I have three questions from my side. The first one is on the standalone business. There is an expansion of yields that we see. I just wanted to understand the levers of the trend. Is it only because of a higher mix of equity, or is there anything else to lead to that? That would be the first thing, sir. The second is on the SIP flows . T he run rate has improved in the current quarter. How are you seeing that as we have moved into Q1 FY25? And I just wanted to understand from your side how the flow share would be across the distribution channels, the direct vis -à-vis the other intermediate channels, and what kind of engagement you might be having to drive this. And thirdly, on the expenses part, sir, if you could highlight what led to the increase in the sequential increase in the employee benefits expense and also if there could be any additional expense from the Paris office side in the consolidated entity ? Other expenses have remained fairly steady over the years. Any comments on that? How big could the impact be?
UTI Asset Management Company Limited analyst Q&A
I'll take the question on the yield as well as on the expenses side, and Sandeep will take on the SIPs and the marketplace. On the yield, there has been a yield improvement across all categories of the funds, apart from equity and hybrid. We are seeing this improvement in cash and arbitrage funds around 2 bps. In the income fund also, around 1.5 bps of yield improvement is there. On the equity and hybrid funds, the yield improvement is close to around 5 bps, primarily because of two factors. First of all, normally we estimate the commissions, basis our understanding of the business mobilization. The actual payout could be more or less. As you are aware, any scheme expenses cannot be charged to AMC, so if there is any underestimation or overestimation of commission, the differential is adjusted in the management fee. There has been some increase in the management fee on account of overestimation of commission. Secondly, as you are aware, the B30 accrual commission was stopped by SEBI in February 2023. Whatever business we mobilized until February '23, the commission was required to be paid for a one-year additional trail commission. Since the accrual has stopped for those businesses, that impacted our yield in the first three quarters for equity and hybrid funds. And in fourth quarter, since we are not required to pay any commission as the one-year period has already ended, that has also improved our AMC yield under the equity and hybrid category of the fund. Coming to the expenses, there has been an increase in the employee cost by close to ~10%, both on a sequential as well as on a year-on-year basis. It is primarily because of two factors. One is the one-time expense on account of gratuity. B ecause of actuarial valuation, it increased was by around ₹ 5.5 crore. Also, the insurance cost also has marginally gone up by ₹ 2.5 crore during this quarter. Apart from that, there has been an increase in employee expenses of UTI International. As Mr. Rahman rightly pointed out, we are expanding our business in the international fund, both in the European market as well as in the North American market. Because of that, we have seen increased employee expenses. For UTI International, there has been a slight increase in employee expenses of close to ₹ 3 crore on QoQ basis . The other expenses are almost flat, and we believe that this run rate should continue going forward as well.
Sir, a quick follow -up on the yield part. I wanted to just ask that, as you mentioned, this quarter we are seeing some overestimation of commission, possibly in the previous quarter, right? This is my understanding, correct?
Yes.
So, from Q1 FY25, how should we look at it? Will it go back to the earlier range?
We are continuing with the same rate. So, almost 76 bps will be there for equity and hybrid funds. So, we start the year with the same rate.
Okay. And for the other categories, the increases that you highlighted, should we take that into account going forward?
Yes.
Understood.
Swarnabha, on the SIP inflows, as we mentioned, we have seen improved inflows and we are further taking a number of steps to further improve our inflows in this category. One is the kind of effort that we are taking with our distribution partners across the country . Even more so in the smaller cities, where we are seeing significant traction for our funds. What we are trying to do is try to pitch new products. We have different product categories that we launched, like the Balanced Advantage Fund, which we launched last year. We are also targeting the new generation of investors who look at more of these index funds. That has also helped us to improve our SIPs. These are the steps that we are taking and we will continue further to take these steps. On the direct versus the distribution mix, it is similar to what it was in the previous quarter, Equity and hybrid, which is the right parameter to look at it because the distribution plays an important role in the distribution of equity and hybrid funds ; that ratio remains similar. 30% is direct, while 60% to 70% comes from the MFD.
We are extremely focused on enhancing our engagement with our distributors. We have a very deep relationship with the banks as a channel for distribution. We are further enhancing our relationship with the top thousand distributors across the length and breadth of the country. As far as the Paris office is concerned, we are not expecting any further expenses to be incurred.
Just one clarification, sir, on the distribution mix that you mentioned. That is for the flow. Would that be a correct assumption?
That is for the AUM, but for the flows as well, it is very similar.
Thank you. We'll move on to the next question, which is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Sir, the first question is, as you mentioned on the yields, can you repeat the numbers on the cash and arbitrage, and as you mentioned on the debt stream, what were the yields and how much expense for the group?
On the flow side, while we are taking steps to increase our flows across channels, but then on the net sales side, and on the equity side, we are still seeing some pressure on redemption. Right? Could you highlight what the gross sales were during the quarter in the equity and hybrid category?
So, gross sales for Q4 FY24 were ₹ 2,981 crore in equity and hybrid category.
Lastly, any new product pipeline or any new product you are looking to launch in FY25?
Yes. We are planning to launch a Multi Cap Fund during the year, and we are also looking to further innovate in the passively managed space as well as thematic funds. We have , of course , continuous efforts to launch new products, and as and when the market cycle and timing is right, we will launch new products.
Thank you. We will take the next question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Just firstly on the yield front, the improvement in the equity and hybrid category you said it was 5 bps. Am I correct in saying that maybe on a sequential basis?
Yes.
So, out of that, how much of that would have come from the B30 because that would have been only for one month, right?
No. That particular payout impacted our margins for three quarters. it is not possible to give a breakup of how much is because of the commission saving and how much is on account of B30.
Because until February, you would have paid the commission, and it is from March that the commission would not have paid. That is the reason I was coming from that point that whether the rates that you have mentioned are the exit rates, so the 5 bps are on an end-to-end basis or on an average basis?
It is on an end-to-end basis.
End-to-end. So, this can sustain basically whatever you are mentioning.
Yes.
And secondly, sir, there is an improvement in the yields on the international side as well, right? Again, for the sustainability of the same, could you just help us understand the same?
Yes. In international business, we are investing heavily and are in the process of launching a few funds as well so we believe that on international front the yield should actually improve. This is an area we are investing heavily in, so we are promoting two new products over there, India Innovation Fund as well as Private Credit Real Estate Fund. Both of these funds have a slightly better margin, so we do believe that overall revenue as well as the margin number should improve for UTI International as well going forward.
Sir, we have seen very high volatility in this yield internationally; for example, in Q4 FY23, it was 0.57%. It has now continuously declined until Q3 FY24, and now we have seen some improvement. What was the reason for this continuous decline and now a recovery? Is the mix changing, or what is driving this improvement in yields after four quarters of consistent decline?
There was a slight asset mix change s as well. During September quarter, we have witnessed some of the redemption in our flagship fund which are the IDEF category and significant inflows have come into our fixed income fund. That brought volatility into the yield number. But we are focusing very heavily on the equity category of the fund and going forward, we believe that overall margin number should improve.
And sir, from an expenses standpoint, how should we look at employee expenses for next year?
Very similar to whatever the growth rate has been there for the current year, maybe on a standalone basis, the increase could be around 2 %-3%. On a consolidated basis, the increase could be slightly higher because we are investing in all three lines of business. For UTI International, I have already mentioned. UTI Alternative is also we are strengthening our team since we are launching two or three new funds over there. And for UTI RSL also, we are expanding our team to grow our private pension business as well as POP business. So, on a consolidated basis, the number could be 100 and 150 bps higher than the standalone number.
And last question on the tax rate. Could you guide for FY25? What would be the tax rate?
I think it should be in the range of 22%-23%.
Thank you. The next question is from the line of Mohit Mangal from BOB Capital. Please go ahead.
I have three questions. First, on the dividend, I think you have given a special dividend. Going forward, should we expect the same 55 %–60% dividend payout ratio?
As far as dividend is concerned, w e have a policy that we always pay a minimum 50% dividend to our investors. Last year, we paid around 66%. This year, 66% or 67% we have maintained for the current financial year, and we have given an additional dividend and 100% of our profit we have distributed to our investors.
Next, in terms of the flow, apart from the equity, we saw liquid also seeing net outflows this quarter. What are the major reasons for that?
For liquid funds, most of the banks go for the exit and therefore there was an outflow. It comes back on the first or second day of the next financial year. So, it is a quarter on quarter problem, and which all AMCs face.
In terms of the live folios, I think we grew from like 1.22 crore to 1.24 crore. I think any strategy over there, if we could increase the live folios, I mean, any particular strategy, that's basically been stable for the last two quarters. Any strategy where we can increase the live folios?
Yes. We are trying to increase our live folios, as we mentioned that we have invested in our digital assets. We have also invested in our partnership, as Mr. Rahman mentioned that we are deepening our relationship with the top thousand mutual fund distributors across the country. We are trying to increase our presence both digitally as well as physically on the ground. Through the SIP flows and partnerships, we are looking to increase the number of folios that we have. Currently, we have 1.24 crore of live folios, and we are confident that we will be able to add more S IP folios as well as normal folios to our accounts.
Thank you. We'll take the next question from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
The first question is a clarification on the balance sheet. What we noticed was that there was a movement between September and March from property, plants, and equipment to investment property. So, if you could just explain that, please?
We own UTI Tower. In UTI Tower, we have leased out three floors to NIIF Ltd., and as per the accounting standard , if any of the property is leased out , it needs to be reclassified from building to investment property. So, it is just a reclassification of an asset; the overall property remains the same.
Sir, the second question going back to yields . If you could just help us, like sequentially, what has been the movement in overall equity and hybrid funds? Is this 5 basis point movement from quarter start to quarter end?
Yes, 5 basis point is the movement on a sequential quarter basis.
And the last question is that on the flows, like the general slowdown on outflows, can you just give some color around , whether it is like 1 or 2 large funds that are driving it and whether the rest of the smaller funds are actually seeing some level of inflows, or whether this behaviour is more or less spread across all the top 5-6 funds? Something on that will be helpful.
Yes, Abhijeet, if you see, we have good performance both in our hybrid funds as well as income funds. Also , in our passive funds, we have the lowest tracking error in the industry, and this has helped us to build traction. In our equity fund, some of our larger schemes had a quality growth bias, and we are confident about their ability to perform over a full market cycle. Our value-oriented strategies have shown good performance, and we are able to capitalize on the performance in terms of market share for these funds. We have also fine-tuned our go-to-market strategy for the overall equity funds. As you would know, we have a strong position in B30 cities, and we remain focused on growing our share in these cities. As I already mentioned, we have also revamped our digital assets , and we are getting good traction on these digital assets. And again, we have plans to launch funds across multi-cap fund, passively managed space and thematic funds. So, these are all the efforts that we are taking to improve the performance and market share of equity funds.
Thank you. The next question is from the line of Dipanjan Ghosh from Citi Group. Please go ahead.
Firstly, a data-keeping question, can you spell out the ESOP expense for the quarter and year for the stand-alone and consolidated entities? Secondly, on your equity outflows that you have seen during the quarter and year. If you can give some color on if there is a dominance of any particular channel or particular geography, be it B30 or any customer type, like HNI, where you are seeing relatively more outflows, some color on the quality of the outflows and also on the fresh gross sales , that are you seeing in the equity and hybrid category? And lastly, if I look at your other expense number, given that you'll be launching a plethora of funds next year, be it multi-cap or on the passive side or also on the thematic side, how should one think of NFO related expenses in your other expense going into FY25-26? Those are my questions.
For ESOP, I will provide you with the full year number. On the AMC, the ESOP cost was around ₹ 13.14 crore. At a consolidated level, it's around ₹ 16.8 crore. And for the next year, as of now, if you don't issue any further ESOP, the next-year cost will be ₹ 4.5 crore on the AMC and roughly around ₹ 5 crore at the consolidated level. As far as NFO is concerned, in terms of thematic or an index fund, we don't foresee much of that expenses on the NFO side because those will be soft launches. The multi-cap fund, as and when we launch, there could be some amount of one -time advertisement expenses being charged. But we are cognizant of the cost and that number will not be that sizable.
On the equity flows, we had seen some redemptions from the banks and the national distributors. But equally, there are other products that are doing well andwe have seen inflows coming from the same channel. So, net -net, it is similar.
Just if I can squeeze in one question on the yield part, if I understand correctly, there was some overestimation of commissions , and when the actual cash flows were compared with the estimations, you reported yield improvement. So, theoretically speaking, when you start from April 1 or if you look at Q1 FY25, it should be on a normalized basis, on the correct estimation basis. So, should 35 bps , or whatever blended yield you have kind of booked in the standalone business for Q4 FY24, be the right benchmark to start with?
Yes, the 34 bps is the right benchmark , and this yield estimation and comparison is being done on a quarterly basis itself. But we need to be cognizant of the fact that no scheme expenses can be charged to AMC. So, normally, it has to be on a conservative basis. If any upside is there, it gets adjusted in quarter four. But 34 bps is the right number to start at the beginning of the financial year.
Yes. Good morning. I had a question regarding the stake sale of PNB, Bank of Baroda, and SBI. There were some reports that they wanted to sell their stake. So, is there any progress on that?
No, we don't know anything about that, and we can't offer any comments on this. This is their matter, the shareholders' matter. And we , as management, have no role to play in this.
Thank you. The next question is from the line of Ajay Jain from Makarand Invest. Please go ahead.
Wonderful figures, sir. Congratulations on that. While going through your investor presentation, slide #38, which is the consolidated statement of P&L, can you please throw some light on net gain on fair value changes? Because in FY23, it was ₹ 99 crore, and in FY24 , it is ₹ 500 crore. I presume it has something to do with the market valuations of shares or the investments that you have made. But can you please let us know? Because the figure is a huge difference. Going forward, what do you feel of the same? My second question is on the sale of services. We have 5% growth right from FY23, ₹ 1,131 crore to ₹ 1,182 crore. Going forward, what do you feel of this?
So, I'll take the question of net gain on fair value changes. So, as you are aware in the investor presentation we have mentioned, we have a total consolidated investment of around ₹ 3,833 crore. Out of that, almost around ₹ 737 crore is invested in the hybrid category funds of UTI, ₹ 709 crore is invested in the equity category , and almost ₹ 557 crore is invested in the equity/hybrid schemes of UTI International. These are equity-oriented schemes, and as you are aware, the market during the last financial year has given a return in excess of ~29%, I am saying for the NIFTY. So, because of that, there has been a mark-to-market appreciation, which has significantly increased the fair value change number. On the management fees, yes, the 5% growth is there, and we are hopeful that with the growth in the AUM, especially in the equity and hybrid categories, we should be witnessing a positive growth in the management fees as well during the next financial year.
Sir, do you feel it would be greater than the current 5% growth?
Yes, we believe in that. Yes, we are quite confident.
And as I understand, the second, fair value change is basically the market improvement in the investments, equity investments, which you've done. Sir, just how do you feel about going forward with this particular assignment? This is the major income that we are earning, and it makes a lot of changes to the profit and loss account. So, what are your views on it going forward, sir?
See, we can't give any forward-looking views on the market appreciation. We will give you quarter-on-quarter details when it comes. Please wait for some more quarters.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Imtaiyazur Rahman for closing comments. Over to you, sir.
Thank you very much for joining this call. I wish all of you a great financial year and a nice weekend. Thank you so much. Thanks, Sandeep, Vinay, and Surojit, for joining me. Thank you.
Thank you.
Thank you, everyone.
Thank you, members of the management. Ladies and gentlemen, thank you for joining the call. In case of any queries, feel free to connect with the Adfactors Investor Relations team. Once again, thank you for joining us. You may now disconnect your lines. Thank you.