Of the distributable TER we share this money.

Unidentified Participant — — Analyst

Okay. Okay fine.

Operator

[Operator Closing Remarks]