Nippon Life India Asset Management Ltd (NAM-INDIA) Q4 FY22 Earnings Concall Transcript

Nippon Life India Asset Management Ltd (NSE: NAM-INDIA) Q4 FY22 Earnings Concall dated Apr. 26, 2022

Corporate Participants:

Sundeep Sikka — Executive Director & Chief Executive Officer 

Prateek Jain — Chief Financial Officer 

Aashwin Dugal — Co-Chief Business Officer 

Saugata Chatterjee — Co-Chief Business Officer

Analysts:

Sameer Bhise — JM Financial — Analyst

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Mohit Surana — CLSA India — Analyst

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Kunal Thanvi — Banyan Tree Advisors — Analyst

Jignesh Shial — InCred Capital — Analyst

Ronak Chheda — Awriga Capita — Analyst

Siji Philip — Mirae Asset — Analyst

Robin Porwal — ICICI Securities — Analyst

Akshay Jain —

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Nippon Life India Asset Management Limited Q4 FY22 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note, that this conference is being recorded.

I now hand the conference over to Mr. Sameer Bhise, from JM Financial. Thank you, and over to you, sir.

Sameer Bhise — JM Financial — Analyst

Thank you, Nirav. Good evening, everyone, and welcome to the 4Q FY ’22 earnings conference call of Nippon Life India Asset Management. With the — from the management team of Nippon Life India Asset Management we have Mr. Sundeep Sikka. Executive Director and CEO; Mr. Prateek Jain, the Chief Financial Officer; Mr. Aashwin Dugal, who is the Co-Chief Business Officer; Mr. Saugata Chatterjee, Co-Chief Business Officer; Mr. Saha, the Chief Digital Officer; and Mr. Hiroshi Fujikake, who is the Nominee Director from Nippon Life Insurance.

I would like to hand over the floor now to Mr. Sikka, for his opening comments, post which we can open the floor for Q&A. Over to you, sir. Thank you.

Sundeep Sikka — Executive Director & Chief Executive Officer

Thanks, Sameer. Good evening, and welcome to FY ’22 earnings conference call. We have with us CFO, Prateek Jain; Co–Chief Business Officer, Saugata Chatterjee and Aashwin Dugal; Chief Digital Officer, Arpanarghya Saha; Head of Elite partner group, Nitin Gupta; and Fujikake, Nominee of Nippon Life Insurance from Japan.

Overall, industry assets remained stable in Q4, driven by rise in passive and equity segments, offset by decline in fixed income assets. The industry continued to see steady interest by retail and HNI investors. The industry’s unique investor count grew by 10% to INR34 million in Q4. The strong growth in investor base and overall assets indicate confidence by long-term investors in mutual funds. We expect the industry to maintain its growth momentum in future also.

At Nippon India Mutual Fund, our priority is to be future ready and capture the long-term opportunity. As stated earlier, we are confident of regaining our market positioning as well as recreating and reinventing by continuously innovating and disrupting ourselves. Towards these goals, I’m happy to share with you the key performance highlights for this fiscal.

NAM-India recorded its highest ever profit of INR7.4 billion in FY ’22. Our overall mutual fund market share rose by 26 basis points to 7.38%, AUM increased by 24% to INR2.833 billion. Along with the steady increase in AUM market share, Nippon India Mutual Fund added more than 7 million investors and has now the largest investor base in the industry. We increased our share of unique investor folios to 36% within with a base of 12 million investors. The growth was driven by superior fund performance, comprehensive product portfolio, strong bonus shrink, robust presence in fastest segment and granular distribution network.

In line with our investor-first philosophy, we keep expanding our product suit to cater to the investors varied and diverse needs. In FY ’22, we launched several innovative and industry-first products. Across seven NFOs, Nippon India Mutual Fund garnered assets over INR40 billion from 275,000 investors. Other such unique a unique offerings in the pipeline include S&P, EV Index Fund, the Innovation Fund, and the Artificial Intelligence Fund of Funds. In total, 11 schemes have been filed for regulatory approval. These products will give investors more value creative revenues to diversify risk and generate sustainable returns. Here I would like to reiterate, even in future, we will focus on strong asset growth, but never at the expense of profitability.

With a keen retail focus, we have — we have one of the largest retail AUMs in the industry at INR764 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 28% compared to industry, which is 23%. Excuse me. We are amongst the leaders in beyond 30 cities category, a category contributed an AUM of INR478 billion. 17.2% of the total assets were sourced from these locations against an industry average of 16.6%. As on 31st March 2022 [Indecipherable] of the individual assets have a vintage of more than 12 months. The annualized systematic transaction book is at INR88 billion. On a gross basis systematic folios rose by INR1.6 million. In FY’22, our systematic AUM rose by 30% to INR514 billion. 48% of our SIP AUM has contributed — contributed for over five years vis-a-vis 21% of the industry. Also in volatile markets, folios with low ticket size have demonstrated normal vintage and better stickiness. 12% of SIP folios have continued for more than five years against the industry average of 8%.

Today, Nippon India Mutual Fund offers industry’s best suit of products in the passive category. With the strong growth in industries passive growth, our ETF ecosystem is already in place and far ahead of its peers in terms of investor base and mind share. In this segment, we manage an AUM of INR558 billion, and have a market share of 14%. Excluding the ETFO [Phonetic] allocation that goes to two specific mutual funds, we would be the largest ETF player in the country. The gold ETF is the biggest in this category with rupees INR66 billion in assets.

Nippon India Mutual Fund share in Industry, ETF folios rose to 58%. In this fiscal, we added 6 million investors and accounted for nearly 70% of the total ETF folio additions in the — in the industry for this quarter. Nippon India has 68% share of ETF volumes on NSE and BSE. Our ETF average daily volumes across key fund are higher than the rest of the industry. As a well-diversified asset management company, we have begun to grow our non-mutual fund segments over the last few years. With the government mandates, we manage assets of INR682 billion in non-mutual fund segments, the offshore business has assets of INR114 billion under management and advisory.

Leveraging Nippon Life’s global network, we continue to ramp up our international presence. Multiple products which are in approval stage with the regulator are a step in that direction. In our AIF business, we manage cap 2 and cap 3 AIFs across various asset classes. As of March ’22, Nippon India AIF raised commitments of rupees INR45 billion across all funds.

Online and digital assets have become a strong source of investor acquisition and communication. Keeping our millennial and Gen Z investors incentives, we are well at the 360-degree integrated framework for acquiring, onboarding, engaging and reengaging with such digital investors. But if this framework lies the signs that has been created an improvised overtime with digital powerhouses like Google, Beta, Adobe’s suit of products. The focus is towards creating the digital experience that is friendly, futuristic and frictionless for our partners and investors.

In FY’22, digital platforms contributed 58% of our total new purchase transactions. Over 3 [Phonetic] million purchases were executed through digital assets and an increase of 63%. Nippon India Mutual Fund has a well-diversified and nimble distribution base. As on March ’22, we have over 84,300 distributors in parallel with us. The MFD base rose to approximately 84,001 an addition of over 500 distributors during this quarter. Also, we have ongoing tie-ups with 20 prominent digital partners. Direct channel contributed 56% of the mutual fund AUM.

On the distributed assets, the share of MFDs was 59%. 81% of distributed assets are contributed by individual investors. Nippon India Mutual Fund has a wide presence through 270 locations across the country. We continue to review our existing branch operations and future expansion plans. In recent quarters, our marketing efforts are increasingly focused more on digital channels, which are more cost effective as against offline advertising.

Now on the financial performance. For the year ended March 31, 2022, profit after tax was INR77.4 billion, an increase of 9%. Operating profit increased by 46% to INR7.6 billion. Operating profit as a ratio of average assets under management rose by 25 basis point — from 25 basis point in FY ’21 to 28 basis points in FY ’22. Our aim is to create sustainable — sustainable value through growth across asset classes, cost optimization initiatives resulting in expanding and favorable operating leverage. We continue to focus on increasing the diversity in our revenue streams. Towards this endeavor, I’m happy to state the revenue from non-mutual fund business rose by 19% in FY ’22, and contributed 25%, sorry, contributed 11% of the consolidated core profit.

We continue to grow organically through physical and online channels. Additionally, we remain open to valued investments in strategic opportunities that add value to the profitability or complement the existing businesses and ultimately are in the interest of the minority shareholders. Board has approved a final dividend of INR$7.5 per share. This is in addition to the interim dividend of INR3.5. With this, this is the highest dividend paid by the company, a total of [Technical Issues] during the financial year.

As a signatory to the UN PRI, the world’s largest voluntary corporate sustainability initiative, NAM India aims to create and nurture a world class performance-driven and socially responsible ecosystem. Integration of ESG aspects into strategy, operations and risk management will help us outride the dynamic market and build long-term relationship with all stakeholders. We have introduced a formal ESG framework in FY’22. We intend to develop responsible investment strategies to build a resilient portfolio that will not only provide superior return to our investors, but will also have a positive environmental and social impact. In line with the stewardship responsibility, we continue to monitor and engage with all our investee companies and in the best interest of unit holders. In FY’22, Nippon India Mutual Fund voted against more than 620 resolutions in our investee companies in interest of our unit holders.

To sum up, I would like to reiterate that at NAM India sensitivity [Phonetic] remains the key theme. We strive to deliver a complete product suit customized to the investor needs, superior fund performance, efficient client servicing based on a comprehensive digital ecosystem. We are confident to continue our trend of profitable growth in coming quarters.

Before concluding, I would also like to welcome our two new Board members from Nippon Life Kimura San and Yao San. Kimura San served as the Managing Executive Officer, Head of Global Business at Nippon Life. He has an extensive experience in asset management operations on a global scale. Yao San is the regional CEO of Asia Pacific Nippon Life. He is a industry veteran with over 25 years of experience in insurance sector. We have shown with the induction of such esteemed individuals, we will strengthen our Board and we’ll continuously — continuously gain from the valuable guidance, specifically in the areas of planning, risk management, governance and synergies with Nippon Life Global Operations.

With these comments, we are happy to take any questions. Thank you very much.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Viraj from Securities Investment Management Private Limited. Please go ahead.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Yeah, Hi, thanks for the opportunity and congratulations for good set numbers in such a challenging environment. I just have a couple of questions. First is, if you look at our B30 share — as a share of our own AUM and if we compare to the industry trend, the gap between us and the industry seems to be shrinking, and that’s a trend which is evolving. And if I also look at the broader launched pipeline, which you shared in the presentation, most are in the active — passive space. So you have ETFs or Index Fund and not much in active equity space per se. So just trying to kind of understand how we are kind of not looking at increasing our market share especially in the active equity space where we’ve kind of [Technical Issues] want success in terms of gaining share per se. So just trying to understand the broader perspective there. And a related question to that is, if we look at the yield, that seems to be further moderating and if I look at last 15 days of March also we have seen a very sharp fall in the yields. So would pricing be a major lever to drive the AUM growth? Just trying to understand that the equation between or the interplay between pricing and market share, especially infrastructure equity. Thank you.

Sundeep Sikka — Executive Director & Chief Executive Officer

Thanks, Viraj. I’ll take a part of — some part of the question and for balance I’ll invite Prateek. Firstly, I think let me take your question on B30. I think we continue focusing on execution. And the fact that we have added nearly 70 lakh new investors is a testimony towards that. I think we, while the gap that you talked is on the AUM, I think we clearly see, I think we continue building on retail and there may be a lag effect with these new investors coming and you will see them toping up in times to come.

Number two, your question on equity. Yes, I think we had last two years we had a little pressure on equity I think. And as you would appreciate, as you can see these had settled. Our equity performance has been improving and normally equity performance whenever there is a one year and three year keeps improving. I think there is, the flow starts increasing. Just to give, put things in perspective. If I was to divide this entire financial year in four quarters, the first quarter in equity we had, because the redemptions were high, I think we had a negative number. But every quarter after that the number kept improving and the net positive number for the quarter Q4 was in excess of INR2,000 crores. So I think the positive trend is already visible. And I think from our perspective, we’ll continue to see — keep focusing on execution. And I think we believe that like in fixed income, and overall the market share has gone up, in equity also the trend seems to be positive and the first that we get on ground tells us, I think you will see with a lag effect in the next three to four quarters the equity market share also moving up.

As the new products are concerned, which are in [Indecipherable] assets, I think we have always believed I think to be more investor-centric and I’ve been trying to complete our product suit. I think that the approach is not to see whether it’s a active or passive. I think continue to keep evaluating products which can, which add value to the investors and they may happen to be active or passive. So I think we continue working on completing our product suite. As for the realization is concerned, Prateek if you could just throw a little light on that.

Prateek Jain — Chief Financial Officer

Yeah, so, Viraj, the change in the last week of March is more to do the compliance part of it. I think we mentioned in the last — last year as well. What happens is that, look, we have to ensure that all the expenses pertaining to the scheme has to be accounted in the scheme. And we cannot measure it to the last year. Therefore, what happens is there is in certain scheme where expenses are reduced or where expenses have increased, we need to just give this notices, and therefore you see there is margin. But then those are resurrected back in the first week of April itself. So those are just to make sure that we are fully compliant with the regulations that all expenses of the schemes are borne by the scheme and therefore you see there is some difference in management fees, not the PR realization, just the management fees. So that’s one thing.

But if you look at the overall basis, if you see, our revenue realization stands at about 49 basis point as against 52 basis points. Yes, of course, there has been pressure on the yields. Obviously, as I mentioned in my last call also there are multiple reasons including the mix, the size of the funds and the rates which a competition is offering, etc. And also because the lower, the old AUM is getting replaced with the new AUM. So there has been slight pressure on the yields. But if you see on a path to AUM basis or rather on the operating income basis, we have made about 20 bps — 28 bps of realization as against 25 bps last year. So because of the — this clearly demonstrate that despite decline in the overall revenue to AUM yield, we have been able to improve our net yields, and therefore our operating yields are better as compared to last year.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Just two follow-ups. One is on the B30 strategy. Sometime back we had put the physical expansion, the center expansion on hold and our thinking was we will kind of wait and focus more on digital. Is there now clarity in terms of what route we are taking in coming years regarding the B30 expansion strategy, anything further you can elaborate in that sense and the kind of investments will be needed to support that? That is one. And second is why I talked about the yield part is because the competition intensity is still by and large the same and there are players who kind of are willing to operate at a much more lower profit spread in a bid to gain share. Relatively, the performance has also been much better for them. If I look at one, three, five year basis. So just trying to understand what will be our pricing strategy given that operating environment?

Sundeep Sikka — Executive Director & Chief Executive Officer

So, Viraj, as I mentioned in my opening comments, I think our focus will be on profitable growth. We will — I think we are very focused that we will not be doing any business at a loss. So I think we will not be swayed by even if competition is going to be charging this or paying both.

Operator

Thank you. Viraj, I’ll request you to come back in the question queue. [Operator Instructions] The next question is from the line of Mohit Surana from CLSA India. Please go ahead.

Mohit Surana — CLSA India — Analyst

Hi, congrats on [Technical Issues]

Operator

Mohit, you audio is not very clear. May I request you to speak through the handset.

Mohit Surana — CLSA India — Analyst

Hi, better now.

Operator

Slightly.

Mohit Surana — CLSA India — Analyst

Okay. Sir, congratulations on the result. First question is in terms of dividend policy. This year almost you’ve paid out 90% kind of a payout on dividends. So what will be the policy in terms of dividend payout going forward? Secondly, in terms of revenues, and revenues are now — looks like they are flat quarter-on-quarter. Whereas if you see the markets as well as AUM, there is hardly any growth. So I’m just — I just wanted to know if there is any lumpy revenue that’s included in this quarter?

Sundeep Sikka — Executive Director & Chief Executive Officer

So for the second part Mohit, you see what happens, last year also, again this question has come. This quarter has actually two days less as compared to the previous quarter and the average AUM actually has fallen on the equity side because of the mark-to-market. So obviously, where equity contributes for larger part of it. Therefore, you will see there is a flat growth. But effectively, if you take the two-day more revenue, you would have seen some improvement in the revenue as well. So that’s — you want to answer for it. I’ll ask Sandeep to talk on the dividend policy. So, Mohit, as we have demonstrated in past, I think as per the dividend policy, I think we have been rewarding the shareholders with high dividend. This year on a standalone basis it is 96%, actually 90%, 96% of the standalone profits have been given back as dividend. I think we’ll continue similar policy of rewarding the shareholders with higher dividend. I think we at this point of time have adequate capital network. I think to explore all M&A activities that we, which is a continuous part of our journey, which we keep doing. So I think as far as the profits are concerned, broadly 100% of the profits will be distributed as dividend going forward also.

Mohit Surana — CLSA India — Analyst

Okay, thanks a lot. Thank you.

Operator

Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Yeah, hi, good evening, everyone. Congrats on a good set of numbers. Firstly, just extending the point on the yield discussion, so you mentioned I think that we are seeing that legacy assets to newer assets transition that has created an impact. So firstly, whether — what could be a mix today in terms of share of those legacy assets in the portfolio which would be earning the lower trade? And that would be helpful if you could give some color there. Secondly, do we think that the intensity of this transition would reduce going ahead given that bulk of the NFO activity will reduce going ahead especially for the direct for the active equity schemes. So that is one part. And secondly, on the other income we’ve seen a sequential increase in spite of the yields rising. Could you give some color that on the yield front — on the other income from, sorry.

Sundeep Sikka — Executive Director & Chief Executive Officer

So in terms of aging, I could not understand your question is. But from the perspective, what we — do not disclose the exact composition of the aging. But if you see last few years, we have seen significant amount of outflows. So all assets which were, now whatever we have remaining is a sticky assets and the recent assets what we’ve got in the last two years have been the new assets. In terms of the overall, I would say that still it would be in the range of closer to to 50:50. But I do not see that the old assets to go out because most of them are now part of the SIP AUM, if you see. So, and hence that asset to continue, you’re right that incrementally whatever assets we gain that will be on a lower yielding. But again as I mentioned that, our focus remains that on a path to total revenue if you see. We are talking about 50% of profitability. So we will try to manage around that. So the path to revenue would be about, we’ll try to maintain pace of 50%.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay. So you know, on this…

Sundeep Sikka — Executive Director & Chief Executive Officer

Whatever yield the decline would be there would, like the operating leverage will take care of it. So that’s the whole thought process and that is how we will be driving our pricing strategy as well to ensure that we have a sustainable growth.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay, got it, and…

Sundeep Sikka — Executive Director & Chief Executive Officer

Most of the, if you see, 70% of the assets are more than 12 months. So obviously, there has been a — this is like, most of the assets that have come is already one year-old now.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Got that, got that. And on the question on the other income? Sequentially — sequentially, the other income increased in spite of the fact that the hardened. So what was the reason for the increase in other income?

Sundeep Sikka — Executive Director & Chief Executive Officer

Frankly speaking, most of our — predominantly one could be the asset increase and predominantly if you see most of our assets now is on the fixed income, our own fixed income mutual fund. We have brought down our equity exposures. And in terms of, in the fixed income also broadly most of our assets are in the one to three-year category.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay. But still I didn’t understand the reason for the increase in the other income sequentially considering that the yields had hardened so much during the quarter.

Sundeep Sikka — Executive Director & Chief Executive Officer

No, so correspondingly if you — so it was just about INR34 crores versus INR31 crores, so I don’t see any significant difference there [Technical Issues] I think predominantly it is the impact of mark-to-market and that too has a last date fee. What is to see is that these numbers are, this mark-to-market is on a last date So we have 31st December versus 31st March.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay, and just slipping in one more question on the debt side, you’ve seen a lot of outflows for the industry in this year. How do you see the debt outflows going ahead for the industry as well as for Nippon?

Sundeep Sikka — Executive Director & Chief Executive Officer

I request Aashwin to take this question.

Aashwin Dugal — Co-Chief Business Officer

Hi, Prayesh. So I think this year with the — what we envisaged, overall that it will continue to harden, the Fed policy and central banks all over the world. Hence, we would see most of the flows that should come into the shorter end of the curve. So consequently we could see some outflow from long end category and more consolidation in the liquid and ultra-short term category. So that overall levels, we don’t see overall numbers going down on debt. But the construct of the flows could change, because corporates and you know some other entities will continue to raise money. Hence you could see money is coming in for more cash management purposes and we could possibly see the long-term investments could possibly be postponed to end of this year or next financial year depending on how the interest rate situation plays out.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay. Got it, thanks.

Operator

Thank you very much. [Operator Instructions] The next question is from the line of Viraj from Securities Investment Management. Please go ahead.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Yeah, so the question I had on the B30 strategy in terms of physical versus and the investments, I think I got missed. So just wanted an update on that.

Sundeep Sikka — Executive Director & Chief Executive Officer

So, Virar, I think broadly at this point of time we have, because we are present in 270 locations and broadly they will not be a lot more expansion, new branch expansion. And even if we do, it would be very minor. So there you cannot. I think there will not be any major investment into that. But we will continue investing in the digital space. We have already on that. So I think that strategy the investing in digital continues. But physical branches after 270 branches, I think we feel that, I think at this point of time we are ready, maybe few could be added. But it will not be any significant number.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

And what kind of investments we’re making in the digital, just I need to get a perspective.

Sundeep Sikka — Executive Director & Chief Executive Officer

I think we’ll not be able to give a specific number on the investments in digital. But I think if the only investment that we are doing for at this point of time, I think on of the substantial happening in the digital space. I think because I think investing both in the ecosystem, creating a lot of our proprietary stuff, trying to also –we have hired two data scientists to work on a few things. So a lot of things happened, very difficult to put a — we’ll not be able to give an exact number. But I think it’s clearly, this remains a very important focus area for us.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

What I was trying to get at is, is there’s a lot of investment capital led or so we may be in that.

Sundeep Sikka — Executive Director & Chief Executive Officer

I don’t think its from a capital point of view at this point of view. I think it will not make a meaningful impact in the profitability in the years to come.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Just one last suggestion. Some of the ESOP plans that we have, we have an exercise price of somewhere around 370, 390. The current price is 330 odd and some days it’s actually even more. Why don’t we just explore. I mean, possibly we can look at buying shares from the market and waiting the ESOP obligation, just a suggestion, It’s something we can thing on that.

Operator

Ladies and gentlemen, please stay connected, the line for the management got disconnected. Participants please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Hello.

Sundeep Sikka — Executive Director & Chief Executive Officer

Viraj, yeah, Viraj, please go ahead.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Yeah, was my question. I mean, I’m not sure whether you were able to here.

Sundeep Sikka — Executive Director & Chief Executive Officer

I think we lost you after the word ESOPs, after that we lost you.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Basically, some of the ESOP plans they have exercised price of around 370, 390 and the current price is around 330 and in some of the days it’s actually even lower. So since we’re kind of sitting on a sizable surplus cash, we can use some of that to kind of buy from the market and probably meet that ESOP that ease of obligation which we would have. So just a suggestion, something we can explore in that sense.

Sundeep Sikka — Executive Director & Chief Executive Officer

So, no, we’ve. Viraj, we’ve taken your suggestions and our Board will appropriately take this matter up because this is more to do with the capital markets and shareholding. I think it is the prerogative of the Board as well as shareholders. So we’ll take your recommendations and we’ll put it across the board.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Sure. And the ESOP, is the bulk of it now done? I mean, should we expect that to kind of trend moderate going forward or how should one look at?

Sundeep Sikka — Executive Director & Chief Executive Officer

So obviously largely if you see, most of this has been accounted because the last was given in 2019. And I think that has been accounted. So obviously, there will be more new ESOPs grant will be given in in terms of which will be investing in the next four years. But this will not be as significant as what we have given originally.

Viraj Kacharia — Securities Investment Management Private Limited — Analyst

Okay, thank you, and good luck.

Sundeep Sikka — Executive Director & Chief Executive Officer

Thank you.

Operator

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

Kunal Thanvi — Banyan Tree Advisors — Analyst

Thank you, and congratulations on good set of numbers. So I had probably two questions. One was on SIP market share. You did mention about that we have started seeing inflows, but still our SIP market share continues to trend down. Any thoughts on that? And secondly, while you didn’t talk about the falling yield up equity would be taken care by the operating leverage that we would see in the business. Whereas if you look at it on an overall basis, the recent launches and the upcoming launches would be on the passive side of the business, right? So if one were to look at the overall yield on the three to five-year perspective, how do I look at it? Like, because of course passive will have a lower realization revenue realization, so how, how the overall realizations would look in next three to five years on a structural basis because at one side we will see equity is coming down and then the second side we will see the share of passives going up, which again are lower yielding. These are two questions that I have.

Sundeep Sikka — Executive Director & Chief Executive Officer

I’ll request Saugata Chatterjee to take the first question and after that Prateek will come back to the second question, please. Saugata?

Saugata Chatterjee — Co-Chief Business Officer

Yeah, Hi, Kunal, thanks. Yeah, with regard to SIPs, as you mentioned, if you see the trend line this year, quarter-on-quarter our SIP market share both from a SIP accretion point of view, which is the actual SIP numbers coming and the SIP input value both have been, have been seen an increasing trend. And as we speak, we also are tracking the market share, how much of market share growth we are getting in that space. Going forward I think the way our trend line has been reflecting in the last two to three quarters, it clearly shows that the market share growth now on the SIP side also will start happening because both are correlated, the equity gross sales, net sales growth and the SIP market share they’re all correlated.

And like SUndeep mentioned earlier, the trend line clearly shows that going forward with increasing SIPs — SIP flows coming in into our — into our funds, the retention improving, the net SIP market share also will start growing. So the trend line is really positive. And hence we are optimistic about the flows going forward [Speech Overlap]

Kunal Thanvi — Banyan Tree Advisors — Analyst

Yeah, yeah, I got it.

Prateek Jain — Chief Financial Officer

Yeah, so in terms of the yield, what we have to factor in from your business model perspective, obviously due to this composition of ETFs or passive rise in share, obviously the overall yields will be under pressure. But I think we do see it that way. What we do is we segment that. We see active versus passive differently and in active also equity, fixed income and other areas separately. So obviously what we need to do is we need to keep working on each of these segments and ensure that our yields remain, or from the yield perspective we continue to grow, sorry, so we continue to grow on the absolute basis. And so if you see that in the last two, three years also we have seen a compression of 2 to 3 basis point on the yields. But I think broadly that is getting off-seted because of the growth. So that I think will continue from a — from the passive perspective, I think what one has to see that this is a new set of AUM which is coming in and the recent growth is a classic example that assets have started growing much faster. And I think the asset growth will take care of the absolute profitability. I’m not saying on the realization piece. So going forward, you’ll continue to see asset growth is faster than the revenue growth. So that that is likely to happen.

Kunal Thanvi — Banyan Tree Advisors — Analyst

Sure. I got it, thanks. And one last question if I can squeeze in is on the overall competitive situation in the market, like since we have seen some softness in the NFO on the active side and they were like of course two problems. One, the newer assets were coming at a lower yield, but again there was a lot of distribution commissions that were being paid out across the industry because of the NFO season. With that softening, are we seeing any normalization in the [Technical Issues]

Sundeep Sikka — Executive Director & Chief Executive Officer

Kunal, as I’ve mentioned earlier in our opening comments, I think every company will have a different strategy. I think our focus remains on profitable growth and we will not be acquiring business which is not profitable for us.

Kunal Thanvi — Banyan Tree Advisors — Analyst

Sure. Got it. All the very best, Sundeep. Thanks a lot.

Operator

Thank you. The next question is from the line of Jignesh Shial from InCred Capital. Please go ahead.

Jignesh Shial — InCred Capital — Analyst

Yeah, thanks, for the opportunity. Just wanted to reconfirm, did you see that in case if the yield softens further from here on we’ll be able to manage expenses and accordingly revenue to profit would be somewhere around 50%. Is that my understanding correct? Has that been the statement?

Sundeep Sikka — Executive Director & Chief Executive Officer

Yeah, so in terms of the operating revenue, net operating revenue to the revenue is about 50%. So that is what I have mentioned. And so, if you see the, if assets keep growing and there is no incremental cost. So whatever we are running, let’s say even if earn — on an incremental asset if I earn 25 basis point and there is no incremental cost and the operating revenue goes up by that much. So that, so we have that much of flexibility at this point of time given that asset growth will be more or less in line with the inflation and thereabouts. While asset growth would continue to be in excess of 20% to 25%. So even if you see the last decade, the industry has grown in excess of 20% CAGR despite the volatility in terms of COVID or if you see the geopolitical situation. Except for the one quarter, there was no decline in the industry, which speaks volume and also the SIP input value, which declined a bit in the first, but again it has come back. So from 8,600 crores of total SIP book, which was in January, now it is close to about 12,300 odd crores. So I think both these things shows that industry is on a secular trend. And given the fact we’re so under-penetrated, just about 18% of GDP, we have a long way to go. And if the asset growth remain at this pace and our cost remains the more or less, cost increment remain more or less, then I think we will be able to manage these ratios.

Jignesh Shial — InCred Capital — Analyst

Understood. So basically operating leverage is going to play out a good role in that.

Sundeep Sikka — Executive Director & Chief Executive Officer

Absolutely.

Jignesh Shial — InCred Capital — Analyst

Understood, understood. Second, also from the debt and liquid fund is is my understanding correct. I guess one of them said that the cockpit would come up for managing money and also. Is our understanding correct that liquid will still see a flow would that, at least the near-term till the time we don’t see a clarity or this interest rate rising gets settled out, we will see a momentum in liquid more compared to that. Is that understanding correct?

Prateek Jain — Chief Financial Officer

Yeah, hi. So to some extent you’re right. So in the near term. So we are still in the first quarter, first month of the first quarter or quarter of this FY. So, but on the same time I would like to mention that a large part of the action that is anticipated by the Central Bank has already been built in into the yields, both in India and overseas, okay. So going forward whatever action that does happen, okay, you would see a knee-jerk reaction. But from here on, at least the shorter for the next one quarter, one or two quarters you will see some inflows in liquid plus ultra-short-term funds. But thereafter I think as things start paying out, the trends might change. [Speech Overlap] on the first two quarters.

Jignesh Shial — InCred Capital — Analyst

And before I ask [Indecipherable] I just want one number was, can I get the gold ETF number, if possible gold ETF AUM. Last time I think it was somewhere around INR6.5000 [Phonetic] crores.

Prateek Jain — Chief Financial Officer

Something 6,700, 6,800 [Phonetic] I don’t remember that. It is about, that number will be, let’s just above 7,000.

Jignesh Shial — InCred Capital — Analyst

Now, Mr. Sikka, to you this, to more just strategic kind of a question that I had. One, obviously we have analyzed them. I’m glad to see that a couple of our schemes are really coming — coming up pretty well. And then that is somewhere, we are also building in that we should see active equity, should — should see a rise. Apart from this, anything specific you want do especially because of the marketing or on the sales side, how we are not tackling it up as far as active AUM share — active equity share is concerned. That is what if you want to highlight something more on it. And number two, how do you see consolidation happening on the AUM industry in general. I mean, we are definitely getting into the segment where our people in spite of a — despite having a lot of uncertainty over COVID people kept on investing in AUM, I mean mutual, that’s a very brighter kind of note that we are having it for this year. So how do you see overall period of mix, into next three years kind of view if you have it that do you see more consolidate mapping, large players dominating more or branded guys are able to dominate more. Just a couple of lines from your side would be really helpful.

Sundeep Sikka — Executive Director & Chief Executive Officer

So, I mean, you asked too many questions. I don’t know how I’ll be able to answer in this call, but I think I’ll try to do justice in the next 2, 3 minutes trying to giving some. So Jignesh, I think from our perspective, I think broadly, I think we have always mentioned this industry is a very simple industry, the keys to the success is execution I think. And for us, I think we’re going to continue executing. The most important part of the strategy is what to do and also what not to do. So, I think from our perspective, I think one thing we have decided is that a thing for us retail remains a very, very important part because it is not very easy to execute, and we’ve been able to get that secret sauce right.

The fact that within the year also 70 lakh new investors getting added, I think which is the thing if you look at the data is equal to what has been added as more than investor base of any mutual funds in India, which have been there for more than two decades. So, and I think we also clearly, an investor which comes once I think he will only keep topping it up as the, in India the per capita income goes up, other, other revenues to invest to be producing, the money into capital markets and mutual funds will keep going up and increasing.

To your other point, I think what has happened in the last two, three years during COVID we saw a lot of investors coming to capital market and also to the mutual fund industry. For us, I think we see both complement each other. Anybody coming into the capital market I think in one form or the other, I think this money eventually will also come into mutual funds because in two ways work from home. After work from home is over, everyone has to go back to the day job. And has to also the trading will go away and people will have to invest for long-term. And I think we clearly see, I think investors coming into once you have been exposed to capital markets, you’ll come into mutual funds.

And finally, I think when we look at our own data, I think we have seen there is a conversion, the cross-pollination of — we see ETF investors also move into active and active move into ETF. So from our perspective, we are very strong on both the sides. So I think I am very excited about the next three years. So I think as far as the strategy you asked, I think the strategy remains exactly the same to execute I think, and execution is going to be the key.

To your final question on consolidation. I think I clearly see, I think in India can have many more asset management companies. I think at this point of time also, the percentage and if we were to see, the unique investors is less than 3%, 4% of the population. But I think it is going to be, the winners are going to be the one who can execute and execute in smaller cities and towns, that will hold the key.

Jignesh Shial — InCred Capital — Analyst

Really, really thankful. That’s really helpful. And thank you, thank you, and all the best. Thanks, thanks a lot.

Sundeep Sikka — Executive Director & Chief Executive Officer

Thank you, Jignesh.

Operator

Thank you. And the next question is from the line of Ronak Chheda from Awriga Capita. Please go ahead.

Ronak Chheda — Awriga Capita — Analyst

Yeah, just one question, sir. If I heard you correctly, did you say that the transition of the AUM to TRAI fee has been 50%. Is that what I picked up when you were answering to an earlier participant?

Sundeep Sikka — Executive Director & Chief Executive Officer

No, no, no. So I’m saying that, look, it is not transition because see, we have also, if you see our overall assets have grown. So if you look at it, as of March we were like close to about, March end, INR62,000 crores, today we are about INR1,15,000 odd crore. So if you see what I’m saying is that look from that perspective there has been substantial market increase as well. So if I capture that number and see that, look there has been an addition to the investments, and of course there has been outflow happening also. So predominantly I think at this point of time the SIP led AUM itself would be about, its the old asset would be about 50% odd of the total assets, total liquidity asset I’m saying.

Ronak Chheda — Awriga Capita — Analyst

Got it. So just to get a sense qualitatively or as well. So our, of the total AUM, what percentage or what share would be based on trail fee and what would be, what would be that number, not a specific one, just a ballpark.

Sundeep Sikka — Executive Director & Chief Executive Officer

See today, 100% of the assets on trail because often trail is not allowed at all. So 100% of the asset is on the trail model now.

Ronak Chheda — Awriga Capita — Analyst

Our stock AUM index.

Sundeep Sikka — Executive Director & Chief Executive Officer

Sorry, Yes, yes. Yes.

Ronak Chheda — Awriga Capita — Analyst

Okay, okay. Thank you.

Sundeep Sikka — Executive Director & Chief Executive Officer

But those trails as of what they were driven at that point of time, so the trail has not been increased. The past trails remains the one what we have been committed at that point of time.

Ronak Chheda — Awriga Capita — Analyst

I’m asking more from the new trail fee which in 2018 that transition happened.

Sundeep Sikka — Executive Director & Chief Executive Officer

After 2018 is only trail. The assets which were acquired earlier to 2018, they continue to get the trail whatever was committed in those years. [Speech Overlap] those are on zero trail now.

Ronak Chheda — Awriga Capita — Analyst

So my question is, of the AUM as on March 31, what would be the percentage of AUM which was on that earlier trail [Speech Overlap]

Sundeep Sikka — Executive Director & Chief Executive Officer

We not disclose that data.

Ronak Chheda — Awriga Capita — Analyst

So qualitatively also that would be helpful. I understand that cannot be 100%, but any qualitatively, is it more than 50, less than 50.

Sundeep Sikka — Executive Director & Chief Executive Officer

No, we do not comment on that data, but we have taken your suggestion. We’ll evaluate. Going forward if any additional disclosures is required to this fact.

Ronak Chheda — Awriga Capita — Analyst

Okay, thank you so much.

Operator

Thank you. The next question is from the line of Siji Philip from Mirae Asset. Please go ahead.

Siji Philip — Mirae Asset — Analyst

Yeah, good evening, sir. Congrats on a good set of numbers, So most of my questions have been answered. Just one question. So the company’s passive fund strategy has been playing out quite well. So any proportional limit in mind for the passive fund as a percentage of the overall AUM.

Sundeep Sikka — Executive Director & Chief Executive Officer

So I think from our perspective we see it in isolation. I think these are different business lines. I think the investors will listen, we have not listed that what percentage can be passive and active. I think we clearly believe both the — both active and passive are taking care of different needs of investors and have opportunity to grow multiple X from here.

Siji Philip — Mirae Asset — Analyst

Okay. Thank you, sir.

Operator

Thank you. Next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Yeah, hi, thanks for the percentage again. Just a couple of questions on the cost trends. So if I look at your other expenses, that is like at the lowest level for past many quarters. So is there, are there any one-offs or just kind of run rate can sustain. Secondly on the fees and commission expenses, those are at significantly higher levels, any one-offs there?

Sundeep Sikka — Executive Director & Chief Executive Officer

Sorry, fee and commission.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Yeah fee and commission expenses are at INR16 crores versus our run rate for the rest of the year at around INR12 crores per quarter, at INR16 crores in this quarter. Any one-offs there or and on the other expenses side that we are at a significant lower level. This trend can — this run rate can continue?

Sundeep Sikka — Executive Director & Chief Executive Officer

Yeah, so this is just for, on the PMS and AF side, there is as and when we pay some expenses related to the acquisition of assets, those get accounted in here, whereas for the all the mutual fund expenses it is completely on trail model. So no expenses are accounted in this line item.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay, got that. And under the other expenses if I look, we’ve been continuously seeing a sustained decline in December and there are INR40 crores our run rate for this quarter. So is this run rate sustainable?

Sundeep Sikka — Executive Director & Chief Executive Officer

No, no. So obviously I’ve been mentioning it for the last two or three quarters now that look going forward we’ll will try to reduce our expenses as much as possible, but given they had headroom available now is very, very limited. Also given the inflation around, I think expenses from here are likely to increase, but what we’ll do is we’ll keep looking at opportunities in terms of automation, in terms of outsourcing, wherever possible we’ll try to bring our cost of operations down. But any kind of further decrease, a significant decrease from here, is not and we saw that this moment.

Prayesh Jain — Motilal Oswal Financial Service — Analyst

Okay, thank you so much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Robin Porwal [Phonetic] from ICICI Securities, please go ahead.

Robin Porwal — ICICI Securities — Analyst

Hi, sir. Thanks for the opportunity. I just wanted to confirm one thing that the drop in yields in Q4 was purely because of managing that year and the Q1 of next year we are seeing better investment yields.

Sundeep Sikka — Executive Director & Chief Executive Officer

Revenue, okay. So the revenue decline because of the two days. So because of the lesser [Indecipherable] TR changes to comply with the statutory regulations where all the expenses of the scheme has to be borne by the scheme itself and therefore what we do for the entire year. We keep reviewing it because you know whatever expense we are incurring. So there will be cases where there will be some, but there’ll be increase. So cases where we have a buffer will take up the additional management fees and cases where we have a deficit, we have to decline or reduce our management fees.

Robin Porwal — ICICI Securities — Analyst

Got it. Sir, in ’23 in the month of April, are we seeing some reversals on this number?

Sundeep Sikka — Executive Director & Chief Executive Officer

That’s right. If you go and see the terms our disclosure you will see that those have been restated back. Further also I think someone has asked this question in the month of October itself that there has been some changes like that so for certain schemes. And if you go and have a look at it, because all of those communications are there in the public domain. If we look at it, they were restated back.

Robin Porwal — ICICI Securities — Analyst

Got it, thanks, Sir.

Operator

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

Akshay Jain —

Hello. Yeah, thank you everyone for joining this call today, and thank you to the team Nippon Life India Asset Management for giving us this opportunity to host the call. Thank you and good day.

Sundeep Sikka — Executive Director & Chief Executive Officer

Thank you, everyone. Thanks for joining.

Operator

[Operator Closing Remarks]