Nippon Life India Asset Management Ltd (NAM-INDIA) Q4 FY23 Earnings Concall Transcript

Nippon Life India Asset Management Ltd (NSE:NAM-INDIA) Q4 FY23 Earnings Concall dated Apr. 26, 2023.

Corporate Participants:

Sundeep Sikka — Executive Director and Chief Executive Officer

Prateek Jain — Chief Financial Officer

Aashwin Dugal — Co-Chief Business Officer

Analysts:

Swarnabha Mukherjee — Batlivala & Karani Securities India Private Ltd — Analyst

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Lalit Deo — Equirus Securities — Analyst

Sahej Mittal — HDFC Securities — Analyst

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

Abhijeet Sakhare — Kotak Securities — Analyst

Bhavya Sanghvi — Fortress Group — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Aniket — BMSPL — Analyst

Nilesh Jethani — BOI AXA Investments Managers Private Limited — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Nippon Life India Asset Management Q4 FY ’23 Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Swarnabha Mukherjee from Batlivala & Karani Securities India Private Limited. Thank you. And over to you, sir.

Swarnabha Mukherjee — Batlivala & Karani Securities India Private Ltd — Analyst

Thank you, Vicko. Good morning, everyone.

On behalf of Batlivala & Karani Securities, I welcome you all to Nippon Life India Asset Management Limited Q4 FY ’23 Earnings Conference Call.

We have along with us Mr. Sundeep Sikka, Executive Director 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. Good morning, and welcome to our Q4 FY ’23 Earnings Conference Call.

We have with us our CFO, Prateek Jain; Co-Business Officer, Saugata Chatterjee; Co-Business Officer, Aashwin Dugal; Chief Digital Officer, Arpan Saha; Head of Product Management and Investor Relations; Arun Sundaresan; and Matsui San, Nominee of Nippon Life Japan. Our detailed presentation and press release have been uploaded on the exchanges as well on our website.

I would like to break my comments into three parts. One, industry overview; two, our performance; and three, way forward. Since this is only the financial year end, most of the commentary would be for the whole year. For the fiscal year, equity markets were volatile and ended the year almost flat, S&P BSE SENSEX returning 0.7%. Small cap returned negative 7%. There was an increase of 250 basis points, where we saw the repo rate y the 10 [Phonetic] G-Sec. It went up by 50 basis points. Despite the mixed overall outlook in the beginning of the year, the subsequent lapsed [Phonetic] market returned, the asset management industry maintained its growth momentum, driven by increase in financialization, higher awareness and improved access to mutual fund products across the length and breadth of the country.

The industry AUM grew by 5.5% in the year, and is currently at INR40.51 lakh crores, a historic high. The equity category, including index and excluding arbitrage funds witnessed a gross inflow of INR5.72 lakh crores and net inflow of INR2.52 lakh crores. Investor interest for investing through systematic investment plans was very high, with the SIP contribution for the year being at INR1.56 lakh crores, 25% higher than last year. The monthly sales touched the all-time high of the INR14,276 [Phonetic] crores per month, while the SIP folios were at INR63 million — INR63.6 million, risen by 20%. Debt funds, on the other hand, witnessed an outflow of nearly INR1.5 lakh crores on the back of rising interest rates. ETF flows were healthy at nearly INR60,000 crores of net flows during the year.

The consistent expansion of investor base and growth in the AUM, driven by SIP and ETF flows indicate investors’ interest in the industry’s superior capability to fulfill them, vis-a-vis, other financial products. Growing financial awareness, differentiated and transparent product suite and innovative digital strategies are expected to be the key driver for industry growth in future as well.

At Nippon India Mutual Fund, our priority is to be future-ready and capture this long-term opportunity. As on March 31, 2023, NAM India assets under management were INR3,62,981 crores, that is $42.2 billion. This includes mutual funds, managed accounts and offshore funds. For the quarter ending March 31, 2023, our mutual funds quarterly average assets were at INR2,93,159 crores. This is a flat Q1 quarter-on-quarter, an increase of 3.5% year-on-year.

In the previous meetings, I emphasized on our equity market share. I’m happy to share with you our equity market share, excluding ETF, has been stable for the last three quarters and is currently at 6.19%. Share of equity assets rose to 44% of our total assets compared to 42% last year. We added 9.6 lakh folios in this segment, with our strong ongoing presence and healthy sales management performance, we hope to increase our equity market share in coming days. At Nippon India Mutual Fund, our core remains on investors’ interest.

We added 2.6 million folios in the year and continue to have the largest base in the mutual funds industry at 13.5 billion investors. We have one of the largest retail assets in the industry at INR85,361 crores. The retail assets contribute 29% of Nippon India’s AUM compared to industry average of 25%. Our B30 AUM is at INR55,680 crores, which has increased by 16.4% year-on-year. This segment forms 19% of the Nippon India Mutual Fund’s AUM compared to industry average of 17%.

In individual AUM, that is a mix of retail and HNI is at INR1,62,000 crores, an increase of 17% year-on-year. This segment contributes 56% of the Nippon India Mutual Fund AUM. One of the areas of improvement, as I’ve highlighted in the previous call, has been our market share in HNI category. I’m happy to inform you that our HNI AUM increased from INR77,289 crores, up by INR15,500 crores, which is 25% up year-on-year and our market share increased by 66 basis points.

Systematic flows are a stable and a key driver for industry’s long-term equity flows. I’m happy to share that over the last few quarters, Nippon India Mutual Fund has seen strong growth in systematic investment flows, and this has led to a sequential increase in folios and value market share. Our systematic book rose by 52% year-on-year to INR1,115 crores. This result — this increased reserves in the annualized systematic book of INR13,380 crores. 60% of our SIP AUM has continued for over five years compared to 24% for the industry. Also in volatile markets, folios with lower ticket size have demonstrated longer vintage and better stickiness. 15% of our SIP folios have continued for more than five years against an industry average of 11%.

At Nippon India Mutual Fund, we offer best suite of products in the passive category. With strong growth in industry passive, our ETF ecosystem is already in place and far ahead of its peers in terms of investor base and mind share. We continue to be the largest ETF player with an AUM of INR70,000 crores with a market share of 13.74%. Gold ETF is the biggest fund in the category, and within this period, even Silver Fund, we are the largest in the industry.

Our share in industry ETF folios is 61%. We have 70% share of ETF volume on both NSE and BSE. Our ETFs daily volumes across key funds remain far higher than the rest of the industry. Under Nippon India AIF, we offer category 2 and category 3 alternate investment funds and have a commitment of INR5,615 crores across various schemes. Our digital-centric strategy is one of the keystones for sustainable growth and profitability. Amongst various digital initiatives such as cart buying, which we took to enhance our partners and investors experience, we have rolled out Nippon India Mutual fund WhatsApp Channel, a real-time comprehensive transaction and service suite for our investors.

Business Easy 2.0 app is aimed in driving more meaningful engagement, retention and growth through advisory, detailed analytics and smart insights. Digital purchase transactions rose to INR33 lakhs, up from INR30 lakhs last year. Digital channels contribute 57% of our new purchase transactions. While I talked about digital infrastructure at Nippon India Mutual Fund, we have a well-diversified physical distribution base, a wide presence through 270 locations across the country. We have 91,000 distributors empaneled with us. The MFD base rose to over 9,800, with an addition of 6,700 distributors during the year.

Now on the financial performance. For the quarter ended March 31, 2023, profit after tax is INR1.98 billion, an increase of 13% year-on-year. The operating profit is at INR1.99 billion, which is flat year-on-year. In the past, the company has followed a consistent dividend policy. And we are following the last dividend payout, which was 96% of PAT ratio. And this year, the ratio has gone to 100% of PAT for the current financial year.

Over the last nine financial years, NAM India has distributed a cumulative dividend of INR41 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 and complement our existing businesses and ultimately, in the interest of the minority shareholders. As a signatory to UN-PRI, we are integrating ESG aspects to the various areas of planning, operations, fund management and risk governance. Our goal is to encourage higher adoption of ESG principles within the asset management industry. As a responsible investment manager, we are building a resilient portfolio that will not only provide sustainable return to our investors, but will also have a positive environmental and social impact. We will also see a relevant disclosures on ESG matters from our investee companies.

To sum up, I would like to reiterate at Nippon India, investor centricity remains a key theme. We strive to deliver superior experience and sustainable results to our investors and in the process, add value to our stakeholders. Our endeavor is to provide sustained profitable growth in the coming quarters. We do hope that the interest rates scenario globally and domestically will be closer to peaking out, if not already peaked out. This may be a positive scenario for capital market investments, both equity and fixed income asset classes and will encourage further reach of our investments.

With these comments, we are happy to take your questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] Our first question is from the line of Mohit Surana from CLSA. Please go ahead.

Mohit Surana — CLSA — Analyst

Yeah. Hi. Good morning, sir. Sir, one question from my side. When we look at your equity scheme performance, Nippon Mutual Fund has done quite well across top categories. But we have not seen that being reflected in market share. As you said, market share remains flattish. So any thoughts on when the improved scheme performance starts to show up in higher market share?

Sundeep Sikka — Executive Director and Chief Executive Officer

Thanks, Mohit. I think the way I would like to see it, typically, good performance. I think there’s always going to be a lag in performance, I mean the inflows. From our perspective, I’d like to give you two data points, I think, which will help you to understand. I think, first, I think because we are — our focus is highly on retail. I think our systematic flows have already increased 50% during the year and from almost INR650 crores has gone, stretching about INR1,100 crores on a monthly basis.

So, all this will have a lag effect, I think, for the incremental net inflows into the company. And also, while I think the — if you were to look at it, while throughout the year it was — the market share was flat. But the last one or two quarters, the net sales numbers are higher than the market share. So both these indicate, I think, in the coming quarters, I think slowing and steadily, the market share will keep increasing.

Mohit Surana — CLSA — Analyst

Got it. Thank you, sir.

Operator

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

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Yeah. Hi. Good evening. Sorry, good morning, everyone. Firstly, on the yields front, the sequential decline is just because of product mix, or is there anything else that you would like to highlight out there?

Sundeep Sikka — Executive Director and Chief Executive Officer

Prayesh, I will request Prateek to take that question, please.

Prateek Jain — Chief Financial Officer

So Prayesh, in terms of the sequential quarters, I think the yields are more or less flat. But in terms of the overall, if you look at the full year, it has moved down from 44 basis points to 42 basis points on the math side, which is typically, we have been mentioning that it is because of the three factors, which we have said in the past, about the replacement of old asset by new assets. The cost of acquisition of the newer assets is higher as compared to the older assets. And third is the increase in sizes. However, the pace of this decline, which used to be higher earlier has come down for two reasons.

One, of course, we are seeing lesser churn now, given we believe the performance — our equity performance has been good, and also the bulk of the replacement has already happened. The other thing is that we have also seen the competitiveness or the payout ratios to the distributors has now moderated what used to be in the last years with the slew of NFOs, etc. That has also moderated. And therefore, we have been able to contain this decline and that is where we see ourselves continuing. That’s all for my side.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay. Sir, from a — like in the past, I think we have kind of alluded to the churn as — churn impacting the equity is the 1 or 2 basis point on an annual basis. Do you think that is still there? Or we should assume that, that has kind of gone away and now it should be, say, much lesser, and it should be more of an impact of the increase in AUM size rather than anything else?

Prateek Jain — Chief Financial Officer

No. So as we said, again, Prayesh, that there will be a marginal decline, which keep happening. However, if you look at the debt yields, that will see some kind of an uplift because the net return to the investors have gone up from what was about 4.5% overall returns on the shorter duration funds to about 6.5% this year. Obviously, there is a flexibility for us to charge marginally higher. And therefore, you will see the yield improvement on the fixed income side.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay. Got that. And just continuing on the debt part, what you mentioned, so how do you read the impact of the taxation that was levied by the Government of India? Do you see that there is an opportunity in a certain hybrid category where the equity portion could be between 35% to 65%? And how do you see the overall debt kind of flows moving in terms of the near term?

Prateek Jain — Chief Financial Officer

So, what I’ll do is I’ll ask my colleague, Aashwin to answer that. But from a tax perspective, if you just ask me, the mutual funds still remain a superior product than any other product in the market because of the flexibility, by which one could redeem and get their money back. And at the same time, it provides a higher return to the investor and the taxation is also at the end when the person is kind of redeeming it. Therefore, during the holding period, there is no taxation involved. So, there are few things which from a tax arbitrage perspective, there still remains.

And I’ll ask Aashwin to talk about how he sees flows from the investors.

Aashwin Dugal — Co-Chief Business Officer

Hi, Prayesh. This is Aashwin here. Thanks, Prateek. So largely, the shorter end of the curve, which is up to one year essentially, in our view, will remain unaffected, okay, from flows. It is the value of the curve and beyond, which is your three years, four years and beyond where we were seeing bulk of investments coming in from savers, okay. There, I think we’ll be competing with some of the other savings products. However, I think, taking a queue from what Prateek mentioned, there are two very essential features of debt mutual funds. One is diversification.

So, with a very small ticket today, okay, the essential benefit of exposure into multiple debt instruments that can be derived from investment in a mutual fund scheme, that continues to be a big benefit to investors. Number two, tax deferment, which Prateek mentioned, I think that is one unique benefit that only mutual funds provide. And that, over a long investment period for a retail or an individual investor can be very meaningful.

So, I think some of these benefits will continue to be inherent to mutual funds. Any which ways the population of investors who were getting tax benefits, okay, was smaller, okay. And I believe that once AMCs now focus on explaining these benefits of diversification and more importantly, tax deferment, I think over the next — in the medium term, I think we should continue to see large flows. So very, very confident of debt funds getting now longer-term AUM than what they have got in the last three years.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

That is helpful. Just a question on the financials here. The employee cost is down sequentially and Y-o-Y basis both. What is this related to? And can you break down the full-year expense in terms of ESOP and non-ESOP expenses and what is the outlook for, say, in FY ’24?

Prateek Jain — Chief Financial Officer

So, see, from our perspective, we have not given any ESOP for the last two and a half years and bulk of that has been accounted for — because in terms of ESOP accounting, the cost is front-loaded. As far as the decline is concerned, both sequentially, it is because of the — our expectation in terms of growth and profit. So, we have been continuing, maintaining certain provisions for the PLI and that has somewhat moderated from what our expectation and therefore, the numbers are slightly lower.

Sundeep Sikka — Executive Director and Chief Executive Officer

I think and also — I think I would like to highlight, as a company, we continue working on operational efficiency. There’s a lot of digitalization that is happening at the backend. So, we’re really seeing advantage of that also playing out.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay. Got it. And just last question. Any reason for the other income fall in this quarter because the yield had — is there a yield impact or how — what should we think [Speech Overlap]?

Prateek Jain — Chief Financial Officer

Yeah. This was purely the mark-to-market. We carry almost INR2,200 crores of our net worth into our fixed income schemes. And this was predominantly the mark-to-market on these schemes as on date.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Got that. Thank you so much, and all the best.

Prateek Jain — Chief Financial Officer

Thank you.

Operator

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

Lalit Deo — Equirus Securities — Analyst

Yeah. Hi, sir. Good morning, everyone. So, just two questions. So firstly, sir, like we have seen strong additions in our passive fund folios. Sir, like how incrementally are we doing — are we looking to do something in terms of cross-sell to these existing investors to like where they can subscribe to our equity schemes also and then we can see some — probably some increase in market share also?

Sundeep Sikka — Executive Director and Chief Executive Officer

So, Lalit, I think you’re right. I think our focus has been, I think, to acquire newer investors. We strongly believe, I think this long-term success of the industry of any company will be, I think if you’re able to increase your investor base. So, I think by design, we are adding more and more investors. And there is, I think, at the backend, there are a lot of initiatives are being taken using PI and various initiatives have been done to cross-sell and upsell different products.

Lalit Deo — Equirus Securities — Analyst

Sure, sir. And sir, secondly, the question was on the yield side. Sir, could you give us the segment wise yield like as on March 31, across like on a book basis?

Prateek Jain — Chief Financial Officer

So historically, we have not been sharing the yields on a product basis. But in terms of the — as in the past, maintained that the equity yields are in the range of close to about high-70s to early 80s. And on the debt side, it has been — because the most part of the debt has been on the ultra short-term category. So that has been around 23 basis points to 30 basis points, somewhere in that range. And on the liquid, it has been around close to about 15 basis points to 20 basis points. So, this is where the overall yields have been.

Lalit Deo — Equirus Securities — Analyst

Sure, sir. And sir, like last quarter, we highlighted that we have seen some increase in yields in our passive funds. So, like are those yields holding up? And do we see any other areas also to increase these into schemes?

Sundeep Sikka — Executive Director and Chief Executive Officer

So, Lalit, we keep evaluating wherever we can. I think whenever there’s a scope. I think it’s — you have to juggle between, I think, how you’re adding value to the investor. I think wherever we feel there is scope, we’ll do that, I think. So, I think it will be very difficult to give a long-term projection how we’ll go ahead. But whenever we see there’s an opportunity, we keep working on it.

Lalit Deo — Equirus Securities — Analyst

Sure, sir. And sir, just last data keeping question. Can you give us a like new SIP registration number during the quarter?

Sundeep Sikka — Executive Director and Chief Executive Officer

Can you please repeat that?

Lalit Deo — Equirus Securities — Analyst

New SIP registrations, which happened during the quarter.

Sundeep Sikka — Executive Director and Chief Executive Officer

Lalit, we published this data about total systematic investments, not only SIP because this is also structural in nature. So, for the month of March, it was INR1,115 crores and for the quarter, INR3,200 crores.

Lalit Deo — Equirus Securities — Analyst

Yes. But in terms of folios, if you can give it.

Sundeep Sikka — Executive Director and Chief Executive Officer

Folios for the entire year, we have added 26 lakh total folios. Out of that systematic investment plan is — yeah, so I think it will be — we are adding 1,20,000 approximately plus-minus a little here, there. I think Arun can share this data with you. But I think it would be — it is for the full year, about 12 lakhs to 14 lakhs kind of a number. But the exact number, I think I’ll have to get back to you.

Lalit Deo — Equirus Securities — Analyst

Okay. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Mr. Swarnabha Mukherjee with Batlivala & Karani Securities. Please go ahead.

Swarnabha Mukherjee — Batlivala & Karani Securities India Private Ltd — Analyst

Yeah. Thank you. So, my first question is on yields. So you’ve mentioned that yields are flattish sequentially, which is the case for the mutual fund business. But if I look at it on a consolidated basis, we do see some amount of compression there. So just wanted to understand anything which has played out on maybe the managed account side, which is offsetting [Phonetic] the mutual fund business, which has [Technical Issues] in this.

Prateek Jain — Chief Financial Officer

No, I think broadly from our perspective, outside the mutual fund business, there has not been much growth. I think we saw some of our existing funds, they had to close down because I think they got matured and new fund launches got a little delayed by the nature [Phonetic]. So, I think we already have set of new fund launches lined up. And I think — so in the coming one or two years, again, you’ll see that picking up.

Swarnabha Mukherjee — Batlivala & Karani Securities India Private Ltd — Analyst

Okay. Got it. In terms of this yield when we try to think about how it will play out over the next two years, three years, just wanted to understand how much of your old assets have already gotten churned into new assets? Or maybe if you can break up your current churn in the equity side, the asset mix between assets older than three years and relatively newer assets? If you can give a ballpark number to help us understand.

Prateek Jain — Chief Financial Officer

See, almost about close to about — we only have about 30% of the old assets now, which are in the old pricing. Rest all has been churned, already have churned. And so the more than three-year old assets would be about 30% of our total equity asset. And most of it, as Arun mentioned, is part of our SIP book, the continuing SIP book. So, we do not see much of a change happening at that end.

Swarnabha Mukherjee — Batlivala & Karani Securities India Private Ltd — Analyst

Okay. Sir, would it be fair to assume then that the realizations that we are making on the stock is now relatively closer to the flow levels right now in terms of yields?

Prateek Jain — Chief Financial Officer

So like, see, as I mentioned to you that, look, the flows also depend on which category we are seeing the inflows. And in certain categories, our propensity to charge is slightly higher as compared to some of the other product. It is — as we said, this is a function of competition, our performance, as well as the size of our scheme. So, as Sundeep mentioned, that we keep evaluating all the opportunities available in terms of transforming the growth, as well as at the same time, maximizing our revenue.

Swarnabha Mukherjee — Batlivala & Karani Securities India Private Ltd — Analyst

Sure, sure. And sir, last question, I wanted to ask on the gold ETF side. So, how has the flows been post this taxation norms are announced for non-equity mutual funds? And what impact do you see on this? Do you see an impact at all?

Sundeep Sikka — Executive Director and Chief Executive Officer

So broadly, I think the way we have to see this is, I think our gold continues, it has been the largest gold ETF in the country for about many years now. A lot of investors — different investors come for a short-term tactical view, some for long-term, there are different treasuries. So, I think we don’t — it’s too early to say what will be the impact. But I think majority of the investors, I think which I mean, who have been coming for short-term or less than three years, I think nothing changes for them. So overall, I think we clearly see both gold and silver been — gold and silver, I think more allocations coming into it. I think one more trend that we have seen is, I think, a lot of HNI’s family offices, I think they keep taking tactical calls on gold and their silver. And I think because of the volumes that we have, I think ours is one of the most preferred ETF.

Swarnabha Mukherjee — Batlivala & Karani Securities India Private Ltd — Analyst

Got it, sir. Thank you so much, sir.

Operator

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

Sahej Mittal — HDFC Securities — Analyst

Hi. Good morning, all, and thanks for the opportunity. Sir, one question, which is on the market share. Sir, what seems to be the likely reason for diverging trends in SIP flows versus your lump sum flows? So, on SIP side, we are consistently seeing improvement in market share, but on the lump sum flows, there seems to be huge outflows. So, what seems to be the likely reason?

Sundeep Sikka — Executive Director and Chief Executive Officer

So I think it’s very simple. I think, I’d say as a organization for us, I think we have always been very strong in retail. I think there was a period when our fund performance was not so strong. After the fund performance getting stronger, I think you have seen the SIP numbers, as you mentioned, have been strong. Last year, we added I think two — answer one of the earlier question, which had come, 19 lakh SIP during the year was the number, that is the number not [Phonetic] available with us. And that should definitely add value here on a monthly basis. If you are adding INR1,000 crores, so this is technically speaking, now the annualized SIP book is about INR13,000 crores incremental inflows that will come into the Company.

As far as the — again, go back, if you go to the last five, six calls, I think we have been saying that we have been relatively weak, we were weak on HNI. And now that is also increasing. I think we have seen a growth — our HNI market share go up by 66 basis points. There has been an overall increase in AUM of 25% compared to the industry AUM of 11%. So, I think that — it will be with a lag effect. I think nothing specific. I think once the basics, the core is in place, I think it’s all about execution. But I think overall, we feel I think the trend that you’ve seen in SIPs, which started a little earlier, you will start seeing in lump sums also and we remain positive with the next four to six quarters, you will see equity market share win also.

Sahej Mittal — HDFC Securities — Analyst

Got it. Got it. That’s all from my side. Thanks. Thanks and all the best.

Operator

Thank you. Our next question is from the line of Mr. Mohit from BOB Capital. Please go ahead.

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

Yeah. Thanks for the opportunity. Couple of questions. First, if I look at the SIP AUM, it has declined sequentially from INR583 billion to INR580 billion. So, what explains that?

Sundeep Sikka — Executive Director and Chief Executive Officer

I think it’s mark-to-market, nothing else. I think overall, the numbers — the monthly numbers have been increasing. I think it would be just that, nothing else. Both the number of count and the overall monthly registration number of new investor and monthly inflow, all have been increasing. As I mentioned earlier, it’s almost gone up by 50% in the last 12 months.

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

All right. Okay. Second is in terms of the dividend payout, sir. I think from the last few years, we have been given more than 90%. But I believe that it will moderate going further? Or do you intend to make it more than 90% consistently?

Sundeep Sikka — Executive Director and Chief Executive Officer

So this year, we have gone for 100% almost. I think as per our present dividend policy, anything between 60% to 100%. I think depending on how the Board evaluates going forward, I think decision will be taken. But broadly, the thought process is, I think — that I think we want to share the profits of the Company with the shareholders, the minority shareholders. We cannot give a futuristic thing, but as a dividend policy and going by the past trends, we’ll be similar to where we are today.

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

All right. And then my last question is in terms of the tax, if I look at the effective tax rate, it’s around 17% for the quarter, primarily because of the deferred tax credit. And even if I look over the entire year, we had a deferred tax credit. So, I mean, prudent to assume that we’ll take this deferred tax credit going forward or a 25% tax rate is something that you can assume for the future?

Prateek Jain — Chief Financial Officer

No. So, see, Mohit, we — on our fixed income investments, we get the long-term benefit. And as and when they turn-long term. So, what we do when we invest with them and whatever gain is there, we provide on the basis of short-term rates till the time they become long-term. So, the moment they become long-term, both on equity and fixed income, we have to do the assessment of our tax calculation once again. However, even if we don’t realize, we have to do this adjustment, and therefore, you see the changes in the deferred tax. So, a significant part of our investments during the year has become turned long-term. And on that, the tax liability has to be adjusted based on the long-term tax rate as compared to the short-term. And therefore, you see in the fourth quarter, there has been a marginal lower provision for the taxation. However, what we expect, which is — there is a part of our income, which comes from other income. So, we expect our effective tax rate to be somewhere around 22 to 23 basis — 23% as against 25%.

Mohit Mangal — BOB Capital Markets Ltd. — Analyst

All right. Perfect. Thanks and wish you all the best.

Prateek Jain — Chief Financial Officer

Thank you.

Sundeep Sikka — Executive Director and Chief Executive Officer

To your question on the SIP numbers have gone down, if you see the Slide number 29 of the presentation, actually, the SIP book has grown from INR45,000 crores to INR50,000 crores. So, maybe I think for further clarification, I think Arun will be in touch with you. But Slide number 29 gives you that data.

Operator

Thank you, sir. Our next question is from the line of Abhijeet Sakhare from Kotak. Please go ahead.

Abhijeet Sakhare — Kotak Securities — Analyst

Hi. Good morning. Is it possible to share [Technical Issues] your net flow market share for the last couple of years?

Prateek Jain — Chief Financial Officer

So Abhijeet, we do not disclose the net flow market share. However, if you see in the last few quarters, our decline is on the market share has more or less stabilized. And so, we are seeing some positive inflows in terms of — or our net sales are higher than our existing market share. And you will see in coming quarters, we will be able to improve the trajectory.

Abhijeet Sakhare — Kotak Securities — Analyst

Okay. So, the flow market share is higher than the current AUM market share in recent period?

Prateek Jain — Chief Financial Officer

That’s right. Yeah.

Abhijeet Sakhare — Kotak Securities — Analyst

Okay. The second one was a broad color. If you can share any color on type of investors and channels that are bringing those investors between, let’s say, the active equity versus the passive equity book that we have?

Sundeep Sikka — Executive Director and Chief Executive Officer

So, I think from the investor’s point of view, as we mentioned, I think majority of our investors are retail from the AUM point of view where the industry has an average of 40% institutional AUM. I think for us, I think the retail is a dominant one, which is retail individual plus and HNI, so that is one. So, majority of the investors which are coming are individual investors. Coming from across the country, I think we continue because of our digital infrastructure, we are having nine purchase transactions per minute. So, I think these are all — it’s a mix of digital-savvy investors, as well as investors coming from small cities and towns.

As far as the channel mix is concerned, I think we have not — the channel mix between active versus passive, if I was to say, in passive, we have seen many investors are coming direct — many or most investors are coming direct and many of these are also family offices. In active, a very high percentage still keep coming through IFAs and national distributors.

Abhijeet Sakhare — Kotak Securities — Analyst

Okay. Sorry, are you also seeing — on the passive side, are you also able to track if these new set of investors are first-time investors in mutual funds? Or this is probably their second, third product on the mutual fund side, which is becoming a passive product?

Sundeep Sikka — Executive Director and Chief Executive Officer

I think we will not be able to have that data, but our sense is, many of the investors who are coming into ETF industry, I think they are first-time investors. I mean, that’s again, like I said, I don’t want to put — because these are some of the new investors, which are coming there. The fact that we have 70% of the market share in ETFs. And I think one out of three investors in Indian mutual fund is still with us. So, the trend would be likely. The first quote of call for any new investor typically is Nippon, whether it’s ETF or this and then it graduates to the industry.

Abhijeet Sakhare — Kotak Securities — Analyst

Okay. Got it. Thanks a lot.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Bhavya Sanghvi with Fortress Group. Please go ahead.

Bhavya Sanghvi — Fortress Group — Analyst

Hello. Hi, sir. My question is on the non-mutual fund piece. So, I wanted to understand the business model, also get some flavor on the yields and the kind of margins that you make on managed AUM, which I think is reported at INR673 billion. And could you just give us an idea about the traction and the size of opportunity in this space? And how is it different from the mutual fund piece in terms of operating numbers? Thanks.

Sundeep Sikka — Executive Director and Chief Executive Officer

So I think, broadly, I think we have already discussed a lot about the mutual fund business, and I think we clearly believe — I think as far as the mutual fund business is concerned, it is the scale of infrastructure. And I think the execution capability that we have built up, I think we clearly believe we should grow in line or a little better than the industry going forward.

I think from the non-mutual fund business, yes, this financial year has not been very good for us. I think it’s a mix of multiple reasons. Like I said, some of our funds, which were there reached up and they were close-ended funds, I mean, they matured. Then after that, I think also we went slow on our real estate offerings and two, three new funds, which are getting launched got delayed. I think from our perspective, this opportunity is going to be divided in three parts. The domestic fundraising in the non-mutual fund, which is going to be both: A, real estate; B, is going to be long-short funds. B is going to be the international funds, I think which we are working closely with Nippon Life to see the opportunity to get the investors into India from Japan. We already have three funds, two bond funds in Japan, one equity fund in Japan, and two real estate funds in Japan. I think there is — and we are exploring how and what more we can do. There has been a little delay. And I should admit, I think this is something, this has been a little slow than what we thought, but there’s a lot of calls [Phonetic] that is happening. And in this upcoming quarters, you will see a lot of traction.

We are also, as we have been mentioning in the past, we continue exploring opportunities to — for inorganic opportunities. We also continue looking at acquiring skill sets that complement our existing businesses to start new product offers, which we do not have at this point in time. So, the next three, four years as a Company, there will be a high focus on AIFs, non-mutual fund business.

Bhavya Sanghvi — Fortress Group — Analyst

Sir, can you give us a sense on the yields that you would make on this kind of a business? Retentions on mutual fund business would be or just a proportion would be — would it be double of what you make on mutual funds and impact on the margins going ahead through this business?

Prateek Jain — Chief Financial Officer

So, see, we need to break this up into two parts. One is, there is a government business, which is the Postal Life business, which accounts for almost INR60,000 crore of assets, where we make — there is a very little margin of fees, I would say, that is a — because that is a government mandate. However, on the PMS AIF and the offshore businesses, which accounts for almost like the offshore business is close to about $1.8 billion. And the — on the AIF side, the commitment, which will be about $800-odd million. So there, I think what we make is on the AIF and PMS, our net retention is about close to about 100 basis point. And on the offshore piece, this would range about between from 33 basis point to 67 basis point, depending on whether we are sub-advising or where we are managing. And these are mostly institutional mandates what we are currently running. On the retail side, on the offshore side also, we have net realization, which is in excess of 100 basis point.

Bhavya Sanghvi — Fortress Group — Analyst

Okay. Sir, $1.8 billion was for offshore business?

Prateek Jain — Chief Financial Officer

Yeah.

Bhavya Sanghvi — Fortress Group — Analyst

Thanks. Okay. Thank you, sir. Got it.

Operator

Thank you. Our next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah. Sorry, sir, if this question is repetitive, but I just wanted to understand your directions on yields, especially in context of the last full year, whether for the industry as a whole as well, where we had multiple challenges on yield, whether with respect to mix or NFOs. So, any comment in terms of yield direction?

Prateek Jain — Chief Financial Officer

So frankly speaking, it will be difficult to tell about the industry. But as we have been maintaining that, look, we would like to continue to maintain the current levels going forward as well. So, wherein our net yields are in the range of about 40 basis point to 45 basis point. And there, we clearly see scope because in the past few years, we have seen a sharp decline in our fixed income yields because of the lower net carry to the investors. However, now the carry is higher. I think we’ll be able to — and as an industry, we’ll be able to improve our net realization on the fixed income side of it, and that will give us some kind of a fillip.

On the other side, equity, we’ll continue to see some marginal decline going forward, as well as because now this is linked to the size of the scheme, as well as the old assets getting churned out. So, I think broadly, our endeavor would be to maintain the current yields, which I think in the last year also, we had said that, look, the decline would be in the range of 2 basis point to 3 basis point. While we do not give any kind of projections for the future. But for the next coming years also, we would see that it would be in the similar range.

Pritesh Chheda — Lucky Investment Managers — Analyst

And my second question is, any comments on the competitive pressure on the NFO side, if any, in terms of easing or still remaining the same or…

Prateek Jain — Chief Financial Officer

So, you would have seen that, look, typically, NFOs are not being there. And also the regulations are very clear that you can launch only one scheme in each category. And also, I think from a distributor perspective or the investor perspective, they have mostly realized that, look, because most of the fund, which they launched big bang in somewhere around in August of 2021, what had happened is that, they went through a cycle where the return to the investors were not so positive. So, on the peak of the market when the funds were raised, they have not given the expected returns. And therefore, both investors and distributors have learned this and they have been investing into the more established and performing categories. So, we’ll see investors chasing returns in the categories where performance of the fund house has been good.

Sundeep Sikka — Executive Director and Chief Executive Officer

As a Company, I think we will not be, I think, as a philosophy, don’t want to come up with too many NFOs. In the whole last year, we have not come up with any NFO. And I think our focus will be to consolidate to build scale on back of good performance of our funds and scale them up.

Pritesh Chheda — Lucky Investment Managers — Analyst

So, do you have your NFO — do you have your presence in a multi-cap, which was the last category launch?

Sundeep Sikka — Executive Director and Chief Executive Officer

Yeah, we have it. We have a multi-cap fund. The largest multi-cap fund in the industry is ours.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Mr. Aniket [Phonetic] from BMSPL. Please go ahead.

Aniket — BMSPL — Analyst

Yeah. Good morning. I just wanted to ask a question regarding the regulatory…

Operator

Mr. Aniket, we are unable to hear you.

Aniket — BMSPL — Analyst

Hello? Am I audible?

Sundeep Sikka — Executive Director and Chief Executive Officer

Yeah, Aniket, please go ahead. Just be a little louder.

Aniket — BMSPL — Analyst

Yeah. So, good morning. Thank you for the opportunity. My question was on the debt side and the regulations that have come into place. So, previously on this call, you said that you don’t expect the debt flows to go down that much in the longer term, but a lot of independent consultants which you deal in debt and equity MF are telling us that the business on the debt side has dried up quite a bit from the 1st of April. So, what is your observation regarding this inflows going forward? And how will it affect the numbers for the company performance [Phonetic]?

Aashwin Dugal — Co-Chief Business Officer

Yeah. Hi, Aniket, this is Aashwin. I’ll just explain what I said earlier. So, what I’ve explained earlier was that the change in regulations have been mainly for investments that would complete three years and beyond, okay? So, what I said was the shorter end of the debt curve, which is investments, which are essentially one year, close to about one year, okay, they will remain unaffected. And if you see the April flows thus far, okay, we have seen the flows have been close to about INR60,000-odd crores at the industry level. So, very similar to what we saw last year in same period. However, what I had mentioned was that at the longer end, okay, we have some benefits that mutual funds enjoy of diversification and tax deferment, where we, as an industry, will have to make efforts to educate, okay, our stakeholders like investors and distributors to explain them in greater detail. So, what I mentioned was that in the medium- to long-term, we feel that on these premises and strengths, some of these debt funds should be able to compete much better. So, that’s our view on the longer end of the curve.

Sundeep Sikka — Executive Director and Chief Executive Officer

So, Aniket, this is yet getting digested. This has come just about a month back. So — and also what you see immediately post the announcement, a lot of debt flows happen in the longer term to go and catch up the last minute tax breaks. So, there has been a good amount of money, which has already got invested into longer term. And therefore, the amount available with the investors may not be much. And as Aashwin mentioned that we have some inherent — as a mutual fund product, we have a lot of inherent advantages. And I think it’s just from a distributor or adviser whom you are talking about, they just need to go and talk this to their end investors.

Aniket — BMSPL — Analyst

All right, all right. Thank you. Thank you for answering.

Operator

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

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Yeah, hi. Thanks again. Just on the debt index fund that segment has really picked up in the last one year. And so, where are we standing there? And how do you kind of see this — on the yield in the debt segment? Or what is our outlook on this segment?

Aashwin Dugal — Co-Chief Business Officer

Hi, Prayesh. So on the rolled down products that you are talking about, I think, yes, they have scaled up well in the recent past. But going forward, I think our focus will continue to be on active funds because we feel that in the longer end, they are able to perform better. However, it’s a growing category. And even though last year, we were slightly late in entering that category, in the last three months, we have scaled up there as well. So in the nutshell, we’ll focus on active funds, okay? But we will continue to be present in the passive debt segment as well.

Sundeep Sikka — Executive Director and Chief Executive Officer

I’d just like to add one thing to it. Unlike equity, in debt, a lot of these passive funds were on the backdrop of the tax advantage which was there. So actually, the way we see is, focus will move in — debt will move back to active funds and organizations and companies which have a longer term track record of managing active in debt will benefit. So, that’s the way — we need to see how things play out. But our first traction is, if it is not going to be because of the tax changes, it’s going to be the AMCs which were highly dependent on roll down of passive strategies in fixed income, they may get impacted. But the AMCs, which have a long-term track record on active in fixed income may not be as much impacted.

Operator

Thank you. Our next question is from the line of Nilesh Jethani from Bank of India Mutual Funds. Please go ahead.

Nilesh Jethani — BOI AXA Investments Managers Private Limited — Analyst

Yeah, hi. Good morning, and thanks for the opportunity. Sir, a few questions on the fees and commission and other expenses. Just wanted to understand with the impending issues with regard to TERs from various aspects, from GST, brokerages, etc. I wanted to understand your view with regards to fee and commission. Do we have any scope to squeeze this going forward? And similarly, on the other expenses as a percentage of AUM, what direction can we give on that side, considering most of the NFOs, etc., are already out? So next year, are we expecting any further NFOs and any direction on the other expenses on the overall AUM?

Prateek Jain — Chief Financial Officer

Yeah. So, see, in terms of the fee and commission expenses, this is predominantly pertains to the — our AIF business where we used to pay upfront and I believe there will be — there are regulations, which will — going forward, these will not be allowed. And most of this will be paid from the scheme as a trail. So therefore, this line item will not exist going forward. And also from — in terms of the NFOs, as Sundeep mentioned that, look, as and when there is an opportunity to come out with a unique product where we can give a differentiated return to the investors, we’ll work it out. Otherwise, just for the sake of raising capital, we’ll not be coming out with any kind of an NFOs.

As regards the — our overall other expenses, those are in the range of about 17 basis point to 18 basis point of our current AUM. And as we expect to our AUM to grow much faster than the — as our expense growth. So typically, our expense growth has been in the range of 6% to 7%, and that is what we expect going forward as well in line with the inflation. And if we increase our AUM more than the — this expense rate, then the operating leverage will come into play, and you’ll see, on our bps basis, this will trend downwards.

Nilesh Jethani — BOI AXA Investments Managers Private Limited — Analyst

Got it, sir. Sir, my question on the impending impact on the GST and the brokerages, etc., to be included in TER, any direction you can give us with regards to what could be our share or what industry could share? And what could be reflected or passed on to the — on the bottom line or the investors?

Prateek Jain — Chief Financial Officer

So, these are certain things which we have also learned from the newspapers. I think these regulations are yet to come out and we would refrain at this point of time on commenting on those. However, if you go by the past, whenever these changes have been come, as our AMCs has been most adaptable and flexible, we will pivot according to whatever regulation comes and we’ll work out a business model, which is the most — or it would be the best for all our stakeholders.

Nilesh Jethani — BOI AXA Investments Managers Private Limited — Analyst

That’s really helpful. Thank you so much.

Prateek Jain — Chief Financial Officer

Thank you.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Sundeep Sikka for closing remarks.

Sundeep Sikka — Executive Director and Chief Executive Officer

So, I think thank you, everyone. Thank you for I think being there. I think we’ll — if there are any further queries, I think please be in touch with Arun. And from our perspective, our focus remains on long-term profitable growth. Thank you very much.

Operator

[Operator Closing Remarks]