UTI Asset Management Company Limited (UTIAMC) Q4 FY23 Earnings Concall Transcript

UTI Asset Management Company Limited (NSE:UTIAMC) Q4 FY23 Earnings Concall dated Apr. 27, 2023.

Corporate Participants:

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Sandeep Samsi — Head of Investor Relations & Corporate Communications

Vinay Lakhotia — Head of Operations

Surojit Saha — Chief Financial Officer

Analysts:

Swarnabha Mukherjee — B&K Securities — Analyst

Viraj Kacharia — SiMPL — Analyst

Lalit Deo — Equirus Securities — Analyst

Prayesh Jain — Motilal Oswal — Analyst

Dipanjan Ghosh — Citi — Analyst

Abhijeet Sakhare — Kotak — Analyst

Gaurav Jani — Prabhudas Lilladher — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the UTI Asset Management Company Limited Q4 FY ’23 Earnings Conference Call. From the management, we have with us Mr. Imtaiyazur Rahman, CEO and Managing Director; Mr. Surojit Saha, Chief Financial Officer; Mr. Vinay Lakhotia, Head, Operations; and Mr. Sandeep Samsi, Head, Investor Relations and Corporate Communications. We also have with us an Investor Relations team from Adfactors joining us on this call. [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 side of the investor presentation that has been shared earlier.

I will now hand the conference over to Mr. Imtaiyazur Rahman for opening remarks. Thank you, and over to you, sir.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Thank you very much. Good afternoon, everyone. Thanks for joining us today to discuss our operational and financial performance. The year witnessed some turbulence globally, the major economies world over are taking measures to tackle the inflation in the best possible manner. It is also encouraging that these economies are taking all possible measures to effectively manage the rising interest rate scenario and the challenges being faced by the financial sector. The Indian economy too remains robust, receiving recognition globally for our economic resilience and the growth prospects. Our mutual fund industry also has demonstrated resilience and is keen for fast growth. Various factors like rising household savings, broader geographical reach of financial products in Tier 2 and Tier 3 cities and a growing share of mutual fund in the financial savings are positive factors that will help drive the development of the sector in a significant manner over the next decade.

The year was characterized by volatility in terms of inflows and outflows from mutual fund schemes. However, the flows in the equity funds has been positive and so as the SIP flows. The SIP contribution in March 2023 was INR14,276 crores. There’s a positive inflow into the equity funds are testimony to retain investors’ confidence in the Indian equity market. And these investments are supporting the benchmark indices amidst investor sentiment.

The total Asset Under Management of UTI Group registered a growth of about 15.4% over the corresponding quarter of previous year and stood at INR15.56 lakh crore as on 31 March 2023. This is a figure of the entire group.

Friends, in UTI, we are focusing on the 5 key objectives: first, to be among the best, good governed company. Government is one of the most important pillars on which UTI stands. Six out of 10 directors on the UTI AMC Board are independent directors. UTI AMC Board, along with the boards of all our subsidiaries have women representation. Two, building a A-class human capital. Realizing the significance of human capital, in an investment organization like ours, we have been investing in acquiring, building and retaining talent with focus on gender diversity. Accordingly, 32% of the hires in the last 4 years were women. And currently, 27% workforce is made up of women employees. We have initiated measures for cash facility for our employees. We have made significant investments to create a state-of-art infrastructure for our investment team. We are also build capabilities for our team. We have created customized training and development program for employees in different levels.

Third, digital-first organization. During the year, we saw a very good response by investors and distributors in respect of our digital sales and digital engagements. Our digital campaign have resulted in influencing sales across all touch points of UTI AMC. We are in the final stage of re-launching superior digital asset, website and mobile app for our partners and investors. Fourth, geographical spread and financial awareness, we are planning to open 29 new offices during the financial year ’23-’24 to reach newer markets across the country. Our investment team has been traveling to various locations all over India to spread awareness about the investment philosophy and processes, considering the potential of the B30 cities. We already have 108 out of 166 UFCs in these locations.

Finally, deeply embedded ESG compliant framework. We have formed an ESG Committee of the Board, which provides guidance and oversight. We have in place a robust ESG framework, covering all relevant aspects for planning at effective implementation. Friends, we are using 100% renewal energy for our corporate office and have received a green energy certificate. During this month, we also published our first sustainability report. Under our social initiatives, our CSR project supplements our commitment to ESG for social upliftment and conservation of involvement.

Our subsidiaries for retirement business, alternative investment products and offshore funds are growing with expansion in operations and business. I would like to share some highlights about our group companies. UTI International, which is 100% subsidiary of UTI AMC has formed a new subsidiary in the United States named UTI Investments America to capture the opportunity in North American market. In UTI Capital, we are building a strong team for opportunities in the alternative business space. We are also planning a series of fund launches such as Real Estate Opportunity Fund and others in the alternate segment and are filing necessary documents with the regulator. While the company is fully capitalized, we have recorded a net loss of INR3.3 crores due to the various investments being made to build that business. UTI RSL, the retirement business in the — retirement business in the country is a very big opportunity, and we have plans to expand our team and open our new point of presence across the country. The business has been growing rapidly, and we aim to capitalize further on the same and enhance NPS business.

Friends, to summarize, we initiated several progressive measures like building resources up in sales and investment enhanced engagement of fund managers with our distributors and partners, conducting investor awareness program, launching, learning and development initiatives for employees, enhancing focus or KYC compliances, upgrading infrastructure of the company and as well as a subsidiary. As one of the positive developments, UTI was appointed as one of the asset manager for the investment ETF for a period of 3 years. Central Public Sector Enterprises have also enabled a policy to continue their investment in all mutual funds, including UTI. In financial year ’23-’24, the participation of the retail investor in Indian growth story is likely to be the key factor for the Indian capital market.

Friends, for this call, I have with me my distinguished colleagues, Mr. Surojit Saha, Chief Financial Officer of the company; Mr. Vinay Lakhotia, Head, Operations of the company; and Mr. Sandeep Samsi, Head, Investor Relationship and Marketing to work with me.

I will now hand over to Mr. Sandeep Samsi, who will give details of UTI MF’s performance. Over to you, Sandeep, and thank you.

Sandeep Samsi — Head of Investor Relations & Corporate Communications

Thank you, sir. I will first take you through the UTI Mutual Fund’s performance during the fourth quarter and for the full year ending FY ’23. UTI Mutual Fund’s performance, the total assets under management for UTI Group registered a growth of about 15.4% over the corresponding quarters of previous year and stood at INR15.56 lakh crore as on 31st of March 2023. For UTI AMC, the quarterly average AUM as on 31 March ’23, stood at INR238,791 crore, up by 6.7% year-on-year against the industry growth of 5.6%. As on 31st of March 2023, our market share has increased to 5.89% for the quarter ended.

The quarterly average AUM for Index and ETF recorded a year-on-year growth of 33% to INR82,871 crore for the fourth quarter. Our equity quarterly average AUM for the quarter ended March ’23 stood at INR70,494 crores, rising by 2% as compared to the quarter ended March ’22. UTI was able to capture a market share of 8.5% of the gross sales of the industry during the fourth quarter. UTI Mutual Fund recorded a net sales of INR1,208 crores for the quarter 4 of the financial year ’23. ETFs and index funds net inflows stood at INR1,100 crore, hybrid fund witnessed a net flow of INR719 crores for the quarter. During the quarter under review, UTI added 36,000 folios taking up the number of live folios to 1.22 crore as on 31 March 2023 from 1.19 crores as of 31 March 2022. Our SIP AUM witnessed a growth of 17.5% over the corresponding quarter of last year, reaching to INR21,509 crores as on March ’23 from INR18,311 crore as of March ’22. During the quarter, a number of SIP accounts rose by 2.14 lakh taking the total number of live SIP folios to 25.2 lakhs as of 31 March 2023.

The SIP inflows for the quarter stood at INR1,667 crores, rising by 12% year-on-year, with the average ticket size being INR3,262 for March ’23. 22% of the monthly average AUM for March 2023 came from B30 cities, while the industry average stood at 17% in terms of its B30 monthly average AUM. The weighted average AMC yield was at 35 basis points for the quarter ended and was 37 basis points for the full year FY ’23.

Now, I come to UTI AMC’s financials. During the fourth quarter, the company posted a consolidated net profit of INR86 crores, recording a growth of 43% quarter-on-quarter and 59% for year-on-year. For the financial year ’23, the consolidated net profit stood at INR437 crores. For UTI AMC stand-alone, the PAT of UTI AMC stand-alone in quarter 4 FY ’23 was INR98 crores, reflecting a growth of 31% year-on-year and a decline of 10% on a quarter-on-quarter basis.

For Retirement Solutions Limited, the UTI Retirement Solutions, as we know, manages the NPS corpus for the government and the non-government sector. The AUM for UTI Retirement Solutions has increased by 19.2% on a closing basis to INR240,709 crores in quarter 4 of FY ’22 and has a share of 26.78% of the industry AUM. The profit after tax of UTI RSL is at INR46 crores, an increase of 10% as compared to the corresponding quarter of last year.

UTI International Limited. UTI International has an AUM of INR21,703 crores as on 31 March 2023. Our international clients are across more than 35 countries. These are primarily institutions, pensions, insurance, banks and asset managers. One of our flagship funds, the India Dynamic Equity Fund, domiciled in Ireland has an AUM of USD852 million. UTI International J Safra Sarasin Responsible India Fund and ESG-compliant fund has an AUM of USD75 million. UTI Innovation Fund launched in the first quarter of this year — of the last financial year has an AUM of USD19 million. The management fees of UTI International is at INR129 crores, an increase of 1.66% year-on-year from INR127 crores in quarter 4 of last financial year.

UTI Capital Limited, as Mr. Rahman has highlighted, we are building this business. UTI Capital, it has a total AUM of INR1,707 crores currently managing active debt funds like the UTI Structured Debt Opportunities Fund I, which was launched in August 2017 and closed in May 2019 and has an AUM of INR137 crores. Currently, the fund is in exit mode. UTI SDOF II, which was launched in September 2020 and has an AUM of INR506 crore. The fund is currently in fundraising, as well as investing stage. SDOF II has a very defined age, policy and strategy.

UTI Multi Opportunity Fund launched in March of 2022, has an average AUM of INR763 crores. Currently, the fund is an investing stage. UTI SDOF III, which was launched in September ’22, has an AUM of INR506 crores and the fund is currently in a fundraising, as well as investing stage.

The employee cost of the organization — the employee cost of the group for the financial year ’22-’23 was INR415 crores, witnessing an increase of 2% over the last year. The employee cost of the group in quarter 4 of FY ’23 was INR107 crores, witnessing a decrease of 7% year-on-year as against an amount of INR115 crores in the quarter 4 of FY ’22.

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 operation and financial highlights on this call for the fourth quarter and financial year 2022-’23.

With this, I would like to open the forum for our questions — for your questions, and thank you for joining this call today. Thank you.

Questions and Answers:

Operator

[Operator Instructions] We have the first question from the line of Swarnabha Mukherjee from B&K Securities.

Swarnabha Mukherjee — B&K Securities — Analyst

Three questions from my side. First one, on the yield, so there has been a quarter-on-quarter drop in the yield. So I just wanted to understand what would be the factors driving that?

Second question is in terms of the other expenses, this had also seen some amount of increase. So if you could highlight the reasons behind that increase?

And thirdly, in terms of the International business, the AUM for the business has now — is now around INR21,000 crores. So it has seen some reduction. So [indecipherable] market or anything else to read into this, if you could highlight? That will be my 3 questions.

Vinay Lakhotia — Head of Operations

This is Vinay here. So I’ll take the questions on the yield, and Surojit will take the questions on other expenses, as well as the international piece.

On the yield part, there’s a marginal decline of yield between the — as compared to the last quarter of almost around — close to around 0.5 basis point decline. Again, primarily because of the decline in the yield under the equity category, where the yield has actually fallen by close to around 2 basis points during the last quarter. Again, primarily two reasons, because the fresh inflows are coming at a lower yield as compared to the stock AUM and plus close to around — there have been a redemption of the older AUM, which has been carrying that slightly higher yield. So these are the 2 primary factors because of which the yield has actually come down marginally by close to around 0.5 basis point as compared to the previous quarter.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Surojit?

Swarnabha Mukherjee — B&K Securities — Analyst

Sir, just a follow-up. Can you indicate what is the yield you are seeing on the stock AUM and the fresh AUM on the equity segment right now?

Vinay Lakhotia — Head of Operations

So on the stock AUM, the yield is close to around on — the equity side and the — equity and the hybrid side, it is close to around 75 basis points. I can’t give an indicative numbers on the fresh AUM because the distribution mix between the distributor and the AMC varies depending on the categories of the IFAs and the distributor. But normally, the distribution which is in the range of around 50% to 80% of the total expense ratios of the fund. So indicative range won’t be possible, but that’s the indication that we have been providing in the last few call as well.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay. Got it, sir. Yes. It could continue on the [indecipherable].

Vinay Lakhotia — Head of Operations

Yes.

Surojit Saha — Chief Financial Officer

In respect of the other expenses, the increase is around INR16 crore from INR56 crore in Q3 to INR72 crore in Q4, which includes some of the expenses like an amount of INR4 crore is to a CSR actual outflow of cash, it is better that CSR amount has to be booked on actual outflow and it is not based on the accrual basis. The actual payment was in the last quarter, though, there was a commitment towards CSR in Q3 FY ’23, there was no actual payment since the amount was not requested by the concerned institutions to whom we had committed. The same has been accounted in the last quarter and reflected the increase in cost.

After coming out of the COVID situation, in the last year, our business operation significantly increased with business travels, visits of the fund managers to different centers for the purpose of creating sustained growth in business and creating awareness about our investment philosophy across the country. For the first time, we conducted a sales meet, in which the entire sales team across the country participated for the strategic sales discussion. And this has reflected in the increase of cost of INR3 crore, which includes the travel, as well as the related expenses for this initiative, which we consider as an investment for the future.

During the quarter, we also spent INR2.5 crore for the digital initiatives, security of the business application and disaster recovery systems across our applications. Further, the subscription fees for index funds have increased corresponding to the increase in AUM, the subscription fees linked to the quarterly average AUM, Nifty banking and banking ETF AUM increased significantly from INR70 crore to INR2,500 crore over the year. The Nifty Index fund AUM increased from INR6,300 crore to INR10,000 crore, and Momentum Fund went up from INR1,100 crore to INR2,200 crore. In view of this trend during the year, there is an impact on Q4 also in view of the linkage of the index fees to the AUM, the quantum of the fees paid during the quarter also increased by INR1.5 crore. Further, there was an increase of INR2 crore in the PFRDA fees paid by UTI RSL, which is in tandem with the increase in the management fees, UTI RSL has started business promotion expenses for increasing the NPS business by reaching out to the pan-India opportunities.

And lastly, towards the promotion of ESG in our company, we took membership of Sustainability Accounting and Standard Board, which is SASB, an internationally leading organization and which did the sustainability and value reporting, which has an expenses of INR1 crore. These are the major expenses. And out of this INR16 crore, around 50% will be on one-time expenditure and around INR8 crore will be a recurring expenditure.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Also the Bloomberg expense is INR1.5 crore.

Surojit Saha — Chief Financial Officer

And Bloomberg expenses, because you know last year also, we have added few terminals, and we said that we initiated Bloomberg Terminals across our investment fund managers. So there was an increase of INR1.5 crore.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

And as well as the depreciation in the currency also impacted. Yes.

Swarnabha Mukherjee — B&K Securities — Analyst

Yes, just a follow-up, sir. This index-related charges, we are paying to NSE.

Surojit Saha — Chief Financial Officer

NSE, as well as Asia Index, that is the BSE charges, both.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay. And how is it accounted for? Has the whole charge paid in 4Q every year? Or…

Surojit Saha — Chief Financial Officer

It is done every quarter. So this particular quarter, it was around INR1.5 crore, which is an increase compared to the last year’s like — last quarter.

Swarnabha Mukherjee — B&K Securities — Analyst

And in terms of the [indecipherable] business, the PFRDA charges, the increase that you mentioned, has that come because our AUM has increased and so we’ll continue [Phonetic].

Surojit Saha — Chief Financial Officer

Yes, of course, yes. AUM has increased. If you see over the year — full year the business AUM has increased by around INR40,000 crore. And as you know, out of the 5 bps, 5 bps is accounted as a seller service and 1.5 bps is accounted as an expenses.

Swarnabha Mukherjee — B&K Securities — Analyst

Right. Okay. So that incremental INR40,000 crore, part of that has come this year.

Surojit Saha — Chief Financial Officer

Yes. And lastly, in respect of UTI International AUM, actually, we have a few funds, which are a periodic funds like Phoenix Fund, 2 Phoenix Fund has matured during this particular period. One is a INR1,500 crore Phoenix Fund, which is B19 then another INR2,900 crore and another one is around INR1,600 crore. So totally around INR6,000 crore in respect of that and India Dynamic Equity Fund, which you know is a leading fund for the International business. There also, there was a repurchase redemption pressure was there. So it’s around INR2,000 crore, and the fund is doing well. And you know across globally, the growth stocks have not been performing. So we expect a turnaround in next year. Hopefully, this will be — and Mr. Rahman has already informed during his speech that we have opened office at Paris and America to improve our International business.

Swarnabha Mukherjee — B&K Securities — Analyst

Sure. In IDF, the redemption is coming from [indecipherable] because I remember that you mentioned last quarter you had redeemed [Phonetic].

Surojit Saha — Chief Financial Officer

We have not redeemed yet. Our seed capital, we have not redeemed. This is one of the HNI investors at this market level who has invested much long before when the scheme was launched. So he redeemed these investments. We have not done yet. We are waiting for the opportune movement, and we’ll definitely try to reduce our exposure in this seeds capital.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

But the redemption is very minimal. It’s more on the currency, which is depreciated by 6%, 7% and 17% is basically the performance issues. But redemption is only to the extent of 5.5%, 6%.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, sir. And out of this INR20,000 crore, how much do we hold right now, our investment?

Surojit Saha — Chief Financial Officer

Our investment is around INR7,000 crore.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay.

Surojit Saha — Chief Financial Officer

INR7,000 crore is the total IDF size now. We should be around INR350 crore type.

Swarnabha Mukherjee — B&K Securities — Analyst

Yes. So, I mean, you invested…

Operator

Mr. Mukherjee, this is the operator.

Swarnabha Mukherjee — B&K Securities — Analyst

Sure. I just had a final follow-up on this. Nothing…

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

It is around INR31 crores, sorry, sorry.

Swarnabha Mukherjee — B&K Securities — Analyst

So your initial is around INR31 crores. And that has gone up to how much, that is what I wanted to do know, sir?

Surojit Saha — Chief Financial Officer

Yes.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Sorry, what?

Swarnabha Mukherjee — B&K Securities — Analyst

At the curing level, how much is this [Phonetic]?

Surojit Saha — Chief Financial Officer

Initially, we’ve invested INR25 million. It went up to INR36 million, and we have already repurchased around INR6 crore to INR7 crore. And today, the outstanding figure is around INR30 crore type.

Operator

We have the next question from the line of Viraj from SiMPL.

Viraj Kacharia — SiMPL — Analyst

I just had 2 questions. First is on the book. So if I look at the equity and the hybrid book, can you just give some color on what share of book is now new flow, the one which comes in a much more higher sharing with the distributor? So can you just give some perspective?

Vinay Lakhotia — Head of Operations

So less than 20% of the overall book is actually the old AUM and almost 80% is the new AUM only.

Viraj Kacharia — SiMPL — Analyst

Okay. So basically then going into FY ’24, we should see the yield should be more or less stabilized for us, because now the book is, by and large, the new…

Vinay Lakhotia — Head of Operations

Yes, we expect until unless there is a significant reduction on the older AUM, we should see some stabilization in the yield. But the overall yield will still have a drag-down effect because of the growth under the ETF and the Index category.

Viraj Kacharia — SiMPL — Analyst

Okay. And second question is largely in terms of the competitive dynamics and on the — so if I look at a year back, we had — and not just us, but the industry has seen a very high competitive pressure and also a significant increase in sharing with the distributor. How is that? If you could just provide some perspective in terms of the competitive landscape and especially in terms of pricing and sharing of TER with the distributor in China? So has that normalized? Or has that corrected or that is still elevated?

Vinay Lakhotia — Head of Operations

No. I think it has more or less become a standardized distribution ratio only. As I stated earlier, most of the AMCs are sharing in the ratios of around 50% to 70%, some maybe sharing slightly higher. So depending on the distributor category, whether it is an individual IFA or a larger national distributor or a private or a foreign bank, the ratios are changing. I don’t think that the competition has anything to do with that. I think over the last 2 years or so, the pricing has become more or less the standardized norms only, as far as sharing is concerned between the manufacturer, as well as the distributor.

Viraj Kacharia — SiMPL — Analyst

Okay. And just one last question, if I can squeeze in. On the expansion part, what I heard — correct me, you said that we’ll be looking at adding another 29 branches. Now, if you look at the spread of our current network itself, and based on the last few calls and what we understand, there’s still a good amount of throughput — potential throughput, which we can further leverage from existing branches itself. So compared to the potential, the AUM per branch or the turnover at the branch level is still relatively lower than what the potential could be. So what is the thought process behind adding another 29 branches when we have all the — we still have scope in terms of further increasing the throughput in existing brands? And in relation to the digital physical mix expansion strategy we talked about over the last 1 or 2 years.

Sandeep Samsi — Head of Investor Relations & Corporate Communications

So Viraj, good question. This is not an either or strategy. This is an and strategy. So while we look at different markets, we realize that there is enough amount of potential in the top 30 markets, which we have also mentioned that we have work to do, and we are continuously working with our partners in those markets. However, the India or the Bharat as it is colloquially called is growing, and we see a lot of potential in these smaller markets also. Now, there is a huge amount of education, which is coming in these markets and there are people who are ready to work in this market. So that’s why we want to open and tap these markets, which has got the potential for us to grow over the next maybe 3 to 5 years. They will not be immediately mature enough. But over the next 3 to 5 years, they will give us good return.

The second part is, yes, we are also focusing on the digital part, but India is still not completely digital. It’s still a digital world, where in India, people while they want to use digital mode, they also look at physical modes. So you have to follow an and strategy. You have to focus on the top 30 cities. You have to look at beyond 30 cities, you have to open in the Tier 3, Tier 4 cities, as well as you have to have a very clear digital strategy to be present, omnipresent across, whether it is on the website or the app or any other mode through partners.

Viraj Kacharia — SiMPL — Analyst

So what kind of opex we will be looking to incur for these 29? And typically, what is the gestation period in terms of the branch to start contributing in terms of profitability?

Surojit Saha — Chief Financial Officer

Yes, we are expecting it around 1.5 to 2 years, it should break even. We have plans and based on the potentials what we already have, we are opening these branches. So our existing plan is to open these 29 branches, and it should break even by 1.5 to 2 years.

Viraj Kacharia — SiMPL — Analyst

Investment, sir?

Surojit Saha — Chief Financial Officer

Investments around for these 29 branches, it will be around INR3.2 crores [Phonetic] because we are expecting to open around 500 square feet to 600 square feet area. The total restructuring is what we are doing in respect of our big offices, which we have.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Viraj, if I can, I am Rahman. Two distinct strategies, which we are working on. We have — we had a strategy meet here in Jaipur and we are attending this call from Jaipur. One is the top 8 cities, which is our key focused area. And second is rationalization of our branch offices. So earlier, we opened a lot of branch offices, bigger in size, which is no longer required. So we are going to rationalize all our branch offices in this financial year. And therefore — and we’re also here to expand. The savings which will come out of those rationalizations will be good enough to meet our expansion requirements. So we are not expecting much pressure on our P&L account other than INR3 crores to INR4 crores, which Surojit has highlighted to you.

So for our digital strategy is concerned, we are investing in our digital strategies. Number of team, which we have is now a 14-member team we have in digital space. We may had more people in digital and make particularly in the data — as a data analyst and also to give a state-of-art digital assets for our investors. As you know, the young Indians, they would like to interact or make investment digitally on app through. So we have 3 different strategies. One, top 8 cities. Second, expansions. We need to go beyond because the beyond 30 cities are doing a terrific job now. They are growing, as well as the digital. All 3 cylinders will be fired.

Operator

We have the next question from the line of Lalit Deo from Equirus Securities.

Lalit Deo — Equirus Securities — Analyst

So just one question. So like in the last 2 to 3 quarters, like we have been seeing a market share of about like more than 8% in our gross sales, but it has all been reflecting in our net sales number. So now within this 8.5% market share of gross sales, could you bifurcate it between, like how is the market share in gross sales and like in equity segment or a hybrid segment? And what are we doing to improve our net sales numbers as well?

Vinay Lakhotia — Head of Operations

You want gross sale percentage across key categories. Is that question correct?

Lalit Deo — Equirus Securities — Analyst

Yes.

Vinay Lakhotia — Head of Operations

Okay. So for quarter 4, roughly around 2.5% of our — the share of wallet for equity sales close to around 2.5%. ETF is around 9%. Income fund 4.5% and liquid fund is actually 9%. So on a weighted average, roughly around 8.5% is our share of wallet as far as the gross sales is concerned.

Lalit Deo — Equirus Securities — Analyst

Sure, sir. Sir, just the only follow-up on this. So like now within this equity segment like we have been around 2.5% market share. Now, in terms of AUM market share, we are at about like around 5%. So like how are we looking to improve our catch up on the market share gain going ahead? Like what are the different strategies are you looking to deploy over there?

Vinay Lakhotia — Head of Operations

So the focus is actually on performance. And definitely, as and when if your fund is performing, it should drag the sales. So the focus strategy is that, we should have a 3 to 4 core strategy among the equity fund, deliver superior returns to our investors. And the outcome will be the sales number.

Operator

[Operator Instructions] We have the next question from the line of Prayesh Jain from Motilal Oswal.

Prayesh Jain — Motilal Oswal — Analyst

Just a few questions. Firstly, on the ETF portfolio, what will be the share of EPFO in our ETF portfolio overall? And secondly, with respect to equity market share where fund performance is a focus area. But any other strategies with respect to distribution that you guys are working on in order to kind of really recoup the market share in terms of flows? And just adding to that, what would be your SIP flow market share?

Vinay Lakhotia — Head of Operations

I’ll answer the ETF part. So the ETF part in terms of gross inflows, roughly the EPFO share is just now 50%. Remaining 50% are coming either from utilization of index funds, as well as we are selling to ETFs to many of the corporate fund houses as well.

On the overall AUM, I don’t have the exact number, but it could be very well in the range of around 60% to 65% of the overall number will be the EPFO mandate. But maybe I’ll come back to you with a specific number on the overall book AUM.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

So far as the sales — you want to say. Please go ahead.

Sandeep Samsi — Head of Investor Relations & Corporate Communications

So far as the sales strategy is concerned, yes, we realized that one of our strategies, which was on the growth stocks have not been doing well because growth stocks overall have not been doing well, but we have been positioning our flanking products in this category. I don’t want to take names, but we have enough number of strategies, which are in place to tide over this issue.

Secondly, we are again approaching, as we mentioned earlier, that we had a long discussion, and we are again approaching our distribution partners with these new strategies for marketing the product. So we are hopeful that with all of these, we should be able to get a good share of our market in the equity funds.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Our products are — Prayesh, our products are on the platforms or banking platforms. We are in continuous touch with our distributors. Our sales team is completely engaged. And it is our focused strategy today to work with the sales team to basically regain our market shares in the equity side.

Prayesh Jain — Motilal Oswal — Analyst

And on the SIP? Hello?

Sandeep Samsi — Head of Investor Relations & Corporate Communications

Yes, Prayesh.

Prayesh Jain — Motilal Oswal — Analyst

Yes, on the SIP flow market share and how do you plan to increase the same?

Sandeep Samsi — Head of Investor Relations & Corporate Communications

Yes. So our gross inflows in the SIP for the month of March were about INR573 crores. And our average ticket size has been, as I mentioned, around INR3,262 crore. And the SIP — closing SIP count is around INR2,518,000 [Phonetic].

Vinay Lakhotia — Head of Operations

So the market share on the gross sale is close to around 4.2% to 4.3%, and the market share on the overall book AUM is close to around 3.5% to 3.6%.

Operator

We have the next question from the line of Dipanjan Ghosh from Citi.

Dipanjan Ghosh — Citi — Analyst

Just 2 questions from my side. First, if you can give some color on the possible expense drag on FY ’24 or ’25 because of the new fund launches in your subsidiaries, mostly UTI International?

And second, while you gave the equity flow gross — equity gross flow market share, if you can give some color of the similar market share on the equity side across the major channels?

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

UTI International launch of any fund, we are expecting some expenses in the UTI International balance sheet. That will be the legal cost. We don’t have the right number at this particular point of time, but we are also in the process of hiring the team for our U.S. market and all legal expenses towards registration will also be there. Exact number, I don’t have at this particular point of time.

So for the launch of products in UTI Capital is concerned, we are not expecting much expenses to be incurred in launching of the fund because there is only the license cost or document filing cost which we need to pay to SEBI, which is not very high.

Dipanjan Ghosh — Citi — Analyst

Sure. And on the second question, your equity flow market share maybe across some of the larger channels?

Sandeep Samsi — Head of Investor Relations & Corporate Communications

Yes. So if I look at my share across various channels, across the banking channel, my equity — and this is not — this is pure equity does not include ETF and Index is around 2%. While from the other MFCs, it is around 7.5%. So equities, this is the — these are the main 2 channels.

Dipanjan Ghosh — Citi — Analyst

Just to clarify, this is on AUM or on gross flows?

Sandeep Samsi — Head of Investor Relations & Corporate Communications

This is on the AUM.

Dipanjan Ghosh — Citi — Analyst

Okay. Would you like to give some color on the flow side also?

Sandeep Samsi — Head of Investor Relations & Corporate Communications

I don’t have the numbers on the flow side. Maybe offline, I can share it with you.

Operator

We have the next question from the line of Abhijeet Sakhare from Kotak.

Abhijeet Sakhare — Kotak — Analyst

First one is on expense line. How should we look at growth in staff costs and non-staff costs for FY ’24? Is there some indicative range that you would like to give?

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Very difficult to predict the redemption…

Sandeep Samsi — Head of Investor Relations & Corporate Communications

The staff cost.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Okay. Generally the — as per [indecipherable] report, the financial services may give increase to 9% to 11%. We are not expecting to give such a raise to our employees, but we will also have advantage of the retirement during this financial year. So our staff cost is expected to grow in the same line as it is this financial year, around 3%, 3.5% because we are not expecting to give a 10% or 12% raise to our employees.

Abhijeet Sakhare — Kotak — Analyst

Got it. That’s useful. And on the non-staff because I think that’s where you’ll have a little bit of a…

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Non-staff cost, as Surojit, our CFO mentioned that, there is a CSR expenses as we grow and make more profit, which continue to be there, but a one-time expenses of sales meet, which we had, where we called the entire sales team to Mumbai, and we have sales meet, these expenses will not be there. And travel will continue to be there. We don’t know how the currency will behave. And this year, investment in the IT will be less than the previous year. We have already incurred a lot of expenses in revamping our IT assets. So these one-time expenses will go, but the expenses towards the CSR will again come because of the profit which we have and as a regulation, which we need to use it for — to meet the regular requirement.

NCS expenses is a variable expense. And it is related to the income that is charged to the profit and loss account of the Retirement Solution. One-time expenses will be eliminated, particularly also the renovation costs which we have. We may have the renovation cost because our building in the UTI Tower, we have a plan to renovate 2.5 floors more, there will be some expenses.

Abhijeet Sakhare — Kotak — Analyst

Got it. So this year, I think we closed the year with overall annual expense growth of 6%. And again, for next year, you’re looking at a few more initiatives that will add to costs and some savings as well. But I do think that going ahead, you can do better than this for…

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

We have a specific target to basically optimize our cost and to ensure that the costs are not increased. If you recall, our data for the last 6, 7 years, we have been outperforming the inflation. We will continue to do that. And we’ll keep you updated on a quarter-on-quarter basis as we go along and to share with you our cost management strategy. But we are not expecting much rise in the administrative expenses side.

Abhijeet Sakhare — Kotak — Analyst

Got it. Secondly, on the flows, on the hybrid side, we’ve seen continuous net outflows. So probably that is linked to how the fund performance is shaping up. So fair to think that ratio will remain — is it driven by the more retail IFA channels? Or you’ve seen funds kind of being removed from kind of focus list or recommendation list? So if that’s the case, I think this pressure can sustain for a few more quarters. So how should we look at the net flow number for the next few quarters?

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

I would like to submit that none of our schemes have been removed from the list of the distributors. Vinay will give you the further details, but also on a strategic perspective, we don’t have the byproduct with us. We have submitted our application with SEBI. We are expecting the approval from SEBI and we will launch the byproduct, that will help us in racing first [Phonetic].

Vinay, over to you.

Vinay Lakhotia — Head of Operations

Yes. So in the hybrid category, I just want to clarify, there is — within our scheme categorization, the arbitrage is being categorized under the hybrid fund category only. The arbitrage fund is more actually a liquid fund in terms of nature and because of the yield that arbitrage fund that has been receiving, there have been a lot of redemption pressure. So pure hybrid fund, if you see, the net sales are more or less — it’s actually flattish. It’s not a positive net sales are not there, but we are quite hopeful with new NFOs of balanced advantage fund that is expected close to around the beginning of the next quarter or maybe the end of this quarter, the inflows under the hybrid fund should actually improve.

Operator

Ladies and gentlemen, we will take one last question from the line of Gaurav Jani from Prabhudas Lilladher.

Gaurav Jani — Prabhudas Lilladher — Analyst

Firstly, a question to Vinay, sir. Sir, could you quantify on a stock basis, FY ’23 versus ’22, what would have been the reduction in equity yields?

Vinay Lakhotia — Head of Operations

’22 versus ’23, it will be close to around 7 to 8 basis points.

Gaurav Jani — Prabhudas Lilladher — Analyst

Understood. Just trying to sort of get your sense, so the fall in equity yields in ’24 and ’25 would not be as sharp, right?

Vinay Lakhotia — Head of Operations

Again, Gaurav, depend on the redemption analysis, if the older AUM is getting redeemed at a faster pace, maybe the yield drop can be sharp, but that will provide respite for the coming financial year. Otherwise, it will be a marginal decline.

Gaurav Jani — Prabhudas Lilladher — Analyst

And stock basis, FY ’23, sir, if you could quantify the equity yields?

Vinay Lakhotia — Head of Operations

’23 — FY ’22-’23?

Gaurav Jani — Prabhudas Lilladher — Analyst

Yes. For the full year, I mean, average yield in equity?

Vinay Lakhotia — Head of Operations

Close to around 75, 76 basis points.

Gaurav Jani — Prabhudas Lilladher — Analyst

Understood. Secondly, did we launch any equity NFOs in FY ’23? And if you could share the amount, please?

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Sandeep?

Sandeep Samsi — Head of Investor Relations & Corporate Communications

Yes. So we launched a number of funds, but not directly in the equity category, we launched ETFs, and we launched the fund of funds.

Gaurav Jani — Prabhudas Lilladher — Analyst

Understood. Thirdly, sir, just a question to Sandeep, sir. Sir, on a Y-o-Y basis, the B&D share on the equity side is about stable or static at 12%. What measures are we taking to actually increase that at a faster pace?

Sandeep Samsi — Head of Investor Relations & Corporate Communications

You’re talking about the banking channel, Gaurav?

Gaurav Jani — Prabhudas Lilladher — Analyst

Correct.

Sandeep Samsi — Head of Investor Relations & Corporate Communications

Yes. So as Mr. Rahman also mentioned that our products are listed on various banking channels. And we are in continuous touch with the distributors, as well as the — distributors at the banking end to promote our products. This is — again, there are 2 things. One is the performance of the fund. So whenever there is a good performance of fund, automatically, the inflows also improve and also the level of interaction and relationship which has been maintained by the relationship manager of the banking channel. So we are trying on both. While, as I mentioned earlier, that some of our funds, the strategy was different and we couldn’t capitalize on that in the last year. But we have now got flanking products to support these funds. And our people are in continuous touch with the distributors, as well as the bank. And we hope that with these measures, we will be able to improve the share.

Gaurav Jani — Prabhudas Lilladher — Analyst

Sir, I understood. Just last bit, a slightly different question on the cash side. So this year, sir, there’s a fair bit of increase in the payout from about 50% to about 63% on a consol level. Fair to assume that this would be maintained or the payout would increase actually?

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Yes, you’re correct, like ’21, we have given 48% of the group. And in ’22, we have raised it to 63.21%. And we hope to maintain this payout ratio or we’ll improve it definitely. It depends upon the Board decision time to time.

I just want to clarify one point to Swarnabha of B&K. The total out of the INR7,000 crore, the seed capital investment today is INR265 crore. Okay?

Operator

Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I would like to hand the floor back to the management for closing comments. Please go ahead.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Thank you, and thank you very much. I also would like to thank my team for their participation, and thanks a lot. Thank you.

Operator

Thank you, ladies and gentlemen, for your participation in our Q4 FY ’22-’23 earnings conference call. In case of any further queries, you may get in touch with the Investor Relations team at Adfactors, or feel free to get in touch with us. We look forward to interacting. Thank you.

Vinay Lakhotia — Head of Operations

Thank you.

Surojit Saha — Chief Financial Officer

Thank you, everyone.

Imtaiyazur Rahman — Managing Director & Chief Executive Officer

Thank you.