UTI Asset Management Company Limited (NSE:UTIAMC) Q2 FY23 Earnings Concall dated Oct. 21, 2022
Corporate Participants:
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Sandeep Samsi — Executive Vice President, Head of Corporate Communications, Strategy and Investor Relations
Surojit Saha — Chief Financial Officer
Vinay Lakhotia — Head of Operations
Analysts:
Sahej Mittal — HDFC Securities — Analyst
Lalit Deo — Equirus Securities — Analyst
Viraj Sanghavi — Banyan Tree Advisors — Analyst
Yash Mehta — Citigroup — Analyst
Prayesh Jain — Motilal Oswal — Analyst
Nirmal Bari — Sameeksha Capital — Analyst
Kunal Shah — ENAM Investment Services — Analyst
FRM Raghvesh — Premji Invest — Analyst
Amay — Metaverse Equity Funds — Analyst
Kunal Thanvi — Banyan Tree Advisors — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to UTI Asset Management Company Limited Q2 FY’23 Earnings Conference Call. From the management, we have with us Mr. Imtaiyazur Rahman, Managing Director and CEO; Mr. Surojit Saha, Chief Financial Officer; Mr. Vinay Lakhotia, Head, Operations and Mr. Sandeep Samsi, Head, Investor Relations and Corporate Communications. [Operator Instructions]
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, disclaimer mentioning these risks and uncertainties are on the Disclaimer Slide of the Investor Presentation that has been shared earlier.
I now hand the conference over to Mr. Imtaiyazur Rahman. Thank you. and over to you sir.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Thank you very much. Good afternoon, everyone. I would like to thank all of you for joining this earning call for the second quarter and first half of the financial year 2022-2023. I delighted to share with you another quarter of operational progress and financial growth for UTI Asset Management Company Limited.
Friends, it has been a proud moment for all of us when our country surpassed United Kingdom as the 5th-largest economy in the world as per IMF. The latest change based on the quarterly GDP figure in current dollars for the period ending December 2021 is an extraordinary achievement and highlights India’s resurgence and emerging super-power. To discuss UTI AMC’s quarterly performance, I have with me my distinguished colleagues, Mr. Surojit Saha, CFO of the company, Mr. Vinay Lakhotia, Head of Operations of the company and Mr. Sandeep Samsi, Head, Investor Relationships of UTI AMC.
Let me share with you about the global and Indian economy. I would like to touch upon the situation and the growth trajectories globally and for the Indian economy. As we all might be aware the global economy is going through a difficult phase with the Central Banks raising the interest rate to tackle record-high inflation. The inflationary environment in all markets, escalating geopolitical tensions and energy crisis in Europe are affecting global growth with various rating agencies forecasting as calculations risks.
Back home, the interest rate scenario has pushed the Reserve Bank of India to raise the interest rate back to pre-COVID levels. The repo rate now stands at 5.9%. However, the situation does not seem to be blooming as India continues to emerge as an outlier as per the financial markets’ experts. As the Indian equity market is concerned, during the second quarter, the Indian equity market recovered from the correction which was witnessed in the last quarter. The benchmark indices closed up by around 8.3% each with Sensex closing at 57,427 points, NSE ending at 17,094. Indian mutual fund industry, with the second quarter witnessing inflows and market recovering from the lower sales in June, the quarterly average AUM of the mutual fund industry as of September 30, 2022, grew from INR37.7 lakh crore as on 30th June 2022 to INR39.1 lakh crores, up by 3.5%. The number of folios rose from INR13.47 crore as on 30th June 2022, and INR13.61 crores as on 30th September 2022, up by around 2.5%.
Now, I hand over to Mr. Sandeep Samsi, Head, Investor Relations, who will update you with the UTI MF performance. Sandeep?
Sandeep Samsi — Executive Vice President, Head of Corporate Communications, Strategy and Investor Relations
Thank you, sir. I’ll start with UTI Mutual Fund performance. Following the rally seen in the equity market during the quarter, UTM Mutual Fund saw AUM growth for the second consecutive quarter. For this quarter, UTI Mutual Fund quarterly average AUM as of 30th September 2022 stood at INR2,33,595 crores up by 11.8% year-on year. As of 30th September 2022, our market share stood at 5.98% as compared to 5.94% for the quarter ended June ’22, and 5.83% for the quarter ended March ’22. On closing AUM basis, our market share has increased by 15 bps to 6.04% as on 30th September 2022 from 5.89% as on 30th June 2022. Our equity quarterly average AUM market share is 4.99% for the July to December 2022 quarter. Our equity quarterly average AUM for the quarter ended September ’22 stood at INR71,717 crores, rising by 13.5% as compared to the quarter ended September ’21. The quarterly average AUM for index and ETFs recorded a year-on-year growth of 36.6% to INR72,465 crores for the second quarter.
Net sales for UTI Mutual Fund for the quarter two FY’23 stood at INR6,612 crores, while the overall industry saw inflows of INR47,278 crores. UTI Mutual Fund contributed 14% to the industry’s net sales during the June to September quarter. While for the gross sales, UTI was able to capture market share of 8.2% of the industry.
The total assets under management for UTI Group registered a growth of about 14.5% over to self-funding quarter of previous year and stood at INR14.4 lakh crores as on 30th September 2022 as against INR12.63 lakh crores as on 30th September 2021. During the quarter under review, the number of life folios at INR1.21 crores as on 30th September 2022 from INR1.20 crores as on 30th June 2022. During the quarter, our number of SIP accounts rose by 5% taking the total number of life folios to INR23.8 lakh as of September ’22. The new SIPs registered during the quarter was 2.58 lakhs. Our SIP AUM witnessed a growth of 18.26% over the corresponding quarter of last year, reaching to INR20,565 crores as of 30th September 2022 from INR17,389 crores as on September ’21.
The SIP inflow for the quarter stood at INR1,589 crores, rising by 2.53% over the first quarter of the current financial year. The SIP gross inflows witnessed a year-on-year growth of 32.9% as against the industry growth of 26.52%, with the average ticket size being INR3,289 for September 2022. 22.8% of our monthly average AUM for September ’22 came from B30 cities, while the industry stood at 16.9% in terms of the B30 AUM — monthly average AUM. 108 out of our 167
UFCs are in the B30 cities. Weighted average AMC yield stood at 38 bps for the quarter.
UTI AMC financials. during the second quarter, the company posted a consolidated net profit of INR201 crores as against INR199 crores during the corresponding period in the last year, reflecting a growth of 1% year-on year and growth of 114%, 1-1-4 percent quarter-on-quarter as against INR94 crores during the last quarter. The consolidated core net profit for this quarter stood at INR85 crore. For the first half of financial year ’23, the consolidated core net profit stood at INR189 crores, up by 12% year-on year as against INR168 crores in the corresponding period during the last year.
The operating profit margin as a percentage of AUM for quarter two of FY’23 was 16 bps. There is a growth in the core profitability of the UTI Group. For UTI AMC Limited standalone, the net profit or UTI AMC Limited for the quarter stood at INR119 crores reflecting a slight decline of 1% year-on year from INR120 crores in quarter two of last year and a growth of 17% quarter-on-quarter from INR102 crores in quarter one of this financial year. The core net profit for UTI AMC Limited stood at INR69 crores, whereas the core income is at INR235 crores in quarter two FY’23, growth of 2% from quarter two of last year’s FY, that is INR230 crores and 0.4% quarter-on-quarter from the first quarter which is INR234 crores.
For UTI Retirement Solutions Limited, the AUM for UTI Retirement Solutions has achieved 16.5% on closing basis to INR217,515 crores from INR186,717 crores one quarter two of financial year ’22. As for UTI RSL is at INR11.9 crores an increase of 3.5% compared to the corresponding quarter of the last year. UTI International, UTI International has an AUM of INR25,105 crores as of 30th of September 2022. The management fees of UTI International is that INR33 crores, an increase of 13.8% year-on year from INR29 crores in quarter two of last financial year.
One of our flagship funds, the India Dynamic Equity Fund domiciled in Ireland has an AUM of $1,140 million. s J Safra Sarasin Responsible India Fund, an ESG-compliant India fund has an AUM $89 million. UTI India Innovation Fund which was launched in the first quarter of this financial year has an AUM of $18 million, 1-8 million. UTI Capital Private Limited, UTI Capital has an AUM of INR1,509 crores as on 30th September 2022. UTI Capital has made a net loss of INR1.2 crores in the quarter two of financial year ’23.
UTI Structured Debt Opportunities Fund called as SDOF Fund has an AUM of INR239 crores and is currently in exit mode. UTI SDOF II with an AUM of INR507 crores is currently raising funds and investing. It has a well-designed ESG strategy. UTI Multi Opportunity Fund launched in March ’22 is currently in investing stage and has an AUM of INR763 crores. Employee cost of the Group. Employee cost of the Group in quarter two of the financial year was INR103 crores, witnessing an increase of 3% year-on year as against an amount of INR100 crores in the quarter two of last financial year.
I would now request the Managing Director and CEO for his concluding remarks. Thank you, sir.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Thank you, Sandeep, for sharing operational and financial highlights. I would like to emphasize that our continued focus on growing high yield assets and fortify our commitment to our people, process and performance, which has been the backbone of our operation is long. As we enter the festive season this weekend, I wish you, your family and fellow citizens, a very Happy Diwali and good health.
With this. I would like to open the forum for Q&A and thank you for joining this call today. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Sahej Mittal from HDFC Securities. Please go ahead.
Sahej Mittal — HDFC Securities — Analyst
Yeah. Hi, good evening, all. Thanks for the opportunity. Sir, a couple of questions from my side. Sir, firstly if you could talk about the operating expenses, operating expenses have shot up quite materially, 2Q sequentially. So, what have caused such a sharp value, because this becomes quite volatile, and continues to become a drag on the margins, on the EBITDA margins. So, if could throw some color on this? Secondly, on the employee expenses, so where are we in terms of the journey to moderate our expenses, so can we expect INR100 crore run-rate, quarterly run-rate for the second half and how should we look at the FY’24 employee expenses if you could give us some outlook on that? And thirdly, was on the International business, so even in the International business the yields have improved quite materially, so what has — are there any such an improvement, yeah?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Yeah, Sujoy, International business…
Surojit Saha — Chief Financial Officer
In respect of the other expenses, other expenses we would like to tell that some of the expenses for which the figure of INR15 crores increased for Q2 FY’23, is firstly INR3.5 crores is in respect of the fund management fees of UTI International. UTI International has seen a substantial growth in respect of revenue from — if you see from INR55 crores to INR65 crores. So accordingly, as you know in respect of the International business the ALP is being paid by the company and not by the schemes. And then INR3 crore is in respect of the membership and subscription fees which we have to pay for the Asia Index Fund that is all BSE, Bombay Stock Exchange related funds we have and also the National Stock Exchange, because if you see the passive fund which has increased by almost INR20,000 crores from INR52,000 crore to INR72,000 crores on a year-on year basis.
And lastly, we have done some investments in respect of our various IT initiatives that is website development and mobile application app in respect of which we had to also do certain expenses which though it’s a capex nature, but we have charged up and its benefits will be over the period, because these are all customer-facing initiatives we have taken, and on those initiatives also we had to do some agile quality management study which also has some expenditure. And the other routine expenditures in respect of TFR/BFEs traveling expenses and because of the normalization of the business activities which has led to higher travel costs and costs related to the different initiatives. So, we feel around INR4 crores to INR5 crore is one-time expenses, which has happened in this quarter, so our run-rate which I told in the last quarter will be around INR50 crores, if you remember, I feel it should be around INR54 cores, INR55 crores. And in respect of the employee cost, I feel the run-rate for the quarter will be around, last quarter it was around INR101 crores, this quarter it is INR103 crores, we feel it will be in this range only. And lastly in respect of the…
Sahej Mittal — HDFC Securities — Analyst
For FY’24?
Surojit Saha — Chief Financial Officer
The cost for the Q1 FY’23 was around INR101 crores and this quarter it is around INR103 crores, so we expect the run-rate to be in this range only.
Sahej Mittal — HDFC Securities — Analyst
Even in FY’24?
Surojit Saha — Chief Financial Officer
Yeah, next year also, next year we feel there should be a little reduction because of the other retirement and all which is on the pipeline. And in respect of the International business, while year-to-date FI outflows from India have been around $22 million, but our offshore funds have marginally positive inflows over this period. We have launched an Innovation Fund a few months back which speaks to invest in the technology-led business across different sectors in India, the endeavor will be to create a strong track-record so that we can distribute this fund at a much wider scale. Apart from that, we have plans to strengthen the retail distribution in the Middle East, increased coverage of South Asian institutional segments from Indian equity. In Europe, we are trying to build an interest in our G-Sec ETF given the likely inclusion of India in the global fixed-income indices, also exploring our options in the U.S. for the Indian equity funds. And definitely why you have seen the yield has increased because if you see the September ’21 our was AUM INR34,536 crores and there is a redemption of our low yielded, which is UTI Phoenix Fund and UTI Chronos Fund, which is around INR10,000 crores, but we have garnered even in UTI India Dynamic Equity Fund around INR1,300 crores and other equity funds around INR700 crores and because of which our yield has improved in the international market. Thank you.
Sahej Mittal — HDFC Securities — Analyst
Got it. And on the — just one follow-up. So, for FY’24 in absolute terms…
Operator
Mr. Sahej, can I request you to speak a little louder please.
Sahej Mittal — HDFC Securities — Analyst
Is it better now?
Operator
Yes.
Sahej Mittal — HDFC Securities — Analyst
Yeah. So, for FY’24 on the staff expenses in absolute terms are we saying that doesn’t see a similar run-rate, INR100 crores, or are we seeing a downward trajectory of that in FY’24 in absolute terms?
Surojit Saha — Chief Financial Officer
Yeah, see, there will be a downward trend because of the retirements are in the pipeline, but anyway normal increment and with respect to the, if at all, we perform in respect of the business, where variable pay will play an important role, but the core employee cost will definitely be on the down trend.
Sahej Mittal — HDFC Securities — Analyst
The absolute employee costs will be on a downward trajectory, okay. Got it. Thanks for this.
Operator
Thank you. The next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Lalit Deo — Equirus Securities — Analyst
Yes, good evening, sir. Thank you for the opportunity. So just two questions. So, especially on the SIP side, sir it seems like in this quarter we have lost market share marginally. So just wanted to understand, so how is the market share trending across channels in the SIP segments, like in the banking, and could you shed some light on that?
Vinay Lakhotia — Head of Operations
So, we are seeing improvement in our market share across categories for the FinTechs as well as for the other channels for the bank tenants. I’m happy to inform you that for the FinTech channel our market shares has improved. Now our — the total SIP market share for the new SIPs has increased — for the FinTechs has increased to 3% — 3.1% sometime back it was around 2% which HAS now improved to 3%. similarly for the banks it has gone up, now we are at around 1.51% of our — of these — that is the share of wallet of our AUM across the bank. So, we are seeing improvement across channels and as you know, the spend that we have in the other distributors be apart from the bank and the FinTechs is very strong.
Lalit Deo — Equirus Securities — Analyst
Sure. And now when you’re moving to on the retirement side, like we have been highlighting that in the last three quarters we have been receiving inflow of about 33%. I mean, that thing is not getting reflected in AUM market share, there we are seeing a sequential decline. So what would be the major reasons for that?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Now RSL influence, if you see the increase in the — so what is the question, can you come again with your question?
Lalit Deo — Equirus Securities — Analyst
Yes, sir. Sir, we have been highlighting that our inflows in the RSL business are now at about 33%, but then in terms of AUM market share that thing is on the declining trend, and it has again declined in this quarter or so.
Surojit Saha — Chief Financial Officer
So, I’ll answer that. I think while in the public sector, the inflows is around 33% but there is a private sector also, so are you taking the combined exposure because of that it could be on a declining trend but on the public sector we are receiving around 33% inflows.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
And so, our private sector is concerned, we had informed all of you, we had this last year, we have a business plan in-place, we are in the process of putting a team to target, we applied for a PoP license, we have a PoP license, we have returned to the other regulators. And accordingly, we will be marketing very aggressively in the private sector as well. We are investing in building the team and infrastructure. We have quite a number of people and in next few quarters we will ensure that we witness growth. In our market share in the private sector as well.
Lalit Deo — Equirus Securities — Analyst
Sure. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Viraj from Banyan Tree Advisors. Please go ahead. Viraj, can you hear us?
Viraj Sanghavi — Banyan Tree Advisors — Analyst
Yes, am I audible?
Operator
Yes, you are now.
Viraj Sanghavi — Banyan Tree Advisors — Analyst
So, in the International business we are seeing the profitability going down on absolute basis, so what is the reason for this is, is my first question? Second question is on the NPS business, even how much are we getting and what is our market-share over there? And third question is on the buyback, the overall buyback in loan, so what is our planning with this?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Firstly, in respect of the international business, we have said that we have opening a new office at Paris, so there are some restructuring going on in the international business. For that the cost has slightly increased, but it will have in long-term basis definitely there will be a growth in the revenue with the new schemes are being launched and the new equity inflows which has happened currently. So, we are definitely, we expect it to be a material contribution to the consolidated profitability.
Surojit Saha — Chief Financial Officer
So far as buyback is concerned, we are still exploring, but we need to be mindful that when we do the buyback there are various other factors that we need to be considered. And we are working in this direction. But I can’t give any assurance of our buyback is concerned.
Viraj Sanghavi — Banyan Tree Advisors — Analyst
And the other question related to NPS business.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
NPS business?
Vinay Lakhotia — Head of Operations
What was the question Viraj on the NPS side.
Viraj Sanghavi — Banyan Tree Advisors — Analyst
So incrementally how much area are we getting versus the other flows?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
We are getting around 31% on regular basis so far, our PSU is concerned, and as I mentioned to you that we are building a team to aggressively market in the private sector.
Viraj Sanghavi — Banyan Tree Advisors — Analyst
All right. Thank you. And Happy Diwali to the team and Happy Diwali to you.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Thank you.
Vinay Lakhotia — Head of Operations
Thank you, Viraj. Wishing you the same.
Operator
Thank you. [Operator Instructions] The next question is from the line of Yash from Citigroup. Please go ahead.
Yash Mehta — Citigroup — Analyst
Hi, sir. One question on the ESOP expense for the standalone business for the quarter. If you can share the number?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Yeah, this quarter it is INR3.85 crores.
Yash Mehta — Citigroup — Analyst
Okay.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
And I can give you the number for the subsequent quarters also, it will be INR7.25 crores and INR5.70 crores.
Yash Mehta — Citigroup — Analyst
So that would be for the — okay.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Yeah, the total this year it will be INR21.52 crores.
Yash Mehta — Citigroup — Analyst
Sure. Thank you. And sir the other was on the lines of the yields in our domestic business crashed, so we understand that the ETF mix have increase and liquidity replacing debt funds, but active equity mix has also increased sequentially. So why did the equity crash so much on a sequential basis?
Surojit Saha — Chief Financial Officer
As I said earlier, the fresh inflow is coming in at a lower yield so that’s why there has been a reduction of around 2 basis-point as far as the equity yield is concern. Also, this particular quarter our inflows under the ETF and the liquid category has been at a much higher rate as compared to the industry because of that it has an impact on the overall lead number. But as the guidance that have been given in the earlier calls as well, as compared to the previous year yields of around 41 basis points, we do see a reduction of around 2 to 3 basis points of yield in the current financial year and that guidance holds good for the remaining part of the financial year as well.
Yash Mehta — Citigroup — Analyst
Okay. Thank you. And sir, distribution mix for SIPs channel wise how has it changed during the quarter?
Surojit Saha — Chief Financial Officer
Yes, so Yeah, a major part of the mix which is coming for the SIP is from the direct business and we see a large part being played by the FinTech. Apart from that the mix of SIP is very similar to the mix that we have given in our presentation on the overall equity mix. So, if you see my presentation, there is about 60% which is coming from direct.
Yash Mehta — Citigroup — Analyst
Okay. Thank you, sir. And just if you can throw some light on the product pipeline if you have?
Surojit Saha — Chief Financial Officer
So, during this quarter, this is the third quarter, we have the plans to launch the Gold ETF Fund of Fund which is live right now and we’ll be closing shortly. Apart from that, we have a plan to launch our them Fixed Income Fund, the SEBI is satisfied. That we are planning to launch in the month of November. We have received approval from the regulator and that will be launched shortly. Apart from that, we have the approval from the regulator for UTI Multicap Fund. We are looking at appropriate time to launch that and we have approval for another FTI Series 35-II and 35-III. Those dates have to be decided, but we have received the approval and it’s at our end now to launch it at an appropriate time.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
So mostly it will be on the fixed income and on the passive side of the equity business.
Yash Mehta — Citigroup — Analyst
Sure. Got it. And sir just lastly was there any replenishment for the international business this quarter?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
No nothing as such. There is the low yielded funds like Phoenix and Chronos which I said in my past answer, they have got redeemed, but it got referred by a good equity content from IDEF and other equity funds. So overall the revenue has improved.
Surojit Saha — Chief Financial Officer
So basically, low yielding asset has actually redeemed and has been replenished by high-yielding assets. Because of that these are slightly spiked.
Yash Mehta — Citigroup — Analyst
Sure. Thank you, sir, this is very helpful. Thank you.
Operator
Thank you. Next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Prayesh Jain — Motilal Oswal — Analyst
Good evening, everyone. Just a couple of questions. Firstly, out of our ETF and next one what was the share of ETF money?
Surojit Saha — Chief Financial Officer
Share of ETF? ETF I think should be close to around 75% to 80% of our total ETF business.
Prayesh Jain — Motilal Oswal — Analyst
Okay, and that should be similar for the industry?
Surojit Saha — Chief Financial Officer
Yeah. I think because ourselves and SBI actually received money from EPFO. The two are the biggest player. For the other AMCs, I’m not very sure about that, but as far as ETF is concerned SBI and UTI only receive money under the ETF category.
Prayesh Jain — Motilal Oswal — Analyst
Okay, okay. And secondly sir just extending that point on the base rank. We have seen that where competitors have declared results has the benefit share of rising share of equities benefiting them and age has improved. Why is it that for us the things are different, and AE on the equity are declining, this is for us?
Surojit Saha — Chief Financial Officer
So. not very sure about competitors. This thing is happening, but what we can do that we have been receiving substantial inflows under the equity categories over the last six to seven quarters and that’s the trend we see continuing it. So as earlier explained in the con-call, in earlier con-call as well, the yield on the fresh inflows is at a lower pace, and so there are other factors that the older AUM is also getting redeem which has an overall impact on the equity yields, plus as I said earlier, for this particular quarter our overall liquid and ETFs percentage of sales has actually improved substantially, because of that there is a marginal impact at what the yield numbers have come from.
Prayesh Jain — Motilal Oswal — Analyst
Could you give some yields on each of the asset classes, what are the current yields and particularly on equity if you can explain as to what would be the yields on the new asset and what will be the yields on the back-book?
Surojit Saha — Chief Financial Officer
So, I can give you the stock and yield. Stock and yield on equity and hybrid fund is close to around 80 to 83 basis points for ETF around 5 basis points, Income Fund will be closely around 30 basis points and liquid fund around 8 to 9 basis points. On the fresh inflows we don’t provide any yield number because again it depends on which channel, which geography this particular business is coming. Stated earlier also the ratio of distribution with the distributor is totally in the range of around 50% to 80%, 50% being with the lower end of the spectrum, which is IFL, and 75% to 80% with banks and national distributor. So very difficult to give a single number as such, but that’s the distribution mix ratio that we have been sharing in the past as well.
Prayesh Jain — Motilal Oswal — Analyst
So how is the sharing of the difference between the individual distributors and national distributors and bank?
Surojit Saha — Chief Financial Officer
So, as I said, 50% will be shared with individual financial distributor, 50% to 60%, and with the national distributor and bank it would be in the range of around 75% to 80% of the total distributable expense ratio.
Prayesh Jain — Motilal Oswal — Analyst
Okay. Got that. And last question, sir, on the ETFs, do we have any plans to launch smart beta ETFs that can give us better yield?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Yeah, so I think we already launched sometime last year with the momentum in that fund, which is actually a smart beta product, and yeah, most of the ETF launches in next due course of time, I think will be in that range. This should provide some fill-up to our yield number maybe Sanddep can share some of those ETF category? Sandeep?
Sandeep Samsi — Executive Vice President, Head of Corporate Communications, Strategy and Investor Relations
Yes, we have yet to receive the approval, so we have — as we mentioned we have a long list of funds which we want to launch, including some of the active-passive, which are the Nifty’s 100 enhanced ESG index funds. And the other funds which we want to launch. So, these are all fine, however we are yet to receive the approval.
Prayesh Jain — Motilal Oswal — Analyst
Okay. And on the debt side, do you see that it is going higher, going ahead now that the money should start moving towards longer duration from 30 bps to 40 bps you mentioned, can it move by the end of this year towards more like 35 bps?
Surojit Saha — Chief Financial Officer
It could happen very well yes because most of the product I think the demand should come in a longer duration product where the yields could be slightly better. So yes, there could be some few basis-point incremental management fees as far as the income fund is concerned.
Prayesh Jain — Motilal Oswal — Analyst
All right. Thank you and wish you all a very Happy Diwali.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Happy Diwali to you. Thanks.
Operator
Thank you. Next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.
Nirmal Bari — Sameeksha Capital — Analyst
Yes, sir. Thanks.
Operator
Nirmal, sorry but your voice is breaking. May I request you to come in a better reception area please. We will move to the next participant. The next question is from the line of Kunal Shah from ENAM Investment Services. Please go ahead.
Kunal Shah — ENAM Investment Services — Analyst
Yeah. Hello sir. I have two questions. First is, in the half year we had a net capex of around INR29 crores in property, plant and equipment. So, could you elaborate on what was the nature of this capex? And the second question is regarding the competitive intensity, if you could share some light on the competitiveness in market in terms of mutual funds?
Surojit Saha — Chief Financial Officer
Yeah, regarding the capex, it is in effect of the building we have done some initiatives as well as IT initiatives which have been taken, these are the two major reasons why the capex has improved.
Vinay Lakhotia — Head of Operations
Yeah Kunal, on the competitive intensity. I think the mutual fund industry remains competitive. We are as a longstanding goal player of the industry we have built our relations with our partners the key mutual fund distributors or the bank or even the newest partners like FinTechs. So we continue to work on our relationship, we don’t take anything for granted and we realize the fact that as the market grows the competitive intensity will also grow, so we have to always work on what we have and build-on our strength so that’s what we look at Kunal.
Kunal Shah — ENAM Investment Services — Analyst
Okay. Just a follow-up on the capex part, so how long do you think the INR40 crore kind of run-rate, annual run-rate that we will be doing, how long will that sustain, because in the end you don’t require too much capital in this business?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
No, no, these are all because of the last 3, 4 years we have not done any capex investment in terms of our IT initiatives so those are mainly it is in respect of the information technology upgradation for the customer facing initiatives which UTI’s taking forward.
Kunal Shah — ENAM Investment Services — Analyst
Okay. And the building part, what was the capex, if you could elaborate a little bit.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Building, we don’t have — already what is on the cards as of March ’22 it is there; we are not taking any other buildings as a capex. But the innovation is going on and we have two-and-half floor more to renovate. It is a very old building and that needs a serious revamping of the infrastructure to provide employees a good place to work. And our goal is to have to be an employer of choice and therefore we need to provide a good work environment. So, we have renovated, we are in the process renovating the entire building. We have completed the renovations in new cafeteria which is work free, we are renovating rather two and a half floors and there will be some cost for this financial year and as well as first half of the next financial year, and there will not be any further capital investment in building. So far as IT infrastructure is concerned, you know it is the need of the day and we need to continuously invest in the IT infrastructure, we will stay competitive and make UTI completely digital organization. And that expenditure is not expenditure, it is an investment for future business and that will help us to reduce optimize the costs and enhance the profitability and productivity.
Kunal Shah — ENAM Investment Services — Analyst
Got it. Got it. Great. Thank you so much sir.
Operator
Thank you. [Operator Instructions] The next question is from the line of Raghvesh from Premji Invest. Please go ahead.
FRM Raghvesh — Premji Invest — Analyst
Hello sir. Two questions. The first one was on the tax provision that you had mentioned, substantially increased the percentage of PBT. Sir, can you give some color on how to estimate that going forward? The other thing can you elaborate on how the PMS keeping income, the dynamics, how can we look at it going forward and what was the major companies existing?
Surojit Saha — Chief Financial Officer
In respect of the effective tax rate for this particular quarter you have to see the effective tax rate for the full financial year even in the last quarter if you see it was different, for the full year it will be around 22 bps to 23 bps, and this particular quarter it is more because as you know in the last quarter there was a INR37 crores loss, M2M loss, and this financial year there is a gain, because of the dividend we had to do a repurchase so there is a realized gain also has come into the books and because of this the tax rate has increased. But for the full financial year, it will be around 22 bps to 23 bps which we will be maintaining for March ’21 as well as March ’22.
FRM Raghvesh — Premji Invest — Analyst
Okay. Thanks. And on the PMS?
Surojit Saha — Chief Financial Officer
Yeah, PMS is, as you know, throughout the last 12 months year-on year it’s around INR13 crores of PMS fees. It Is less than 1 bps as you all know, and we have mentioned in all the earlier calls so it’s a volume game once the AUM increases it will be contributing, but it will not be a very substantial contribution to the revenue.
FRM Raghvesh — Premji Invest — Analyst
Okay. Thanks for that. And Happy Diwali.
Surojit Saha — Chief Financial Officer
Thank you. Happy Diwali.
Operator
Thank you. The next follow-up is from the line of Sahej Mittal from HDFC Securities. Please go ahead. Sahej? The next question is from the line Sahej Mittal, may I request you to unmute your line please. Due to no response, we move on to the next participant. The next question is from the line of Amay from Metaverse Equity Fund [Phonetic]. Please go ahead.
Amay — Metaverse Equity Funds — Analyst
Yeah, good evening, everyone. So. I would like to know your thoughts on impact of interest rate on fixed-income part of the business in the financial year. I’ll let this one.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
What was your question, come again please?
Amay — Metaverse Equity Funds — Analyst
Interest rate — fixed income side of revenue impact?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Fixed rate, yeah. I think for fixed income is the right person to speak on this particular subject and I have no comments to offer as a CEO of the organization, but as you know it is nearly coming to the settled down situation and there may be some small hike in installation, but I’m not the right person to speak on this particular subject. If you need to know, we continue to note separately, and so you can send your request to Sandeep and we will send you the reply, appropriate reply.
Amay — Metaverse Equity Funds — Analyst
Thank you.
Operator
Thank you. Next question is from the line of Kunal Thanvi from Banyan Tree Advisors. Please go ahead.
Kunal Thanvi — Banyan Tree Advisors — Analyst
Hi, thanks for the opportunity. So I had two questions, one was on the number of employees that got retired this quarter, and how many of them will get retired this year — for current financial year, and of that how much cost reduction we are expecting this year like we had mentioned some numbers last quarter, are we maintaining those numbers? That is question number one. Second on the international business, you said that you know we have invested some money this quarter in terms of opening of offices etc. which led to reduction in operating profits, how should one look at for this whole financial year, like in the first quarter we did our operating profit of around INR15 crores and this quarter we did some INR6 crores, like we will be maintaining the INR6 crore run-rate or will go back to INR15 crores run rate from the next quarter? Yeah, these are two questions.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
On question number two, we are not expecting any further expenses so far as the Paris office opening is concerned, the expenses is done. And so far as your first question is concerned about how many people retiring, Surojit?
Surojit Saha — Chief Financial Officer
Yeah, so for ’22, ’23, around 60 people will be retiring and there will be a saving of around INR7 crores to INR8 crores. And this was the figure we have mentioned earlier also, and for ’23, ’24 it will be around 50 people and the saving will be around INR8 crores.
Kunal Thanvi — Banyan Tree Advisors — Analyst
Sure. And one more question on the hybrid side back like two, three quarters back you had said that you know we don’t have a product on the hybrid category as such because we had some ULIP product and we were trying to solve the issue with SEBI, any update on that?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
We have taken up the matter with SEBI and the work is in progress. And we are also planning to file and seek the approval first from the Board and the trustees and plan for that. But it is a work-in-progress, and I can’t give any forward-looking statements about the timeline.
Kunal Thanvi — Banyan Tree Advisors — Analyst
Sure, got it. Just last one if I can squeeze in was on, you in one of the comments you had mentioned about hiring new employees for other initiatives like in terms of what we understand is in last two years we have hired people across the teams, we have strengthened our team, where we are in that journey because what has happened is at one side we have been reducing employees, another side we have hiring more people to strengthen the team, so hence the cost benefit is not reflected in the financial. Now in terms of strengthening the team where we are in journey across department functions?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Good question. In the various department, let me give you the first of all investment, and investment we don’t need any further addition of the manpower, we are sufficient number of professionals to take the company forward. In the sales and distribution, at the senior level we don’t need any further hiring, but at the junior level, relationship managers, as you know the attrition is also very high, but we will continue to expand. We are seriously working to rationalize our branch office costs and that process will continue. We don’t have any plan to hire the folks or employees in any other functions so far as the operation is concerned or HR is concerned. We are — whoever retire from non-managerial staff we are not rehiring those, we’re only hiring for the managerial staff. On the subsidiary side, yes, we will — we are building the competencies in UTI Capital. We have the team, and we will have some more folks and the associates in UTI Capital. UTI International, as Surojit mention to you that we have launched our U.S. strategy. We will be building a team in U.S. We will be expanding our network and our team in Middle East so we may have — we will witness some added, those investments very significant results in the years to come. And the corporate office, there will be a continuous reduction so far as the manpower is concerned. To summarize, the Class III, Class IV and non-managerial staff whoever is retiring there is no substitution, going one for all. So far as the investment is concerned, generally we will do only the replacement and no further addition. Sales we need to build A-Class distribution team and wherever is required at junior level we will hire the folks.
Kunal Thanvi — Banyan Tree Advisors — Analyst
Sure. Got it. So, in terms of our absolute cost structure when we look at both employee and non-employee, how should one look at it, like is there any possibility that we’ll see absolute cost reduction or it will be stable the way it is, because in the past we had also indicated that the employee costs would reduce on absolute basis, but now commentary seems like that it will be there where it is, that is INR100 crore run-rate. Any thoughts on absolute reduction of cost over next two years would be helpful.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
Very good question. I think you need to see the cost in a different way, you need to see how much is the ESOP costs, if you take-out the ESOP cost then there is it downward trend. Throughout there is a downward trend and this trend will continue. And therefore, Surojit can give you the information, one is the employee cost and the ESOP cost. So if you see separately, the segmentation of the implied cost you will find a downward trend, but ESOP costs as you know it is not the cash cost, it is a book entry, and we need to continue to issue the ESOP for our team to ensure that we are in a position to retain the talented people, particularly the investment. Our ESOP policy is building the case, 100 plus persons of our investment team will get the ESOP. So, this is important from — and your question is very relevant, we had given the guidance and we are committed to take the employee cost on the downward trend.
Kunal Thanvi — Banyan Tree Advisors — Analyst
Sure. So, we will see…
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
We will then give you separately, breakup. Surojit, you have the information ready, or you want to…
Surojit Saha — Chief Financial Officer
We have. Yes. If you see the June ’22 our actual employee cost — core employee cost was around INR75 crores, INR76 crores, it has come down to INR73 crores in quarter — September ’22. And only the variable cost will depend obviously on the business we garner and how our sales team and the investment team perform, but the core employee cost will show a downward trend in future.
Kunal Thanvi — Banyan Tree Advisors — Analyst
Got it. Thank you so much. All the very best. Happy Diwali.
Surojit Saha — Chief Financial Officer
Happy Diwali.
Operator
Thank you. Participants, we will take the last question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Prayesh Jain — Motilal Oswal — Analyst
Yeah, hi. Sorry to labor on this employee cost again. You mentioned that in the next couple of years this year and next year included, you will have around 110 kind of employees retiring and that will lead to a saving of INR16 crores, right?
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
No, no, saving will be more than that, but you also need to give increase in salaries to the employees year-on-year, so this is a net effect. And then after giving them salary increase, we are saving the money, you need to see that from that particular angle, as employee, all of us are entitled for the salary increase and if it’s a competitive market where the skilled staff are in this, we need to give a salary increase year-on year but still we are seeing a downward trend.
Prayesh Jain — Motilal Oswal — Analyst
The INR16 crores saving will be net of increment given variables will be different, variable pay is…
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
That’s correct.
Prayesh Jain — Motilal Oswal — Analyst
All right. Thank you, sir.
Operator
Thank you. As there are no further questions, I will now hand the conference over to, Mr. Imtaiyazur Rahman for closing comments.
Imtaiyazur Rahman — Managing Director & Chief Executive Officer
I would like to express deep gratitude and thanks to all the participants for participating at this particular point of time, despite your busy schedule, I know a lot of calls are there. Thank you for participating. I would like to thank all our partners, my colleagues and everyone for actively participating to take UTI to the new high. I now once again extend my deepest greeting on a personal behalf, on behalf of UTI to our partners, to all the participants here and to the entire country men and women for a Happy Diwali and Festive weeks ahead. Thank you so much and good luck. Stay safe and stay healthy, bye-bye.
Surojit Saha — Chief Financial Officer
Thank you.
Operator
[Operator Closing Remarks]