UTI Asset Management Company Limited (NSE: UTIAMC) Q2 2025 Earnings Call dated Oct. 26, 2024
Corporate Participants:
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Sandeep Samsi — Head of Investor Relations & Corporate Communications
Vinay Lakhotia — Chief Financial Officer
Analysts:
Dipanjan Ghosh — Analyst
Lalit Deo — Analyst
Mohit Mangal — Analyst
Abhijeet Sakhare — Analyst
Madhukar Ladha — Analyst
Prayesh Jain — Analyst
Jignesh Shial — Analyst
Gaurav Jani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the UTI Asset Management Company Limited Q2 and H1 FY ’25 Earnings Conference Call. From the management we have with us Mr. Imtaiyazur Rahman, Managing Director and Chief Executive Officer; Mr. Vinay Lakhotia, Chief Financial Officer and Head Corporate Strategy; Mr. Surojit Saha, Group Financial Advisor; and Mr. Sandeep Samsi, Head, Investor Relations, Marketing and Corporate Communication. We also have with us our Investor Relations team from Adfactors PR. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
Before we begin, I would like to mention that some of the statements made in today’s discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties are on the disclaimer slide of the investor presentation that has been shared earlier.
I will now hand the conference over to Mr. Imtaiyazur Rahman for their opening remarks. Thank you.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Thank you so much. Good morning to all of you for joining us today as we review our operational and financial highlights for the half year ended 30th September 2024, as well as quarter ended as on date. We have uploaded our investor presentations on our website as well as on the stock exchanges website. Thank you so much. I’m quite confident these informations must have read by all of you. We all are here to clarify any doubts that you may have about our operations. I have with me my distinguished colleagues, Mr. Vinay Lakhotia, CFO of the Company and Head of Strategy; Mr. Surojit Saha, Group Financial Advisor of the company; and Mr. Sandeep Samsi, Head, Investor Relations, Marketing as well as the Corporate Communications. So, we will be appraising all of you about the details of the operation of our company.
I’m pleased to mention that India’s economy continues its growth driven by robust domestic demand, rising private capital expenditure and vibrant service activities. Manufacturing sector outperformed in early 2024, aided by lower input costs with growth stabilizing at 6.7% in quarter two. The IMF and World Bank both projected 7% growth for our economy for the financial year 2025, supported by a rebound in agriculture and a strong private consumption. The Reserve Bank of India maintained 7.2% growth forecast of our economy. We are the fastest-growing economy in the world. Let me share with you about the mutual fund industry. Mutual fund industry is extremely transparent industry and the required information are already available in the mutual fund industry or AMFI website as well as the details which we have provided in our presentation.
Let me begin. The Indian mutual fund industry has witnessed remarkable growth in recent times, much of which can be attributed to the retail investors. The aggregate folio count as of September 2024 is INR21.05 crores as against INR15.71 crore a year ago, indicating an increase of 34% on a year-on-year basis. The assets under management of the mutual fund industry saw a significant increase. The average AUM of the industry as on 30th September 2024 was INR67.09 crores, a growth of 44% over September 2023 and the figure was INR46.58 lakh crore as on September 2023. The increase in investment under SIP has helped the industry to grow. The AUM under SIP touched a new milestone of INR13.82 lakh crores in September of 2024.
The monthly inflows under SIP is seeing a steady rise with 66.39 lakh new SIP accounts were added in September itself, taking the total count of more than 9.87 crore SIP folio holders. The growth can be to various factors, including investor confidence, financial literacy initiatives and enhanced awareness, especially in cities beyond Top 30 and a noticeable shift from traditional saving to new investment avenues. It is pertinent here to mention that mutual fund industry is playing a very significant role in India’s economic growth.
Let me share with you about UTI AMC. Our total assets under management of the Group stood at INR20.16 lakh crore as of 30th September 2024 compared to INR16.89 lakh crore in the same period in the previous year. The UTI Mutual Fund’s quarterly average AUM accounted for INR3.43 lakh crore, reflecting a growth of 28% from INR2.67 lakh crore a year ago and INR3.11 lakh crore as of 30th September 2024. This significant increase can be largely attributed to our focused go-to-market strategy, which aggressively promoted all categories of funds.
Friends, in addition to our strategic focus on product categories, we have expanded our investment research universe, which has been instrumental in consistently improving the performance and competitive ranking of our various schemes. Notably, the fixed-income category has witnessed a marked revival in recent months, which has further helped in growth of our AUM. The strategic approach has enabled UTI AMC to sustain its upward trajectory, delivering value to our all stakeholders.
Regarding launch of funds, we are also focused on launching new products as needed by our investors. During the quarter, we successfully launched the UTI Nifty 200 Quality 30 Index Fund and the UTI Nifty Private Bank Index Fund, both performing well in their respective investment categories. We now offer 15 products with closing AUM of INR36,505 crores as of September 30, 2024. Geographically, our strong hold is in beyond 30 cities and we are extremely strong there. Our AUM flow is close to 21% monthly average AUM, which is higher than the industry average of 19%. To further capitalize on the emerging opportunities, there has a lot of focus on expanding and strengthening our distribution network.
UTI has been constantly planning interventions like dedicated training and workshop to equip them with necessary knowledge and skills to navigate the evolving financial landscape. UTI has been at the forefront of investor education drive to create awareness about the mutual fund category with our flagship program, UTI Swatantra. During period September 2024, the company held 383 Investors Awareness Program, reaching over 31,000 investors. Out of these 115 sessions were specifically for women investors engaging more than 5,000 participants. A targeted educational campaign was also conducted for teachers focusing on retirement planning.
Regarding digital assets, we are pleased to inform you that we are constantly augmenting our digital assets and processes to provide best-in-class technology with top-notch safety standards across our network. UTI is known for its culture and implies welfare. Many initiatives and processes have been put in place to create a conducive environment for our team within the company, within the country and in our overseas offices. Technology upgrades are being implemented to streamline operations, enhance performance monitoring and improve client servicing.
Let me now share with you about our subsidiaries, first of them, UTI International. UTI International has obtained a new object in New York. U.S. presents significant opportunities offering large pool of investors of institutional capital. Our existence in this market provides us a unique opportunity. We have undertaken significant steps for the growth of this business. These have led to higher employees and administrative costs, but these are critical steps for market expansion, operational upgrades and the product development from a medium to long-term growth perspective. I am confident that our investment would be extremely fruitful in our future growth.
A dedicated push for brand building along with the product distributions is planned for long-term sustainability and AUM growth. These relationships will serve as a catalyst for potential future inflows as our track record of India-focused investments differentiate us from other global peers. We are actively hiring professionals in key geographies to accelerate business development. The Middle East is driven by sovereign wealth funds and institutional investors seeking global diversification offers another important growth avenue and therefore, we are upgrading our regulatory license in DIFC to give us greater flexibility to offer investment advisory services.
UTI Pension Funds Limited. The UTI Retirement Solutions Limited was renamed as UTI Pension Fund Limited at the beginning of this financial year. After obtaining the POP license of PFRDA and NOC from SEBI, we opened 16 branch offices across Bharat. We are in the process of building a strong sales and distribution team for NPS in order to grow our market share in the private sector. I’m extremely delighted to share that UTI PFL’s fund performance during financial 2024 has been commendable. We have been ranked number one for the central governmental scheme and as well as for the state government schemes. Our other subsidiary, UTI Alternatives, we intend to dive deeper into existing business territories along with expanding into new one simultaneously.
Between financial year 2021 and half-year ended 30th September 2024, we saw high implied costs. This is due to the increase in hiring of core business executives. During the same period, management fees income has also increased. Therefore, we can say with all confidence that implied costs have increased conventionally with the growth of the business and it provides us a great business opportunity in the future. Sales function in this organization will continue to operate on a lean model and we will be leveraging on our distribution network largely. For sales support, we may also explore some tie-ups. SDOF-I and SDOF-II expected to be fully closed. Existing funds which are currently in fundraising mode will be achieving their financial close soon.
Friends, at a group level, we are delighted to share that our subsidiaries are well-capitalized. I would like to highlight that in UTI Group, our focus continues to be on, one, launching appropriate new products in all business lines; two, increasing our geographical expansion; three, investing in hiring and upskilling our human capital for the entire group; four, investing in digital resources for the entire group; five, enhancing the governance practices globally of the gold standard; six, having robust risk management processes globally; last but not the least, building a strong mechanism for strict compliance and regulation.
For further insight into UTI AMC’s performance and other operations update for Q2 and H1 of financial year 2025, I now invite Mr. Sandeep Samsi, Head of Investor Relations, Marketing and Corporate Communications to provide the details of our operations.
Over to you, Sandeep, and thank you.
Sandeep Samsi — Head of Investor Relations & Corporate Communications
Thank you, sir. I will first take you through UTI AMC’s performance during the second quarter and half year ended 30th September 2024. UTI had a market share of 6.2% of the total gross sales of the industry during this quarter and market share of 6.6% of the gross sales for the H1 FY ’25. Our equity quarterly average AUM for the quarter ended September ’24 stood at INR98,638 crores, rising by approximately 26% as compared to the quarter ended September ’23.
Quarterly average AUM for index and ETF stood at INR1,45,135 crores, up by 47% year-on-year in the second quarter. ETFs and index fund net inflows stood at INR6,022 crores in quarter two of FY ’25. UTI Mutual Fund has added 4,07,000 folios during the quarter, picking up the number of live folios to 1.29 crores as on 30th September 2024. Our SIP AUM witnessed a growth of 50.26% over the corresponding quarter of last year, reaching to INR39,882 crores as of September ’24. The SIP inflows for the second quarter stood at INR2,058 crores. The SIP gross inflows for UTI Mutual Fund witnessed a year-on-year growth of approximately 25% with the average SIP ticket size being INR3,297 on September ’24. For the half year, SIP inflows were INR3,907 crores, higher by 18.42% as compared to INR3,300 crores in the H1 of FY ’24.
On UTI financials on consolidated basis, during the second quarter, the company posted a consolidated net profit of INR239 crores, higher by 31% year-on-year and down by 6% quarter-on-quarter. While the consolidated core revenue from operations stood at INR373 crores, higher by 28% year-on-year and by 11% quarter-on-quarter. The core profit after tax for the second quarter was INR132 crores, higher by 50% year-on-year and 14% quarter-on-quarter. For the half year, the consolidated net profit was INR493 crores, higher by 18% year-on-year and consolidated core revenue from operations was INR710 crores, up by 24% year-on-year. On a standalone basis, PAT of UTI AMC Limited for Q2 of FY ’25 is INR201 crores, reflecting a growth of 50% on a year-on-year basis and 8% on quarter-on-quarter basis. As for H1 FY ’25 is INR387 crores, higher by 29% Y-o-Y.
The core profit after tax for the second quarter was INR116 crores, higher by 65% Y-o-Y and 17% Q-on-Q. The core profit after tax for H1 FY ’25 is INR214 crores, higher by 54% Y-o-Y. On HR initiative as part of its commitment for continuous learning, we successfully rolled out a new learning management system called UTI Pragati. This platform provides employees at all levels with opportunities for ongoing development and training. On tax-related matters, we would like to highlight an important aspect on the additional deferred tax liability created in Q2 of FY ’25 for INR12.10 crore.
As per the Indian accounting standards, we mark-to-market our treasury investment every quarter and create deferred tax liability on the notional gains. Till June ’24, we had created deferred tax liability at a prevailing tax rate then, including indexation benefits. However, the capital gains tax rate has been changed in the union budget of ’24, including the change of tax rate for equity-oriented mutual fund to 12.5% and the indexation benefits have also been removed. Accordingly, we have recomputed the deferred tax liability on all the past M2M gains at the new rate. As a result, the deferred tax liability recorded on fair value gains on the investment as of June ’24 has increased by INR12.10 crores, thereby resulting in an additional one-time charge in the net profit of the company as on September 30, 2024.
Coming to the Group company on UTI Pension Fund Limited, our 100% subsidiary UTI Pension Fund Limited has recorded a growth of 24.64% year-on-year in its AUM, reaching approximately INR3.36 lakh crores as on 30th September ’24 and currently it manages 25.12% of the NPS industry’s AUM. The PAT of UTI Pension Fund Limited for the first half of the year is at INR29 crore, an increase of 16% year-on-year. On UTI International, UTI International represents our international business interest and has an AUM of INR29,814 crore as on 30th September ’24, up by 23.16% year-on-year. Our international clients are across more than 40 countries. These are primarily institutions, pensions, insurances, banks and asset managers. One of our flagship fund by India Dynamic Equity Fund domiciled in Ireland has an AUM of INR1,136 million.
UTI International J Safra Sarasin Responsible India Fund, an ESG compliant India Fund has an AUM of $76 million. UTI Innovation Fund launched last year has an AUM of $56 million. UTI Alternatives Private Limited. UTI Alternatives Private Limited has an AUM of INR2,856 crores. It has a well-defined ESG policy and strategy. It is committed to responsible investing. UTI SDOF-II & III have a well-defined ESG policy and strategy. It currently manages the following active debt fund. UTI SDOF-I, which has received SEBI approval in August 2017 and has final close in May 2019. It has a net commitment of INR71 crores and is in the exit stage. UTI SDOF-II received SEBI approval in February ’21 and has the final close in May ’22. It had net commitments of INR467 crores and is currently in existing mode.
UTI SDOF-III has received SEBI approval in April ’22 and has a net commitment of INR540 crores. It is currently in fundraising and investing stage. UTI Multi Opportunity Fund-I, which had SEBI approval in February of ’22 has net commitments of INR1,598 crores, it is currently in investing stage. UTI Real Estate Opportunity 1 is currently fundraising and investing with commitments of INR130 crores. UTI Alternatives got four investment portfolio managers CPM license in August ’22. We have launched two more funds in Credit Opportunity Fund-I and UTI Asset Reconstruction Opportunities Fund. We have three more funds registered in GIFT city, which will be launched soon. Just an update, UTI Venture Fund has been renamed as UTI Hart Financial and Investment Services Limited.
I would now request the Managing Director and CEO for his concluding remarks.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Thank you, Sandeep for sharing operational and financial updates of the company for second quarter and the first half of financial year 2024-2025. With this, we would like to open the forum for question-and-answer session.
On behalf of on behalf of UTI AMC, we wish you, your family a very Happy Diwali and Prosperous New Year. We would also like to wish our partners, investors and other stakeholders and to all Indians wherever they reside, a Happy Diwali. Thank you very much for joining this call. Over to you.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Dipanjan Ghosh from Citibank. Please go ahead.
Dipanjan Ghosh
Hi, good morning, everyone. So, just three questions from my side. First, a data keeping question, if you can quantify the ESOP expense for the first half for the standalone and consolidated business. Second, we have heard in the conference call of some of your peers that they have either tweaked the renewal payout structures on the back book in some schemes or incremental flows that come in, they are going for a differentiated renewal payout structure for the flows that incrementally are coming in. So just wanted to check, have you undertaken any such change either on the back book or on fresh flows? And also as a philosophy, do you kind of conquer with this view? And my third question is more from the perspective of UTI Pension. So, just wanted to understand how the yield trajectory or the realizations in this segment are really structured and how do you foresee it going ahead.
Vinay Lakhotia
So, on the ESOP expenses, we have expenses close to around INR3.5 crore for half year and for the whole of the financial year, the number should be in the range of around INR5 crore only. On the second question…
Dipanjan Ghosh
Just wanted to say if this is on standalone or consolidated basis?
Imtaiyazur Rahman
Yeah, it’s same only. On the stock AUM as far as the commission is concerned, no, we haven’t carried out any rationalization of commission expenses on the stock AUM. On the fresh inflows, anyway, we are calling a marginal expense ratios or policy where only on the sharing ratios on the incremental inflows we shared between us and the AMCs. So, on an incremental inflow, that has been our policy over the last four to five years. But on the stock AUM, no rationalization has taken place. And the third question with respect to pension fund, the gross fees is close to around 3 basis points. And as you are aware, 50% of the fees is required to be paid back to PFRDA for development of pension fund. So on a net basis, the incremental fees on a net basis is close to around 1.5 basis points.
Dipanjan Ghosh
So, just wanted to follow up on the second question on the marginal sharing front. So, let’s say, let’s say a distributor sells a large-cap fund or some of the fund of yours, well, let’s say the gross expense ratio on the fresh inflow for the year is whatever, let’s say around 1.75%. And on that, on the first year, you will have a certain payout and then you will have a certain distributor renewal payout also. But as the AUM goes, obviously your gross expense ratio keeps coming down. So, what — I understand you’re trying to say is that it’s like a proportion of sharing. So, if the gross expense ratio comes down then on the year two, year three, year four onwards, also the percentage sharing between you and the distributor remains same and the sliding structure is followed. Is that a correct understanding on the cash flow?
Vinay Lakhotia
Yeah, that’s correct. But normally, it happened that the that the second and the third year commission in many of the cases are on a lower side as compared to the first year commission. So, even those arrangements are also there. But as of now, we haven’t reduced the commission on the stock AUM. That exercise we have not done.
Dipanjan Ghosh
Got it. Thank you, sir, and all the best.
Vinay Lakhotia
Thank you.
Operator
Thank you. The next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Lalit Deo
Hi, sir. Good morning. Congratulations on a good set of numbers. So, just first question, a data keeping question, sir. Could you give us your segment-wise yields and also you could give that yield for a quarter-on-quarter basis like with respect to [Indecipherable]. My second question is just could you also give us some color on the…
Vinay Lakhotia
Lalit, your voice is not clear, could you repeat your question?
Lalit Deo
Yeah, segment-wise yields, revenue yields across equity, debt…
Vinay Lakhotia
Okay. And second question?
Lalit Deo
So, second question was more from the flow perspective. So again, in this quarter, we have seen some outflows in our core equity schemes. So, if you could give us some color on your gross flows as well as some color on the outflow redemption side also. And sir, third question was on the expenses side. So, like how should we see the employee expenses for this year as well as the next year?
Vinay Lakhotia
Okay. So, on the yield part, I can say for equity and hybrid fund, it’s close to around 75 basis points. ETF and index fund is roughly around 6 basis points to 7 basis points. Cash and arbitrage is around 10 basis points and income fund at around 20 basis points to 21 basis points. With respect to your, I think second question, Sandeep will reply. And the third question was with respect to the cost part. So, the employee costs, I think what we indicated in our earlier call also, employee costs for a standalone, you can see a rise of just around 2% to 3% on the FY ’24 number. And on the other admin expenses, the range the increase would be around 8% to 10%.
Sandeep Samsi
Our equity funds have shown steady improvement in the performance and peer ranking over the last six months. And if you look at our performance on a one-year basis, 11 out of our 18 equity funds are now in the quartile 1 and 2. And if you look at my March number, there were about six. So from six, we have moved up to 11. As mentioned earlier, many of our equity funds had a focus on quality style of investing for the portfolios whereas the value style was receiving over quality in the last three to four years, which somehow impacted our performance.
The turnaround of our fund performance should help us to build the momentum for a sustainable growth, both in terms of assets and market share. Given the current market condition and volatility, we have been following our hybrid fund as the go-to-market strategy with a lot of trust via sales campaign. This has led to some impetus to the performance. And if you look at our SIP AUM, this has grown by more than 50% to INR39,882 crore on a Y-o-Y basis. And our gross sales of the market share was 6.2% for the quarter 2 and 6.6% for the half year.
Vinay Lakhotia
And just to add, Lalit, I think we are doing fairly well as far as the hybrid category is concerned. In fact, for the half of the financial year, we have mobilized in excess of close to around INR2,500 crore on the hybrid category. So, this is one category we are actually focusing on and receiving a good amount on inflows. And as Sandeep rightly pointed out, I think for the next two quarters, we should see some traction as far as the equity inflows are concerned.
Lalit Deo
Yes, sir. Yes, thanks, sir. I’ll rejoin in the queue. Thank you.
Operator
Okay. Thank you. The next question is from the line of Mohit from Centrum India. Please go ahead.
Mohit Mangal
Yeah, hi. Thanks for the opportunity. Hello?
Vinay Lakhotia
Yeah, go ahead, Mohit.
Mohit Mangal
Yeah. Sir, first question is, if I look at the last three to four quarters, the number of branches and employees have reduced. What could be the reason for this?
Vinay Lakhotia
The number of branches in fact has increased by close to around 24 branches because last year we opened 29 branches. However, there have been some rationalizations of branches where the AUM doesn’t justify the branches. So, we have closed five branches, but net addition as compared to last year has been 24, we have opened new branches. Natural retirement that is happening. So because of that, the headcount of employees has actually come down.
Mohit Mangal
Okay. But sir, are we going to fill this and will this have an impact on the employee expense, the number of employees?
Vinay Lakhotia
Already for the retirement, we have already explained earlier that we have recruited the management trainee over the last two to three years and they are being groomed to take some of these leadership positions. So, no new additions or to the employees per se, no.
Mohit Mangal
All right. Got it. And in terms of the market share, I think again we saw a minor decline this quarter as well. So, are there any immediate steps that you’re taking in terms of changing in responsibility of any fund managers or something to gain more market share, especially on the equity side?
Imtaiyazur Rahman
No, this is because we are collectively working to increase our market share. So, fund performance is on right side in right directions. We as a team, the investment, CEO office as well as the distribution of the distributions, we are working with our stakeholders to take our equity schemes to the market and we are rightly placed to go to the markets of our equity schemes are concerned. And that will help us to basically containing our decline in the market share and increase market share. You have seen in other segments, we have increased our market share and I’m quite confident that on the backdrop of the better performance and the right product positioning and with the go-to-the-market strategy, we will be in a position to gain our market share.
Mohit Mangal
Right, sir. This is helpful. Thanks and wish you all the best.
Imtaiyazur Rahman
Thank you.
Operator
[Operator Instructions] The next question is from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
Abhijeet Sakhare
Hi, good morning, everyone. Sir, I have three questions. First one is on the yield. Just wanted to clarify, you mentioned 75 basis points on the active equity funds, including hybrid. I just wanted to know what would this number be in the first quarter and last year full year, please.
Vinay Lakhotia
It’s a very similar number. Last quarter also, it was close to around 76 basis points and similar quarter was around 75 basis points. So, we have been able to maintain the yield number.
Abhijeet Sakhare
Understood. And secondly, on the cost front, sir, again, just clarifying, you mentioned 2% to 3% for employees and rest of it at 8% to 10%, but this is at the company level, right, because I thought you mentioned for the standalone business. So, just wanted to clarify that point.
Vinay Lakhotia
Yeah, yeah. Yeah, let me clarify 2% to 3% at a standalone level. At a consolidated level, since you are building our business there in all the three subsidiaries, employee cost at a consolidated level could be in the range of around 4%.
Imtaiyazur Rahman
So Abhijeet, there are two costs there. One is the cost to run the operations. Another is investment in future. So, we are hiring, as I mentioned in my opening remarks that we are hiring in all geographies. We have hired now two people in the USA. We have started out our office in USA. We have hired more people in France. We are in the process of hiring some more people in Singapore. We have already hired one person in Dubai and in the process of hiring more people in Dubai. And we are also relocating our CEO from the Group CEO of UK International from Singapore to Dubai. These are our investments in future and therefore, we need to be careful and I don’t want to quantify them as expenses.
In accounting term, is expenses, but in business terms, these are the investments in the future. So far as standalone is concerned and I think whatever we have promised four, five years back to the market, we are able to keep our commitment up as against the 7% or 8%, 11% generally has been an increase in the employee cost of the asset management space overall and the increase is only 2% to 3% and it will further reduce in the next few quarters. So, far as standalone is concerned. Be a bit careful to distinguish between investment in business and cost to run an operation. Thank you. Abhijeet?
Abhijeet Sakhare
Thanks for clarifying. And again, sir, last bit on the expense front. For non-employee cost, you mentioned 8% to 10%, right? That’s the number to consider.
Vinay Lakhotia
Yeah, yeah.
Imtaiyazur Rahman
And they are also just be careful about we are investing in our digital strategy that goes right in the P&L. We have tied up with the sales force, we are revisiting our digital assets and we are also hiring in the digital space of our employees are concerned and this is globally applicable. We already put in place a very strong risk management processes and therefore, we have had the services of the various consultants across the across the globe to put in place the right business processes in place. But if you see on a line-item wise, the expenses will be in the range of 5% to 6%. There are extraordinary expenses, which we are not in a position to tell the market these are the expenses.
But I mentioned to you the extraordinary expenses, which we are incurring and these are the one-time expenses. So for example, we hired the services, year and a half back of Alvarez & Marsal to look into our investment processes. There is a cost and I admit to this one. And also we have the Bloomberg in place. The Bloomberg is in dollar. So, any change in the exchange rate also increase our cost. So, far the cost are not so much because currency was a bit stable. Abhijeet?
Abhijeet Sakhare
Thank you so much, sir. The last one is on flows. I think this quarter we’ve done better compared to trends in the past. So again, like going forward into next 12 months, do you really foresee overall net inflows into active equity funds to be in a positive zone and possibly a substantial jump over the past run rate.
Vinay Lakhotia
That is the whole idea, Abhijeet that the thought process since Sandeep rightly pointed out, the uptick in performance is there at least on the six month and now closer to one year. So, we are actively pushing our equity fund. Hybrid fund, as I explained earlier, we have been doing well in this particular segment, especially with the repositioning of our multi-asset fund and this is a one fund where we are mobilizing a good amount of inflows. So, on the equity as well as the hybrid side, yes, the management focus is there and we should expect a good inflows in the next two quarters.
Abhijeet Sakhare
Understood, sir. Thank you so much.
Operator
Thank you. [Operator Instructions] The next question is from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Madhukar Ladha
Hi, good morning, everyone. Congratulations on a good set of numbers. Just most of my questions have been answered, but just on the employee expenses. So finally, we are seeing that expense line getting contained. And I wanted to know, are you completely done with all the hiring for the year and this current expense of about INR115 crores, can we take that to be your sort of normalized run rate? And then post that in ’26-’27, what sort of hike should we build in or how many more you know employees will retire over ’26-’27? So, what sort of cost-benefit can come through from there? So that will be helpful to know. And then on a consolidated basis, what would that mean?
Second. I think you know, I think earlier in this year in 2Q, your direct TERs across most equity schemes went up and that would have meant about a 5 basis points incremental yield. So, why has that not played out because you’re saying quarter-over-quarter your equity yields have remained stable. So, is there some expense which has gone up below the direct TER level. Is that why this has not happened or what could be the reasons for that. Those would be my two questions. Thanks.
Vinay Lakhotia
Madhu sir, I think we will stick to our guidance number as far as this particular financial year is concerned, at least 2% to 3% increase on the employee costs on a standalone basis and close to around 4%, 4.5% on the consolidated level. And the overall guidance that we have been given that 2024, 2028-2029, the employee cost should be on a declining trajectory. As and when we progress through the next financial year, we will provide an overall guidance. I don’t want to comment on the individual number of employees, but at the beginning of the next financial year, we will provide a guidance for the full year. But as we have stated earlier that the employee cost will be on a declining trajectory even after factoring the inflation number.
Secondly, on the yield part, yes, the direct plan yield has gone up by around 3 basis points to 4 basis points. But obviously, we have got a fresh inflows also. So in equity and hybrid fund, there have been a fresh inflows of almost around INR6,000 crore to INR7,000 crore during this half year. So, as you are aware, the yields are lower on the fresh inflows and the higher yield on the debt, we have been able to ensure that the overall yield at the stock level remains the same at around 75 basis points.
Madhukar Ladha
Got it. Got it. Okay. Thank you, sir. All the best.
Operator
Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Prayesh Jain
Yeah. Hi, good morning, everyone. Just a few questions. Firstly, on the rationalization of commissions, the industry in a couple of calls that have happened of your counterparts have kind of mentioned about the rationalization of commission structures linking them to the TERs and industry kind of moving towards that. So, do you think that or even UTI would follow suit going ahead. That would be my first question. Just one second. Yeah, sorry.
The second one being, in terms of debt, how do you see the kind of flows coming into the longer duration funds going ahead with the interest cuts likely to come through probably towards the end of the quarter, the end of the fiscal? And lastly, how do you see the mix between mutual funds and other businesses, say, from a two- to three-year standpoint in terms of your revenue and profitability mix? Those would be my questions. Thanks.
Vinay Lakhotia
So on the first one, as far as the rationalization of commission is concerned, yes, we are exploring that option definitely not in this particular quarter, but maybe quarter four or beginning of the next financial year, we will take a call on that. As far as debt inflows is concerned, over the last two quarters, we have seen a significant amount of inflows are coming only in short duration product, but if the interest rate cut cycle plays out, then definitely a longer duration product will be the flavor of the season and not only UTI Mutual Fund, but the entire industry can witness a good amount of inflows as far as the long duration product is concerned. But as of now for the last few quarters, the inflows are into a shorter-duration and a money market kind of a product mix.
On the next slide, yes, we as Mr. Rahman and Sandeep already pointed out, we are building our base as in all the three subsidiaries. Alternatives, the yields are quite good and we are building our team and expanding our capabilities and in the process of launching three to four funds. So definitely, the business volume and the yield from that particular business segment should improve. On the International, depend on the inflows is coming into which category. If it is coming under the equity categories and if the Indian market continues to attract and arise on the foreign investor, we should see some yield improving on the International business as well.
Imtaiyazur Rahman
So far as pension fund is concerned, as you know, the Government of India has already announced that unified pension schemes and 10% more will be their locations for the central government and as well as the state government employees that will help us tremendously in increasing our AUM and the profitability so far as business fund is concerned.
Vinay Lakhotia
Prayesh?
Prayesh Jain
Yeah. Thanks for that. Just on this, so in terms of scales in alternate business and do you think that you have you are at that level where incremental flows or incremental revenues will kind of flow down to bottom line and resiliently the profitability of the entire company, the core profitability can actually see a significant boost up from from something like an alternate assets?
Vinay Lakhotia
So from the alternate, we are quite hopeful that at least from the beginning of the next financial year, this company will this company will turn into core PAT positive. So definitely, from in next financial year, this company is going to add to the core PAT number of UTI AMC on a standalone basis.
Imtaiyazur Rahman
This company, UTI Alternative has built a very strong track record in mobilizing the money and paying back to the investors. We have not seen any defaults and we have given extraordinary return. So, this company has become the role model so far as the credit funds are concerned in our country. And we are expecting good traction in all subsidiaries of us.
Prayesh Jain
Great. Thank you so much and all the best.
Operator
Thank you. The next question is from the line of Jignesh Shial from InCred Capital. Please go ahead.
Jignesh Shial
Yeah. Hi, thank you for the opportunity. I just have a couple of questions. First of all, I mean, sorry if I missed out. Your other expenses had some 19% kind of, I’m sorry, on consol basis, 19% kind of a Y-o-Y and 16% kind of a sequential growth. So, anything specific to read into or any one-offs in that?
Vinay Lakhotia
Not sure which numbers are you looking at.
Jignesh Shial
INR74 crores, which are seen in other expenses.
Vinay Lakhotia
Okay. On a consolidated level, you are saying.
Jignesh Shial
Yeah, yeah, on consolidated.
Vinay Lakhotia
So, yeah, the consolidated level, as we pointed out, since we are expanding our reach as far as the international business are concerned, so we are building our team and Mr. Rahman rightly pointed out, we have opened an office in Paris as well as in the United States. So, initial establishment costs as well as the rental cost of these two offices have come into. So, on a consolidated level, these expenses have gone up. And also we have opened 15 points of presence offices for our pension fund company. So because of that, the expenses at the consolidated level has gone up.
Jignesh Shial
Understood. So, on a Y-o-Y basis, what so as you’re pointing out that…
Vinay Lakhotia
8% to 10% [Phonetic], yes.
Jignesh Shial
10% to 12%, right. Okay. Secondly, what I’m seeing it up on your SIP flow, SIP flow has seen a significant improvement. But specifically, if I see your monthly gross SIP numbers inflows, there has seen a massive improvement in July, August and September this year. So, anything specific that you want to highlight that the steps that you’ve taken or what is the resultant? I mean, what are the reasons for such a significant improvement and how we are seeing it up SIP flows specifically in the coming months? Anything specific that you want to highlight from here?
Sandeep Samsi
Yeah. So Jignesh, as we pointed out earlier also that we have been taking efforts to improve our market share with the fintech partners as well as with all the distributors who are there with us. So banks, national distributors, fintechs are important partners who help us in our SIP count. So, with the fund performance being there, improvement in the equity fund performance as well as the fixed income and the hybrid funds, we are seeing significant inflows coming in the SIP format. And as you know that SIP has now become a popular trend in the country where young people who are coming into the industry are also looking at SIP as the first way of investing into mutual funds. So that’s the reason UTI has also benefited from the SIP flows.
Imtaiyazur Rahman
But we have a very clear plan and we are executing it well. Each and every sales team has got a target for our SIP and that is working well for us. The investment team and the distribution team are working cohesively and they are going to the market together. So, we are in a position to give a lot of confidence to the market and I’m quite confident going forward, this number will have further improvement.
Jignesh Shial
Understood, sir. No, why I was asking you because obviously, the trend had been improving over the last couple of months itself. But last three months had seen a significant improvement. So, I was wondering whether is it coming up from hybrid because your market share has gained and that is the reason why there is a significant improvement on month-on-month basis or something else to read into. But that’s okay.
Sandeep Samsi
Hybrid is the one category that we are focusing on. So, major part of that incremental inflows is coming into hybrid.
Jignesh Shial
Understood. Understood.
Imtaiyazur Rahman
Our focus is in all products. Our focus is on all products. For example, equity, we have some of the very, very good performance schemes. We have repositioned the market. We are having very focused way of selling them. We are waiting to turn the flagship fund and we’re extremely thankful to our fund management team and as well as God that is doing the turnaround and these all will help us going forward.
Jignesh Shial
So, that’s quite good.
Imtaiyazur Rahman
Our Board is extremely particular. They review our performance and they advise us, they counsel us appropriately. So, the entire teamwork which is helping us to grow up our presence in all fields.
Jignesh Shial
Understood. Thank you. And lastly, just one more thing is that our index and ETFs have seen a massive improvement on the market share segment side and all. But typically, what my understanding is that these are low yield funds overall. But obviously, our growth seems to be doing pretty I mean, relatively, it looks to be far higher. So, will that have any impact because obviously ETFs are anyhow getting very popular across the industry also. So, will that have an impact on our revenue yields or you don’t see that happening much on because of this no much impact or not. Any comments on revenues because your share and your market share and the growth in index and ETFs are far higher. That’s it from my side.
Imtaiyazur Rahman
The yield is a very, very difficult indicator. So overall, yield will be different, but I strongly believe in the absolute profit not the yield. So, if we and this is a volume business, passive is a volume business. Your yield may be the same and overall yield may come down if you put a per unit basis, but the overall profit will go up. So, I’m considering as an overall profit. My profit number should go up and up and up. That is the focus.
Vinay Lakhotia
I think, as earlier highlighted also in the call, I think PAT margin number is one parameter. I think most of you guys should look into it because the kind of industry we are in, yield margin numbers are bound to come down because of asset mix and there is a difference between the yield on the stock AUM and the fresh inflows. So, yield margins will be on a declining trajectory, but PAT margin number is one where due to operating leverage and because of volume growth, that number should keep on improving.
Jignesh Shial
Perfect. Perfect. That’s really helpful, sir. Thank you so much and all the best.
Vinay Lakhotia
Thank you.
Operator
Thank you. Ladies and gentlemen, this will be our last question for today’s conference call. It is from the line of Gaurav Jani from Prabhudas Lilladher. Please go ahead.
Gaurav Jani
Thank you, and congrats on a good quarter. Most of my questions have been answered. Just one question pertains to the net flows, right. So, I understand or could you just clarify that the equity and hybrid net flows includes the arbitrage number, right?
Vinay Lakhotia
No, it doesn’t include arbitrage. Arbitrage we are including in cash and liquid.
Gaurav Jani
Okay, okay. Understood. Okay. That was it from me.
Operator
Thank you. That was the last question for today’s conference call. I would now like to hand the conference to the management for their closing comments.
Imtaiyazur Rahman
Thank you very much once again. And again, I would like to wish all of you and your family a very, very Happy Diwali. And thank you for joining this call. May God bless all of you.
Vinay Lakhotia
Thank you.
Operator
[Operator Closing Remarks]