Aditya Birla Sun Life AMC Limited analyst Q&A

Thank you very much. The first question is from the line of Yash from Citigroup. Please go ahead.

Sir, Thank you for taking the question, just a few data-keeping questions from my side. One is if you could share the operational revenue from the non -mutual fund business and also the ESOP expense for the quarter.

So, Yash, Prakash is answering.

So, Yash, the other than MF, non -operational income from the alternate asset is around INR 32 crores for this quarter, and the ESOP expense is around INR 1.6 crores.

Sorry, 1 point?

INR 1.6 crores.

INR 1.6 crores. Okay. And sir, the SIP AUM share, if you could please repeat? I know you mentioned it in the opening remarks, but I think I missed it.

SIP AUM is around Rs 84,000 Crores.

On the overall market share, we remain more or less flat compared to the last quarter. I think, as you all know, for last year, quarter-on-quarter the fall was continuing. At the same time, the fall was getting narrowed as we progressed and various steps t hat we have taken. And in this quarter, more or less the market share remains somewhat flat backed by the focused equity funds that you have identified where we need to get our rightful market share. That’s something we are working. And as a result of that, the first quarter net sales though we don't disclose the number per se. But otherwise, when I look at the number, first quarter net sales number is equivalent to our last year net sales numbers, which is an increasing trend that we are seeing and hopefully we are able to maintain this on the basis of strategy that I just explained.

Okay. Thank you Sir, that’s last question from our side

The next question is from the line of Lalit Deo from Equirus Securities.

Hi Sir, good evening. Firstly, on the yield side, could you give us the segment -wise yields across equity, debt, liquid and passive side? Second question was on the employee expenses. So, like this quarter, we have seen some sequential decline. So, could you tell us the reasons why there has been a decline in the employee’s expenses? And how should one look at it for the whole year? And lastly, just a clarification, when we say that the overall net sales in this quarter have been higher than the full year -- has higher than FY25. So, this is only for the equity segment, or this is for all the segments?

Last question, of course equity, what I mentioned. And other 2 questions in terms of yield, I'll ask Prakash to answer.

So, Lalit, the yield on the equity is around 67- 68 basis points. It is in the range of around 24- 25. And liquid, it is in the range of around 13- 14 basis points.

And employees then.

And the employee cost is mainly on account of the variable pay. It was a little bit on the higher side in the last quarter.

So how should -- when we look at it like for the whole year, sir?

No. So, Lalit, actually, so this -- on a yearly basis, we see this variable pay basis of business performance and all. So what numbers, normally, if you see the Q4 number, you will have to annualize it for the full year. So that will be the normal trend.

I think on a broad basis, just to add to what Pradeep has mentioned, the employee cost that is at what we have earlier guided, one, building our team as far as the HNI team concerns. Now we already have about 95 team members. And anyway, right now, we have taken a call, we'll go up to 100 team members. We'll restrict to that and see the outcome of this broader business outcome point of view. Aditya Birla Sun Life Second, the alternate side, we have been having in mind that to have somebody to build as a business in addition to the existing team of people who could be the driver of this business for the larger growth. That's something we have been seeing. Of course, this headcount would come partially a little bit in our role, a little bit come in the -- mostly will come in the Sun Life role. That is, we are planning. So, headcount will increase, but not actually a significant increase in the cost as a result of that. And then as and when the GIFT City this year, once we convert that into a subsidiary company for which we would take some steps in the current financial year. That may warrant some bit of marginal capital investment, which is not very significant. But however, may have to have the right set of people at least to carry out the compliance -related work as well as if you have to have somebody to build the business, that point will take Anyway, that will take about 6 months for us to crystallize it.

The next question is from the line of Tanmay Choudhary from Mentor Securities.

Hi Sir, Thanks for the opportunity . Sir, my first question is on the equity AUM side, like we have seen 7% sequential growth. So I just want to know like was it majorly driven by M to M, or we have seen good traction in the net sales also because as per -- and you also -- can you also comment here on the market share over the net sales.

Yes, after I explained earlier, Tanmay, on this. One, of course, net sales largely, I mentioned about its net sales with adding to the overall AUM. Market share remained somewhat flat. That's actually largely on account of, one, of course, net sales are improving on certain segments. There are certain schemes, which, of course, not been favourable from an overall investors' point of view. So therefore, the market share remained somewhat flat. But overall number, if you have to look at it, given the large size, of course, the industry itself so large, we still have to go further in terms of showing that in the reflection of the overall marke t share. But other way, the path is towards that.

Okay. Got it. Sir, one more question on the liquid flow side incoming, like as I see like around more than 60% of flows or AUM comes from the corporate in T30 cities, right? So how do we see that corporate flows ongoing? And are we penetrating more corporates and...

Sure. So the way we always approach the institutional business as the only institutional business predominantly is a direct to customer business. And we currently handle roughly about 9,000 corporates across the country, covering the large 8 cities. Given the fact that we have an established track record in fixed income space and also given the fact that our engagement at the ground level is e xtremely good when it comes to question of treasury solutions by the institutional team about 55 people. And that team now hitting an additional responsibility to expand the market in the next 12 locations, taking the coverage about T20 locations. That's one we already planned. And we Aditya Birla Sun Life also planned where the team -- each of the companies about 9,000 companies, we target to take it about 12,000 companies. And each companies have also got the family offices and promoters driven investment opportunities. We also hold additional responsibility to reach out to the family offices using that relations that they have built in order to sell some of the other product segmentations, including alternate solutions. That's the approach we have taken. That's the way we also aligned the KRA with each of the teams to take full advantage of the presence that we have in the segment. And this opportunity, which will be provided to the investors will not only be in the fixed income solutions, we've also seen flows coming in our index funds that we launched last year, which is like old maturity kind of things, where we have seen new traction. We also launched equity taxation debt-oriented funds after a 2-year period. We have aligned all of our funds in order to serve the needs of those customers. We are educating these customers in the current low interest rate regime, which are the least - - the minimum risk that they can take. However, they can get relatively tax advantage kind of return over a period of time, such as balanced advantage fund. Also, we are actually positioning them -- for them to consider investing. Last but not the least is from a family offices' point of view, we are targeting, AIF an asset class could be the right asset class within the fixed income space with interest rate being very low. But as we go down the credit line, credit rating, the yields are better. And there are people who actually seek those investment opportunities but also something we are doing in the A IF sector that we have seen recently -- of closure of fixed income opportunity AIF fund is largely coming from the participant coming from this kind of family offices.

Okay. Fair enough, sir. Sir, just one last question. In the last PPT, the SIP contribution number is a bit different from the latest PPT. So, is that restated? Or like can you just correct me over that.

Sure. I'll just ask Prakash to highlight on this.

So, Yash, earlier, we used to report SIP book in our presentation that methodology we have changed to SIP contribution from this quarter onwards, which is in line with what AMFI has also started disclosing on their website and which other players have also started reporting in the presentation. So that is the only difference. Otherwise, from the flow side or on the AUM side contribution, it remains the same.

The next question is the line of Abhijeet from Kotak Securities.

So, the first question is on yields. If I recall correctly, I think equity yields are now down 1 basis point sequentially. despite about 7%, 8% equity AUM growth. So just wanted to double check if there's been any tweaks with respect to commissions or this is just the normal slab movement? Aditya Birla Sun Life

Yes, Abhijeet, I'll ask Prakash to answer.

Abhijeet, this is largely on account of increase in the A UM only. If you see our A UM has increased to around INR 180,000 crores from last year -- last quarter is INR 1,69,000 crores. So, there is no tweak in the -- on the brokerage structures. It is mainly because of the increase in the AUM.

Let's say, if you look at the bottom line, the yields more or less remain the same, especially in the operating profit level, if you take, the yields are a little better than the last quarter as well.

Yes, sir. Sir, secondly, in terms of net flows, I think, again, going back to last quarter, I think we had highlighted that you're seeing some traction in 2, 3 funds like frontline, balanced, multi- cap and maybe a couple of other thematic funds as well. Anything specific that you want to highlight with respect to the flow movement that we are seeing over the last few months as well?

Sure. So, the way we said the entire team right from investment to the sales team and also with the distribution partner partners, given the fact that we have large funds in our bouquet, but we have to identify 7, 8 products in consultation with the investment team and position that as a product where we need to get flows in terms of -- with respect to the competition. So that's why we have Large Cap Fund, Flexi -Cap Fund and Multi -Asset Allocation Fund, Balanced Advantage Fund and GenNext funds. These are the 5 focused products that we kept. In addition to that, we also kept 2 other products on the thematic side which is the conglomerate fund and some other long-term solution product that we have is the Bal Bhavishya Fund, Retirement Fund. So, this is way we have positioned the product, and the entire sales team is also encouraged and in order to have the engagement. From fund management point of view, in order to get a higher mind recall, uniform push is also being given from the fund management side also, right, from Mahesh to Harish the entire team, talks only on these 5, 6 products so that we are able to get a higher market share. This is what we are seeing in terms of traction, whether it is the flows, whether it is SIPs, that's why we are seeing actually increased flows. It will take some time for it to see a significant change in numbers, but at least trend is the positive. In addition to that, despite doing well, Arbitrage fund is one category where the industry was also growing their size. Our growth was a little less. But we also ensure -- we also taken some steps internally as to how we manage these funds very effectively, efficiently so that we can meet the expectation of investors as well as the large allocator of money in the segment, also have been addressed. So therefore, a holistic growth in those segments of the market where the flow is coming. At the same time, we can get our rightful mind share or market share rather. There's one segment where right now, we are not positioned enough, which is the mid and small cap segment. We thought let us focus on reviving the performance on these funds with respect to the competition. And then when the time comes right, we'll start pushing these funds. Aditya Birla Sun Life

Got it, sir. Super helpful. Just one last question on the industry side, sir, this recent consultation paper with regards to scheme classifications and a couple of other additional points regarding one additional scheme apart from the current one. Any broad thoughts that you can share from an industry perspective?

Sure. So, this was -- of course, it's come as a draft paper at this point of time. In fact, is also discussed in the committee and one of the CIO committees then the operation committee. Some of the draft proposals with respect to the one aligning of the schemes , which already the industry has accepted it. As a frontline equity, which is a 23 years track record that we have, just creating a brand as frontline equity as the name. Now that has become history. Now we've made a large cap. So, the uniformity has come across the industry. We used to call a blue chip, now it is no more a blue chip. It's a large cap. That's something we all have got aligned and fully done with that. The second is the fund size has become larger than whether we can launch one more fund, the discussion was there at the AMFI level as well. In fact, AMFI themselves wrote back to SEBI that then we will completely take away the purpose of classification, and it can probably create more confusion of people than how the portfolio will be constructed, how the expense will be charged and then it goes back to the old system of multiple schemes coming from the same category, this confusion will come. Therefore, there is no -- not even -- I mean, majority of people have agreeing with that. But however, SEBI felt, let us put to the public opinion and by way of draft, therefore it has come. My own assumption is given ultimately why the classification has come, not one in the interest of first the customers to have better clarity in terms of what product he buys and single product from each fund houses. I can say that we are one of the old fund houses. We used to have 2 liquid funds in the past. And because it is size and various things that we used to do. And today, I can't have 2 liquid funds. And it was done -- it was a conscious decision, which was taken by SEBI. Therefore, why that should get reversed now will remain a question mark. But having said this, I think SEBI is also looking at various thematic funds that is being launched. You do have an opinion that how many thematic funds we can create unless until you are able to get at least about 60% differentiation between the existing funds, the thematic fund. This also over a period of time would get curtailed. So therefore, this needs to be seen as to how market in general people react. But at this point of time, members of the industry, majority of them, I would say, 99% of them or 95% of them were especially on the same category were not fully fulfilled, but still another draft report has come, all of us will respond to that.

Got it, sir. This is super helpful

Hi Thank you. A couple of questions. One, what is the yield on the ESIC mandate? And two, have we taken any cuts on the distribution commission in recent quarters? So, do we plan to take some like our peers have done? And what is the pipeline on the specialized investment fund look like?

ESIC mandate, anyway, the government mandate, it only use the headline number, no doubt, but it doesn't give us the much profit. But we'll barely -- we'll, of course, we will have some cost we'll incur, which I call it as the investment that we have to make to serve government of India. So, we are happy to do that. With respect to the SIF, we do have a plan. We already taken approval from our Board to have a separate brand, which I can, of course, share, which is called Apex, internally already named, and we'll come with a press release on this very soon. At the same time, we have already identified a product opportunity that we can create in the SIF space, covering fixed income, covering credit, covering arbitrage plus equity as well as long short. So, while we have internal capability to manage rest of the -- most of the product innovations. We don't have internal capability to manage the large -- sorry, what we call long short kind of fund -- arbitrage kind of fund – we are in the process of finalizing rather looking for people in the process of finalizing it very soon, that I think should come on board . And the second question was on the...

On distributor commission.

On the distributor commissions. In fact, we not have taken the call given the fact that one as fund house we have the longer term vision of building scale further which really means as long as I'm able to maintain the current margin and the growth aspiration, then we must also have a balanced approach with respect to the revenue that we can get as well as the distribution commission that we can pay to build our size. Therefore, we are taking the -- while we do have a room, I can't say we don't have room. But at the same time, we don't want to take the call at this time given the need of the business to grow the business, the next level of growth and build scale.

Thank you Sir.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you. On behalf of Aditya Birla Sun Life AMC Limited, that concludes this conference. Thank you for joining us, and you now disconnect your lines. This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Company takes no responsibility for such errors, although an effort has been made to ensure a high level of accuracy. ------------------------------------------------------------------- End --------------------------------------------------------------------- Aditya Birla Sun Life