Nippon Life India Asset Management Ltd (NAM-INDIA) Q3 FY23 Earnings Concall Transcript

Nippon Life India Asset Management Ltd (NSE:NAM-INDIA) Q3 FY23 Earnings Concall dated Jan. 30, 2023.

Corporate Participants:

Sundeep Sikka — Executive Director and Chief Executive Officer

Prateek Jain — Chief Financial Officer

Aashwin Dugal — Co-Chief Business Officer

Arpanarghya Saha — Chief Digital Officer

Saugata Chatterjee — Co-Chief Business Officer

Unidentified Speaker —

Analysts:

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Kunal Tanvi — Banyan Tree Advisors — Analyst

Sahej Mittal — HDFC Securities — Analyst

Lalit Deo — Equirus Securities — Analyst

Unidentified Participant — — Analyst

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

Akshat Haria — Multi Act PMS — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day and welcome to Nippon Life India Asset Management Limited Q3 FY23 Earnings Conference Call, hosted by Motilal Oswal Financial Services. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Prayesh Jain from Motilal Oswal Financial Services. Thank you, and over to you, sir.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Yeah, thank you, Aman. Good evening, everyone. On behalf of Motilal Oswal Financial Services. I welcome you all to Nippon Life India Asset Management Limited 3Q 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 and Chief Executive Officer

Thanks, Pray [Phonetics]. Good evening, and welcome to Q3 FY23 Earnings Conference Call. We have with us our CFO, Prateek Jain; Chief Business Officer, Saugata Chatterjee and Aashwin Dugal; Chief Digital Officer, Arpan Saha; and [Indecipherable] Nominee of Nippon Life Japan. Detailed investor presentation and press release has been uploaded on the exchanges as well — 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 Q3, Indian equity market remains the main range-bound with a positive bias, driven by strong corporate earnings, superior growth, economic growth versus peer [Phonetics], and picking of inflation expectations. However, ongoing global uncertainties, FI outflow and a weak IML USP outlook also impacted the growth momentum and led to some vertality. Despite the mixed overall outlook, asset management industry maintained its growth momentum, driven by higher retail awareness and improved access of mutual fund products across the length and breadth of the country.

The industry assets rose by 5%, mainly driven by higher equity and ETF assets. The base of unique investors grew by 20% to INR37 million. Monthly SIPs touched all-time high of INR136 billion, an increase of 20%, while SIP folios rose by 25% to INR61 million. The consistent expansion of investor base and growth in AUM driven by SIP and ETF flows indicate the investors diverse needs and the industry’s superior capability to fulfill them vis-a-vis other financial products. Growing financial awareness and differentiated and transparent product suit and innovative digital strategies. I’d expect it to be the key driver for the growth of the industry in future as well.

At Nippon India Mutual Fund, our priority is to be future-ready and capture the long-term opportunity. In Q3, Nippon India Mutual Fund maintained its industry ranking of fourth position. In this quarter AUM increased by 3% to INR2,928 billion. At Nippon India Mutual Fund, our core focus remains to invest on investors’ interest. We added 2 million folios in the last 10 months and continue to have the largest base in the mutual fund industry. Our share of industry-unique investors was largely stable at 36%, with a base of more than 13 billion investors. Systematic flows are stable and the key driver for industry long-term equity….

[Technical Issues]

Apologies for that. Our MLAs systematic transaction book is at INR123 billion. Quarterly flows increased by 45% to INR29 billion, on a gross basis. 561,000 systematic folios were added in Q3. Our Systematic AUM rose by 15% to INR583 billion. 56% of our SIP AUM has continued for over five years, vis-a-vis 23% for the industry. Also in volatile markets folios with low ticket size have demonstrated longer vintage and better stickiness. 14% of our SIP folios have continued for more than five years against industry and industry’s revenue percent. Today, Nippon India Mutual Fund offers industry best suit of products in passive category. With strong growth in industries’ passive assets, our ETF ecosystem is already in place and far ahead of its payers.

In terms of investor base and mindshare. In this segment, we manage an AUM of INR683 billion and have a market share of 14%. Excluding ETFO allocation which goes to two specific mutual funds, we would be the largest ETF player in the country. The gold ETF is the biggest fund in this category, with AUM of INR67 billion in assets. Our share in industries ETF folios rose to 61%.

In Q3, we added 137,000 investors and accounted to 99% of the total ETF portfolio addition in the industry. We have 69% share of ETF volumes on BSE and NSE. Our ETF average daily volumes across key funds remain far higher than the rest of the industry. Our digital-centric strategy is also the key — keystones for sustainable growth and profitability.

Along with several digital initiatives such as card buying, which we took to enhance our partner’s and investor’s experience in Q3, we also rolled out Nippon India Mutual Fund Whatsapp channel real-time comprehensive transition and service suit for our investors. The Business Easy 2.0 app is aimed at driving more meaningful engagement, retention, and growth to advisory, detailed analytics, and smart insights. In Q3, the digital platform contributed to 59% of our total new purchase transactions. Over 902,000 purchases were executed through digital assets, an increase of 19%.

Nippon India Mutual Fund has a well-diversified and a nimble distribution base with a wide presence to 270 locations across the country. As of December 2022, we had over 59,000 distributors in panel with us. The MFT base rose to over 88,800 with an addition of nearly 1,900 distributors in this quarter.

Now on our financial performance. For the quarter ended December 31st, 2022, profit after tax was INR2.1 billion, an increase of 18%. Operating profit was at INR2 billion; operating profit as a ratio of average assets under management was 28 basis points in Q3 20 — FY ’23 as compared to 26 basis points in Q2 FY ’23. In the past, the company has followed a consistent dividend policy. In FY ’22, NAM India distributed it’s highest-ever dividend with a payout ratio of 96%. Over the last eight financial years, NAM India has distributed a cumulative dividend of INR36 billion. As we grow organically through our physical and online channels, we remain open to evaluate investments and strategic opportunities that add to the profitability or complement our existing business and ultimately are in the interest of minority shareholders. A signatory to UN PRI, we have already begun to integrate ESG aspects into various stages of planning operations, fund management, risk, and bonds. Our goal is to encourage higher adoption of ESG principles within the asset management industry.

As a responsible investor manager, we are building a resilient portfolio that will not only provide sustainable returns to our investors but will also have Steve’s environmental and social impact. We will also seek in relevant disclosures in ESG matters from our various investee companies.

To sum up, I would like to reiterate at Nam India investor’s simplicity remains the key thing. We strive to deliver a superior experience and sustainable returns to our investors and in the process add value to our shareholders. 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]. The first question is from the line of Kunal Tanvi from Banyan Tree Advisors. Please go ahead.

Kunal Tanvi — Banyan Tree Advisors — Analyst

Yeah, thanks for the opportunity. So, I had three questions. The first one was on the yields we saw an improvement in the yields both on a Q-o-Q basis and like-kind of flattish on a Y-o-Y basis. Can you help us understand the key reasons for the same and how sustainable the improvement would be given the natural decline in the yield because of the increase in size? That is number one. Second is on the debt side of the business. Again, the industry continue to see outflows during the quarter and our outflows were even higher than that and we saw a dip in the market share. Can you run us through what’s happening in the industry and how we as a company are kind of dealing with this because what we remember in last quarter we had said that we have taken some increase in pricing like kind of increase at the, so where we are there in that journey? And finally, third on there was this article regarding — news article regarding CBS study on the TR for the mutual fund industry. So wherein the regulator is thinking of moving from a scheme-based TR to AMC base, overall AUM base TR, any thoughts on that would be helpful. Thanks.

Sundeep Sikka — Executive Director and Chief Executive Officer

Thanks, Kunal. I think I’ll start with your third question and then give it to my colleagues Prateek and Aashwin for the income of wheels and net outflow. I think with regard to the recent news article regarding TR. The discussions are still underway. We await the final draft of the regulation. And in this regard, I think we will avoid making any comment on speculation at this stage. And I think with respect to the yields, I think Prateek if you could just take that.

Prateek Jain — Chief Financial Officer

Yeah, thanks, Kunal. So, Kunal, we have been maintaining the yield debt look if the asset mix remains the same. And also in terms of the debt returns as and when it increases we will be having the probability to increase the TR as well and also on the ETF side, we’ll keep looking at opportunities, if can further improvise on yields. So all the three things, the composition has remained more or less the same or it has improved on the equity side. We have been able to marginally increase our yields on the debt and the ETF side, which has helped us to maintain the run-rate vis a vis the last quarter or the — vis a vis the corresponding quarter.

Sundeep Sikka — Executive Director and Chief Executive Officer

And Ashwin, if you take the.

Aashwin Dugal — Co-Chief Business Officer

Thanks, Sundeep and, Kunal, regarding the outflows. First I’d take what’s happening in the industry. So, owing to the changing macroeconomic scenario across the world and central banks tightening yields, we have seen yields move up quite substantially all over the world, including India. Hence, we have seen outflows from debt funds across the industry. One, to avoid any MTM losses that may arise out of returns; second, there is some competition also from bank deposits because bank deposit rates have moved up since. So there is some, especially, short-term money which is one year, six months, 12 months, 18 months, one year has moved there. And thirdly because of the rising interest rates a lot of corporate treasuries have preferred to prepay their loan, their credits to be banks, et cetera. So a combination of these three factors has led to industry outflows.

However, we have seen slightly higher outflow for Nippon because over the last two years. We also had a fairly robust build-up in fixed-income assets and some of that money has now moved out and we are fairly confident as things settle down, yields stabilize over the next one or two quarters, we should see some of those flows come back into the system.

Kunal Tanvi — Banyan Tree Advisors — Analyst

Sure, sure. Thanks. If I can ask two follow-ups? One was on the increase in the yield per se, that and the ETFs, how does one think about the market share impact of the same like over the medium-to-long term like when we attracted other plays, we haven’t seen any other players taking price — increasing the TRs and we have done that. How does that reflect into market share and how do we think about it over a longer term? And the second is for the equity side of the new money that we received from the distributors, have we seen any improvement in the net realization, which was very bad, say, in 2021, how has that, have we seen any improvement there? So, Kunal in terms of the yields, since there were no NFOs that way, which can have a significant impact on the overall equity yield. The money has come in the existing schemes and there we have been maintaining that we’ll continue to make profitable growth. So, we have maintained our payout ratios there. As regards to the debt yields are concerned. See, what we continuously monitor is what is the return generated from our scheme vis a vis the competition and what is the net yields in the hands of the investors and appropriately we take decision and the recent redemption, if you’re talking about there has got nothing to do with our increase in the Tr and also wherever we have increased the TR, it is barely one or two basis points. So. I don’t see that can be attributed to any kind of change in market share. Sure, thank you so much. Got it. All the very best.

Sundeep Sikka — Executive Director and Chief Executive Officer

Thank you.

Operator

Thank you. Before we take the next question like to remind the participants to limit their questions to two per participant. If time permits you can join the queue for any follow-up. 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. So.

Operator

Sahej, you are not clearly audible. May I request you to bring the handset?

Sahej Mittal — HDFC Securities — Analyst

Is it better?

Operator

Yes.

Sahej Mittal — HDFC Securities — Analyst

Yeah, hi, good evening. So two questions from my side. So firstly on yield, right. So if I calculate, definitely the if I look at the segment-wise yields. So for equity, even if you have taken, even if you have increased your TRs for maybe ETFs or debts, even then the equity segment has seen some improvement and material improvement. This is not a small improvement, close to 1.5 basis point improvement on a sequential basis. So what is driving that? Is this an aberration or some lower commission payout, some adjustment to commission payouts done in this quarter, what is actually driving this, and is this kind of are these kind of yields sustainable? That is one. Second is on so you draw — so you talked about using Business 2.0 for data analytics. So how are you using this and if you can give us some insights how is this helping us in better customer retention or improving customer journey? Yeah, and the third is around our operating expenses. So the expenses have shot up quite materially in this quarter. So what has — what is driving that, yeah?

Sundeep Sikka — Executive Director and Chief Executive Officer

So, see, in terms of the yields, again the — we have been maintaining that, look, one is the composition of our AUM; secondly, the size of the scheme third, the competitive environment and fourth; how do you receive your new flows. So if you receive your new flows from partners, IFAs, and from B 30 cities those are more profitable and more sticky, and those are more granular AUMs where we make slightly more margin and it is the combination of these effects predominantly most of our money has come from B 30 cities, from our partners and that’s where our realization is up on the equity side.

With regard to the expenses. There has been some one-off expense on the IT spend, what we have done so that’s not a regular feature. Almost the increment that we’re seeing 30% to 40% of that is related to that one-off spend that we have done. Further, what we’ve also done is consolidated our office in the last quarter. So we have shifted, and have closed down one of our office on Nariman Point and we have consolidated even the sales office, which used to be in the Nariman Point, same place where our corporate office is. So that also has led to some increased expenditures, but these are nonrecurring. So predominantly, those are the expenses, but besides that, now that we are completely open and we are seeing good traction in terms of our equity performance there has been increased travel and activities in terms of our distribution mix, et cetera. So this is all about the, I’d say it’s about the difference in the expenses.

Arpanarghya Saha — Chief Digital Officer

Yes, hi. This is Arpan. So to quickly give you an insight on the business. As we know, data is the new fuel for the — for part doing any kind of work our operations. Business, easy by itself is a very smart and intelligent asset that we have developed in-house, which allows our partners to give the best of choices to their consumers and which also revolves around real-time market movements. So those particular aspects when they come in and the ease of doing business, completely paperless, allows them to connect to a larger denominator of consumers who would want to do things at the click of a button. So it’s a completely app to web interface or a web-to-web or an app-to-app interface, which works together at the same point of time ensuring that the best of advisory, best of insights, analytics are passed on to the consumer through basic execution delivery. Thank you. Right. Sir, one follow-up maybe so ex of the mix change which has happened right towards equity. So even ex of those changes, yields seem to have improved in equity, so. I couldn’t quite get that if you can.

Saugata Chatterjee — Co-Chief Business Officer

So as I mentioned, the contribution from the.

Arpanarghya Saha — Chief Digital Officer

Even the share of banker has increased, right, if you’re saying that ISAs are more profitable?

Saugata Chatterjee — Co-Chief Business Officer

So I think we have not changed. Yeah, so Saugata Chatterjee this side. See the flows which are coming to us in equity like Prateek mentioned it’s cutting across the B30 market. Like you mentioned the share is also increasing for us. We are seeing an increase in flows across the distribution category either MFD or banks or the national distributor. The good part is, most of these banks also have very deep penetration in B30 market, we are strong there and we are getting a lot of retail flows coming in from those branches which are spread across the B30 market of India. Hence the distribution of equity flows is quite fragmented. Historically, it has been fragmented. Along with that, we also have this big sort of delta which has come in through SIP. As you know SIP is a very strong category, which we have built up, we have also shared in our initial talk how the SIP book has grown from roughly around INR650 crores to more than INR1,000 crores per month. So those — all those things aggregate into equity sales, and of course, the margin expansion is happening because of that.

Sahej Mittal — HDFC Securities — Analyst

Got it. I’ll join back in the queue. Thanks.

Operator

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

Lalit Deo — Equirus Securities — Analyst

Hello sir, good evening. Thank you for opportunity. So sir, just wanted to understand on this SIP flow movement. So sir, if. I look at for this quarter like we have received garner on about like INR29 billion and funds in this quarter. Now, if we see the movement of AUM. So if we exclude — if we include the fund flow then the AM seems to be on flattish. So just wanted to understand are we seeing enough redemptions in the SIP close or if they are like mark-to-market losses, which we have seen in this SIP.

Arpanarghya Saha — Chief Digital Officer

I will take this. So, Arpan this side again. You’re right the market share, the equity markets now has flattened for us rather it has started inching up, if you take March, April market share, the March market share, and current market share, it has moved from 6.1% to 6.18%. It is a small jump, which has happened, but the result in this because of the increasing every month. Net sales, like we have been mentioning in previous quarterly calls also till the time the net sales for us does not cross the six-quarter percentage, our market share jump will be limited. Happy to share the net sales growth every month they has started moving up. And currently, as we speak last quarter, month-on-month net sales has now started moving towards the 6% mark. So. It’s a combination of both SIP inflows plus lump-sum inflows coming in, which is contributing to net sales. We still have some margin of growth to take place, which will help us grow the market share. Yeah, that’s the point from our side.

Lalit Deo — Equirus Securities — Analyst

Sure sir. And sir, like on the ETF side, can you tell us about like what is the, what kind of yields do we make currently on the ETF side, and like sir mentioned that we have some we are looking to increase the TRs in that segment. So how do we see that yield spanning over the next two, or three years, like how much can we increase in that segment?

Sundeep Sikka — Executive Director and Chief Executive Officer

See, we have been maintaining that — we may make about 9-to-10 basis-points on the net on the ETF side and we’ll continue to explore the products where we can — or whether we have a unique proposition available and where our a market acceptability is better than the competition, we’ll keep increasing our margins, because as you know, our overall ethos remains that we need to do a profitable growth. However, ETF is a vanilla product and there is not much we can do beyond the point and therefore, it will be broadly in-line with the industry. But wherever we have opportunity, we’ll try to improve the net realization.

Unidentified Speaker —

And just to add to it. I can taken into account the liquidity we have on the stock exchanges, I think we’re in a far better position to increase the yield wherever it is required, compared to the competition.

Unidentified Participant — — Analyst

Sure, sir. Thank you. Thank you.

Unidentified Speaker —

But just as a clarification, when I spoke about the ETF, this was including our CPSE, as well as — but this excludes the goal. Just in case if you are putting into the model, comparing to because, the gold, we charge much higher as well as — and CPSE again because it’s a government mandate. They are governed by what is allowed by the Ministry.

Unidentified Participant — — Analyst

Sure, sir. Thank you.

Operator

Thank you. [Operator Instructions]

The next question is from the line of Mohit from BOB Capital. Please go-ahead.

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

Yeah, thanks for the opportunity. My first question is basically, the unique customers declined during the quarter from 13.4 to 13.2, just wanted to know what has happened over there?

Unidentified Speaker —

So those can be — because obviously, as we see some outflows which has happened on the fixed-income side, as what Ashwin was mentioning and also on the equity side, some redemption would have have happened on the lump-sum, but I’ll give you some data point which would be interesting, because if you see on this SIP Gross folio share, what we used to be at 5.4% industry, we are now 8.5%, if you look at year-on-year growth, so on 5.4% to 8.5%.

Similarly on the net basis also, where, if you remember,that because of performance issue, we were seeing higher redemption. Now, on the net basis, we are almost 12% incremental folio share. So this decline could marginal —

Unidentified Speaker —

Also, SIPs which were discontinued across the industry, but overall — I think on the overall also, the good thing is, overall folios continue to grow, continues to grow.

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

All right, understood. My second question is towards the equity market-share. So, I mean, while we understand that we have maintained 7.3% market-share overall, but if I look at equity, you know. I mean, overall, if I look at like 10 to 12 quarters, we have lost market share. So any clarity on that in terms of the equity? I mean, industry is growing faster than [indecipherable], any clarity on that?

Unidentified Speaker —

Well, I think you’re right. I think it’s — earlier we were seeing some redemptions coming in. I think but last 12 months, I think with the performance coming back, I think we have seen the redemption has almost slowed down and the new incremental flow is increasing. And as we mentioned earlier, we started this financial year — sorry, the calendar year, Jan, with a SIP book of INR650 crores, which made it annualized at about INR8,000 crores and now, on a monthly basis, this month, we closed at INR1,020 crores, which is maybe, about INR13,000 crores. So I think equity will go up with the lag effect, but I think we far — we feel more far more comfortable and confident as we talk now.

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

All right, perfect. Wish you all the best.

Operator

Thank you. [Operator instructions] The next question is from the line of Akshat Haria from Multi-Act PMS. Please go-ahead.

Akshat Haria — Multi Act PMS — Analyst

Yeah, hi sir, thank you for the opportunity. Sir, my question again is on yields. So, basically, if we see our yields sequentially also have improved by about three to four basis points and while you’ve already explained, as the increase that we’ve seen on the debt and ETF side, what I really wanted to confirm is, whether there is any one-off revenue from specially managed accounts or advisory accounts which we booked in this quarter and if you could get that number. And also what would be the comparable number for the previous quarter and the same quarter last year?

Unidentified Speaker —

No-no, I think somewhere you’ve picked it wrong. We are — our gross realization has been 43 basis-points in the Q3 ’23 blended, and it was 43 — 42 basis-points last quarter, so I think it is more or less remain the same. While on a nine-month basis, we are currently trending at 42 basis-points versus 44 basis-points. So there has been marginally decline of two basis-point on a nine-month basis and it is one basis-point higher than the. sequential-quarter.

Akshat Haria — Multi Act PMS — Analyst

So, any one-off revenue which we have booked for the specially managed accounts?

Unidentified Speaker —

No-no, there is nothing, there is no one-off managed. As I mentioned in the last call also, that as and when, you know, the opportunity arises, we’ll be improving our expense ratios. On the fixed-income as well as the ETF and that is what you know, this quarter there has been the increased realization on fixed-income and ETF has helped us to improve our realization. Overall realization.

Akshat Haria — Multi Act PMS — Analyst

And sir, my second question was on the yield differential on the stock versus flow. Earlier, you know, when we started this discussion, it used to be around 20 basis-points. And in one of the previous calls, you had also mentioned that almost 2/3rd of our AUM has now shifted to the new, newer yield, the lower yield. So you know, what would be the differential now and what percentage of our AUM, which used to be 2/3rd, is now on newer yields, if you could give some color on that side?

Unidentified Speaker —

No, so if you’ll see this year, the gross flows have not been and as significant, but whatever — the newer gross flows which have come in, those are all, you know, those basically, those who have come at the IRR rate in the equity side. So I think marginally, if you say that earlier, it was 2/3rd, it would be like almost 70% would have been on the — 70% of those assets now would be on the newer rates.

Akshat Haria — Multi Act PMS — Analyst

Okay, okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Prayesh Jain. Please go-ahead.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

Yeah, hi, sir. Sir, firstly, just a broader question for the industry. The profit growth for most of the players has been kind of flattish or declining say in the last one or two years, and that obviously has been because of the pressure on yields. How do you see the profitability for the industry, say in the next two to three years, do we ever see the profit growth coming in for the industry, or for players like us, how do we see this really panning out?

Unidentified Speaker —

So I’ll take this one. I think, again from our perspective, the way we see, asset management industry is ultimately a volume game. Definitely, I think, it’s not just about the basis-point, what is going to be the yield, it’s going to be how well you execute and how well you can scale it up. So, I think from our perspective, I think they will be definitely, as there — when the opening question, regulatory changes [indecipherable] will keep coming up, but we believe that I think the key to long-term profitability is going to be execution and building scale and I think our focus will be on that.

Prayesh Jain — Motilal Oswal Financial Services — Analyst

But if you look at the last couple of years as well. There has been a very strong volume growth within, you know, the SIP counts hasn’t reached new highs. While debt has been kind of on the negative side, the last say six months to a year, but — and the volume growth still has been healthy on the equity side, but still we haven’t seen any profit growth coming in for the industry. So even going ahead with volumes kind of being strong, do we see the profitability — so that — in a way, I’m saying that the other matrices which contribute to profitability, basically, the yields and of course can kind of be at levels which can offset — which can still benefit — support the profit growth.

Unidentified Speaker —

I think it’s going to be — I think, before I will give it Prateek sir, part of this question, I think when we talk of volume, it’s not going to be the volume also, the quality of business that you built-up. I think in the earlier question, when Saugata talked about the granular business, the small-ticket size, all these things, the stickiness is going to be very-very critical and we strongly believe that the long-term business model cannot be built only on higher fees, higher brokerages. I think ultimately, you have to keep adding value to the investor. And we continue maintaining, yes, they can, even if there may be a little pressure on the yields in short-term, which will come because of disruption, because of some competition or somebody, new players becoming very-very aggressive, but this always short-lived. I think from a long-term point of view, execution and I think the quality of business remains important.

Prateek Jain — Chief Financial Officer

And secondly, if you look at the debt business, and there has been increased flows towards the index funds and ETFs, the passive side. So how do you see this panning out over the next three years, when we are expecting actually the long-duration or the median duration assets to gain traction? So in a way, I am asking is whether you know the active will grow faster or do you see the passives on the debt side, kind of picking — maintaining the momentum of what they’ve seen and we see the yields on the debt also kind of staying weak?

Unidentified Speaker —

I think it’s very difficult to make a prediction with what in the end debt, whether it’s going to be active or passive, but we believe the kind of impact, the volume growth that we’ve seen in the passive in equity, I think the same kind of trend will not be seen in fixed-income. I think in fixed-income, active will continue to play a bigger role, because — I think from our perspective, while we are ready on both the sides, I think we have built — we have a strong portfolio in the passive side and on the debt side, but we believe and I think as time will tell, that active will play a far bigger role than passive in fixed-income.

Prateek Jain — Chief Financial Officer

Thank you. That’s all from me.

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. Thanks for the follow-up. Sir, just one clarification. So if MF AUM mix remains this same on a Q-o-Q basis for the next quarter, maybe in 4Q say for hypothetically, if the mix stays the same, then should we expect similar, I mean, same yields even in the next quarter?

Unidentified Speaker —

Yeah, of course. See, there is no one-off, you have to understand in terms of — see, broadly, I’ll tell you, what is happening —

Sahej Mittal — HDFC Securities — Analyst

I’ll just clarify, because the kind of jump which we have seen in yields in this quarter. It seems like there is some maybe one-off this or maybe there is some improvement, in terms of what we negotiate with our distributors, something of that sort, yeah.

Unidentified Speaker —

No, no, so, I will tell you that, look, there is only one basis-point increase in the yield compared to the last quarter. Also one has to understand that when you are saying that AUM remains the same, but let me share with you that certain — certain of our schemes, where our AUMs have grown and this also goes to answer what Payesh was asking that, what is happening when the size of the scheme goes up, we, as a larger AMC, we tend to lose significant amount of our earning, because on the entire stock, our PR or our chargeability goes down, but we cannot go and renegotiate the total distribution costs on the thing. And therefore, like for example, if you look at our small-cap fund, which has doubled in the last two to three years. The total TR drop because of this reverse telescopic raids[phonetic], you know our TR chargeability has gone down by 15 basis-points. So the — one is, the size of the scheme, the asset mix and also the mix, where it is coming from because obviously you share larger proportion compared to IFAs with the DNDs and BNDs, so that composition also matters and also that NFOs, therefore if you early Renesas were the one who bringing it down now. If it is, if this AGM comes more granularly into our existing schemes. I think broadly is this realization should continue in the next quarter as well.

Unidentified Speaker —

And of course, ne has to keep in mind the regulatory intervention as well.

Sahej Mittal — HDFC Securities — Analyst

Right. So. Right. So in 4Q, given that we are seeing drop in AUM, right, because of the mark-to-market, then, ideally, we should see because the TR should increase from here on in the next quarter and hence our yield should improve even further in the next quarter, right?

Unidentified Speaker —

Like. I’d rather not comment on that.

Sahej Mittal — HDFC Securities — Analyst

Mathematically, I’m just trying to understand.

Unidentified Speaker —

Mathematically, yeah.

Sahej Mittal — HDFC Securities — Analyst

Got it, got it and just to get a sense on a SIP flows, so what percentage of SIP flows have a vintage of less than two years?

Unidentified Speaker —

Two years. We don’t have that data readily available with us, we can discuss that. Abhishek will talk to you separately on that.

Sahej Mittal — HDFC Securities — Analyst

Sure. And on our opex, so could you quantify the one-off for this quarter and on a sustainable basis, what kind of opex can we expect?

Unidentified Speaker —

So, see you know the total difference is not that significant and almost 60% of that is one-off, 40% of that is one-off and IT and the remaining is on the office shift what we shifted from Nariman Point to Lower Parel. So broadly, the difference which is there, of that 60% amount is one-off which has happened due to IT and IT spend and on office movement.

Sahej Mittal — HDFC Securities — Analyst

Got it, got it. Thanks. This was all from my side. Thanks.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. [Operator Closing Remarks]