HDFC Asset Management Company Limited — Q3 FY26

HDFC Asset Management Company Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=bFP5VtqUtv4 Published: 4 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the Q3 FI26 earnings conference call of HDFC Asset Management 0:08 8 seconds Company Limited. As a reminder, all participant lines will be in the listenon mode and there will be an opportunity for you to ask questions 0:15 15 seconds after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on 0:23 23 seconds your touchstone phone. Please note that this conference is being recorded. From the management team, we have Mr. 0:30 30 seconds Nonit Manor, Mr. Nad Survala and Mr. 0:34 34 seconds Siml Kanuga. I now hand this call over to Mr. Siml Kanoga who will give us a brief following which we will proceed 0:41 41 seconds with the Q&A session. Thank you and over to you sir. 0:45 45 seconds Thank you very much. Uh good evening everyone and uh appreciate you all joining this call. Uh we trust you have had an opportunity to review our 0:53 53 seconds presentation. Uh I'll begin with an overview of the industry. Uh as of 31st December 2025, the total AUM stood at 1:02 1 minute, 2 seconds rupes 80.2 trillion. Equity and equity oriented net new flows continued to see healthy momentum during this quarter 1:10 1 minute, 10 seconds adding another rupees 1188 billion. For the calendar year 2025, net inflows into 1:17 1 minute, 17 seconds this category added up to rupees 4752 billion compared to rupees 5420 billion in 2024. 1:26 1 minute, 26 seconds In aggregate over the past two calendar years, net new flows have exceeded rupees 10 trillion or approximately USD 1:34 1 minute, 34 seconds 115 billion. Systematic investment plan remained a key structural driver for the industry. Monthly SIP inflows reached 1:43 1 minute, 43 seconds rupees 310 billion in December 2025, highest levels recorded to date. The SIP 1:50 1 minute, 50 seconds asset base increased to rupees 16.6 trillion accounting for over 20% of industry AUM and significantly higher 1:59 1 minute, 59 seconds proportion of equity and equity oriented AUM. For calendar year 2025, total inflows from SIP amounted to rupees 3.3 2:08 2 minutes, 8 seconds trillion. Debt fund saw net outflows of rupes 163 billion during the quarter while liquid fund witnessed net inflows 2:17 2 minutes, 17 seconds of rups 147 billion. An additional rupees 112 billion came in arbitrage funds. 2:24 2 minutes, 24 seconds Quarter ended December witnessed rups 327 billion of net new flows in gold and 2:31 2 minutes, 31 seconds silver ETFs. This category now contributes to the tune of 18% of industry ETF AUM. We now move to us. 2:41 2 minutes, 41 seconds Overall QAUM crossed rupees 9 trillion while equity oriented AUM exceeded rupees 6 trillion resulting in an asset mix with equity at 65.5%. 2:54 2 minutes, 54 seconds The number of unique investors for the industry increased by 6.4 4 million as compared to December 2024. 3:04 3 minutes, 4 seconds For us, this increase was 2.8 million, taking our total unique investor to 15.4 million, a penetration of 26%. 3:14 3 minutes, 14 seconds Systematic transaction which includes SIP and STP reached rupees 47.3 billion 3:22 3 minutes, 22 seconds in December 2025 representing a YI growth of 24% or an absolute increase of rupees 9.1 billion. 3:32 3 minutes, 32 seconds Turning to our PMS business aum crossed rupes 50 billion during the quarter. We also secured couple of large mandates 3:40 3 minutes, 40 seconds during the quarter. In alternative, we completed the first close of our structured credit fund raising 3:47 3 minutes, 47 seconds commitments of approximately rupees 13 billion from institutions, family offices and UHNI investors. Now on to 3:55 3 minutes, 55 seconds financials. Total revenue for the quarter was rupees 12332 million. 4:01 4 minutes, 1 second Operating revenue came in at 10743 million, a growth of 15% yi. Other 4:08 4 minutes, 8 seconds income was rupees 1589 million. Total expenses were rupes 2186 million. As a 4:15 4 minutes, 15 seconds result, operating profit for the quarter was rupees 8557 million with an operating margin of 36 basis points. 4:24 4 minutes, 24 seconds Profit after tax stood at rupees 7701 million translating into a yi growth of 20%. 4:32 4 minutes, 32 seconds So thank you very much for patient hearing. Namit Nazad and I are here to take all questions. We can start building the question queue please. 4:40 4 minutes, 40 seconds Thank you. 4:41 4 minutes, 41 seconds Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 4:50 4 minutes, 50 seconds touchstone telephone. If you wish to remove yourself from the question Q, you may press star and two. Participants are 4:57 4 minutes, 57 seconds requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question Q assembles. 5:19 5 minutes, 19 seconds We'll take our first question from the line of Kushagra Goyel from CLSA. Please go ahead. 5:26 5 minutes, 26 seconds Hi. Hi. Thank you for taking my question and congrats on a good set of numbers. 5:31 5 minutes, 31 seconds Uh just had uh one question. So your operating profit margin that sort of went up uh by one bip or so. So 35 bips 5:40 5 minutes, 40 seconds went to 36. So just wanted to understand if there was some specific reason. I see your other expenses was materially lower 5:48 5 minutes, 48 seconds but uh just wanted to understand more on that. 5:52 5 minutes, 52 seconds Yeah. Hi Krishna. So other expenses uh you're like it's from a quarter on quarter quarter basis up by a basis 6:00 6 minutes point. uh that's largely because other expenses were lower for this quarter. 6:04 6 minutes, 4 seconds Now previous quarter we had a larger expenditure on CSRs also certain uh marketing business promotion expenditure slightly more in the previous quarter as 6:13 6 minutes, 13 seconds compared to this quarter. So that's got it sir also. So just one more 6:20 6 minutes, 20 seconds question uh in terms of your growth momentum uh how do you see it going forward if you could like share some 6:28 6 minutes, 28 seconds guidance or something on that that's all. Thank you. 6:35 6 minutes, 35 seconds Growth in context of uh in general for the industry and how do 6:43 6 minutes, 43 seconds you see HDFC placed if you could and how are we placed? 6:50 6 minutes, 50 seconds Yeah. Yeah. Like share some thoughts on that aspect. 6:53 6 minutes, 53 seconds No no sure. So you would have seen the uh latest number on the SIP where they crossed 31,000 crores in the month of 7:01 7 minutes, 1 second December despite the fact that there has been quite a bit of volatility in the market and returns have been muted for 7:08 7 minutes, 8 seconds last 15 18 months. Uh but I think the momentum in in in the book has been 7:15 7 minutes, 15 seconds continuing. uh industry has been um adding more number of investors, more number of folios month after month, 7:23 7 minutes, 23 seconds quarter after quarter. Uh we have been participating very well. There is a slide on our new account edition, our 7:30 7 minutes, 30 seconds our new investor edition and you can clearly see that uh uh we've been participating very well across all channels, across all geographies, across 7:39 7 minutes, 39 seconds all of the classes and and products and I feel like very optimistic uh on the overall industry growth for next several years. 7:49 7 minutes, 49 seconds Got it. Thank you. 7:52 7 minutes, 52 seconds Thank you. We'll take our next question from the line of Mohit Mangal from Centrum. Please go ahead. 7:59 7 minutes, 59 seconds Yeah. Uh good evening. Thanks for the opportunity and congratulations on a on a you know strong set of numbers. My first question is on the PMS and AIF. So 8:06 8 minutes, 6 seconds I think you have put a separate slide on that. Uh so I've got two three questions within that. So first is basically just wanted to know uh what is the NDPMS and 8:15 8 minutes, 15 seconds PMS if you can just separate it. uh second is that how big is this EPFO mandate and thirdly if you can tell me 8:22 8 minutes, 22 seconds the growth overall in the PMS and EF segment on the PMS side we have two segments 8:28 8 minutes, 28 seconds discretionary and uh nondiscretionary uh we have been adding accounts and growing on both sides we have focus on 8:36 8 minutes, 36 seconds the uh both sides uh on the EPFO and SPFO mandate uh as you would appreciate this segment operates with very very 8:44 8 minutes, 44 seconds tight economics uh It's uh very competitive. Uh but these mandates allow us to participate meaningfully in the 8:53 8 minutes, 53 seconds ecosystem. Uh we build execution capability. We enhance our platform and gives us an opportunity to offer that 9:01 9 minutes, 1 second product to many other clients in the in the same segment and and and related segment. So we see this as a strategic 9:08 9 minutes, 8 seconds phase where capability building and scale take precedence over uh immediate margins from a quarter to quarter perspective. 9:19 9 minutes, 19 seconds Okay. 9:20 9 minutes, 20 seconds Andically if you I think Simil mentioned earlier that we have crossed the 5,000 cr number 9:27 9 minutes, 27 seconds in terms of a year uh apart from these two mandates where I think we are in the process of uh signing and and executing 9:35 9 minutes, 35 seconds the agreement etc. So they will get executed uh in in in some time. Uh but we have on the team side we have hired 9:42 9 minutes, 42 seconds senior resources across investments and and services uh that will help us build this business. So PMS on the fixed 9:50 9 minutes, 50 seconds income side on equity side both discretionary and non-discretionary we would like to uh build that uh gradually 10:00 10 minutes also question on alternative on the overall alternative so most of you are aware uh about the first uh VCP 10:07 10 minutes, 7 seconds fund of fund uh you might have seen the recent announcement we announced the first close of our structured credit fund and uh what humbles us is our 10:16 10 minutes, 16 seconds partnership with IFC We are very proud of our partnership with the IFC. They're coming as the uh anchor investors. Uh the fund has 10:26 10 minutes, 26 seconds declared its first close and has raised commitments of about 1290 crores. And uh 10:33 10 minutes, 33 seconds another feature of that 1290 crores is that almost 70% has come in from investors who have contributed 25 crores 10:41 10 minutes, 41 seconds or more. uh so underscoring strong participation from ultra high net worth individuals and institutions in the fund. So we've got institutions, family 10:50 10 minutes, 50 seconds offices, ultra high net worth individuals participating uh in that and uh IFC as a partner and anchor investors 10:58 10 minutes, 58 seconds uh will contribute up to uh 220 cr rupees to the fund. uh our our partnership with IFC is rooted in a in a 11:06 11 minutes, 6 seconds shared vision of expanding access to to uh financing for midsize corporates, 11:13 11 minutes, 13 seconds midsize midsized enterprises uh that drive um manufacturing output that drive employment that drive 11:21 11 minutes, 21 seconds regional development and uh this is the first step in in in what we think will be a long and meaningful journey of 11:28 11 minutes, 28 seconds working together developing the uh private credit market on India. 11:33 11 minutes, 33 seconds And uh overall on on the private market side we've been engaging with uh lot of other global institutions and domestic 11:42 11 minutes, 42 seconds institutions. The team is working on creating a second fund on private equity and venture capital front. uh we did 11:49 11 minutes, 49 seconds that one first VCNP fund of funds and and and large part of that is already committed and uh we would soon be coming 11:58 11 minutes, 58 seconds with the second fund and we'll be engaging with a few large global institution clients for that as well. 12:06 12 minutes, 6 seconds Understood. So this is very helpful. So just a one followup. So in terms of fields so how much are discretionary PMS earns and while how much are 12:14 12 minutes, 14 seconds non-discretionary PMS earns? Uh you can just throw some light on that. 12:19 12 minutes, 19 seconds No, we have not we have not kind of uh given those years out. 12:23 12 minutes, 23 seconds Oh, understood. Thanks and wish you all the best. Thank you. Thank you so much. 12:28 12 minutes, 28 seconds Thank you. Before we take the next question, would like to remind participants to ask a question, please press star N1 on your phone. 12:37 12 minutes, 37 seconds Next question is from the line of DH Agarwal from IFL Capital. Please go ahead. 12:43 12 minutes, 43 seconds Uh good evening everyone and thank you for the opportunity. Uh so my first question would be on the uh asset class yield for the quarter. Could you just share those numbers? 12:53 12 minutes, 53 seconds Yeah, sure. Uh so equity is around 56 57 basis points. Uh this includes index 13:00 13 minutes funds. Uh debt is 2728 basis points and liquid would be 123 basis points and the blended yield uh is around 45. 13:12 13 minutes, 12 seconds So blended you said is on 45 46 basis for the quarter is 45 or 9 months is 45 right. So we see that overall the yield 13:21 13 minutes, 21 seconds number has been uh decently resilient over the last six quarters. Uh I'm assuming if we remove the passage from the equity uh the active would be closer to 58 uh something around that number. 13:33 13 minutes, 33 seconds So despite the growth in the am we are seeing this resilience. So uh is there anything to read into this? 13:45 13 minutes, 45 seconds I mean you know us well for us uh scale and quality profitability all three are 13:52 13 minutes, 52 seconds important and uh we don't sacrifice profitability just for market share or for a scale for us that's very critical 14:01 14 minutes, 1 second we've been able to maintain it very well and overall operating margins also I think being a tight leash on the cost side we've been able to maintain 14:09 14 minutes, 9 seconds operating margins point. Of course, the tele pricing has an impact, but we've been trying to uh 14:18 14 minutes, 18 seconds kind of like impact through the through the Sorry sir, your audio was not very 14:27 14 minutes, 27 seconds clear. Can you just repeat the last part please? 14:30 14 minutes, 30 seconds I'm saying of course there is there's an impact of telescoping pricing as market goes up there would be impact on the uh 14:38 14 minutes, 38 seconds uh fund level or or overall class level margins but the overall operating margins we've been able to maintain well with tight lean cost. 14:51 14 minutes, 51 seconds So that is exactly what I was wanted to understand uh that uh the impact of telescopic pricing has not been visible. 14:58 14 minutes, 58 seconds So what is that we are doing to offset that impact or what is leading to uh that impact not being visible and uh how do you see the trajectory going forward? 15:07 15 minutes, 7 seconds We think uh this yields will remain uh steady at this level. So we are expecting that uh at for a 10 20 10 12% 15:15 15 minutes, 15 seconds growth in EUM there will be some decline in the yield. 15:19 15 minutes, 19 seconds No so on the equity margins I mean I mentioned that some degree of compression is inevitable over time because you have a sliding scale 15:26 15 minutes, 26 seconds structure of TR. So which naturally leads to lower expense ratio as the AUM scales. U so we're conscious of this 15:34 15 minutes, 34 seconds dynamic and and therefore make this reality into our pricing decision on the incremental and the new flows. So they constantly keep getting adjusted on the 15:43 15 minutes, 43 seconds new flows and now new flows are also becoming uh sizable. So over a couple of years they also make an impact but as I 15:50 15 minutes, 50 seconds mentioned earlier that despite uh the impact of telescoping pricing uh we have been I mean so far we have managed to 15:58 15 minutes, 58 seconds keep our margins in the 33 to 36 basis point range uh that reflects like discipline cost management as well as 16:05 16 minutes, 5 seconds the uh operating leverage and uh you ask like going forward so we'll continue to work hard to maintain margins within 16:13 16 minutes, 13 seconds this band. We recognize that this is easier said than done. Uh but I've mentioned this earlier that margins are only one way of looking at the business. 16:22 16 minutes, 22 seconds We keep a close watch on that. But the real focus has to be on growing absolute profits in a sustainable way. And as 16:31 16 minutes, 31 seconds long as uh profits continue to compound, I mean we are comfortable with how the business is is evolving. 16:40 16 minutes, 40 seconds Right. Uh and sir uh what is the impact of the two regulatory changes that are uh expected to go live from 1st of 16:48 16 minutes, 48 seconds April? Uh one is what is a gross impact and uh how do you see how this will be passed on? 16:55 16 minutes, 55 seconds Sure. So uh what has changed uh firstly removal of five basis point of additional TER which AMC's were allowed 17:04 17 minutes, 4 seconds to charge in lie of exit load. So exit load since 2012 was going to the books of the fund. Once the new regulations 17:13 17 minutes, 13 seconds come in play, this is gone. Uh the impact for the industry as a whole is definitely material. So active equity 17:22 17 minutes, 22 seconds oriented mutual fund industry is at rupees 44 trillion and five basis point on that comes to about 2200 cr. So to 17:31 17 minutes, 31 seconds put numbers in context for FI25 total operating profit of the industry as a whole was around 16,000 crores. So this is definitely uh material. 17:43 17 minutes, 43 seconds Uh second change in the expense ratio construct. So rather than all statutory levies which were uh inbuilt in as part 17:50 17 minutes, 50 seconds of the TER now we have base TER plus statutory levies uh so methodology or for that matter accounting has changed. 18:00 18 minutes uh the slabs have been accordingly readjusted, realigned. You would have seen the the the the new slap table. The smaller schemes will benefit to an 18:09 18 minutes, 9 seconds extent because of this change and will largely set off the loss due to five basis point reduction which I spoke about earlier. 18:16 18 minutes, 16 seconds Lastly, uh third thing is the rationalization of brokerage uh limits uh what we pay on on our transactions. 18:24 18 minutes, 24 seconds So this is in reference to brokerage we pay to buy and sell securities. Um so brokerage for cash market transactions is now reduced to six basis point from 18:33 18 minutes, 33 seconds the cap of 12 basis point earlier but this six now excludes levies. So comparable number to 12 is now some 8 18:41 18 minutes, 41 seconds and a half basis point odd. So between the first and the second point that is the five basis point and the GST etc. 18:50 18 minutes, 50 seconds few of our larger scheme will see an impact that is reduction in TER smaller schemes less affected uh as TE reduction 18:59 18 minutes, 59 seconds due to this five basis points going away is largely offset by by redefined flaps. 19:06 19 minutes, 6 seconds uh larger schemes definitely are getting impacted. Uh actually you'll be surprised dish that um many of the 19:13 19 minutes, 13 seconds smaller schemes will see increased er so we are evaluating the way forward with an objective to uh to contain the 19:20 19 minutes, 20 seconds financial impact if any uh all I can say is that uh you have a precedence uh on how we handled the same in 2019. 19:30 19 minutes, 30 seconds uh we understand this sensitivity and will optimize to the finest in terms of impact on margins. 19:37 19 minutes, 37 seconds The positive side of this change if I can highlight one is reduced er and hence even better alpha. So clearly in 19:45 19 minutes, 45 seconds favor of larger size funds I've mentioned this several times earlier that u uh the larger funds because of 19:53 19 minutes, 53 seconds the telescoping pricing charge lower TR and the alpha keeps getting uh uh baked in. So the long-term positive impact of 20:02 20 minutes, 2 seconds this in my opinion is not as well understood. So I mean I can say classical bitter pill theory long-term 20:10 20 minutes, 10 seconds good for the alpha. So my investment team is smiling for sure. 20:14 20 minutes, 14 seconds The positive aspect is that regulator and industry is always focused on enhancing transparency. 20:22 20 minutes, 22 seconds Another step forward where one knows what's the fees and and and what's the statutory levies. Uh to sum it all up, 20:31 20 minutes, 31 seconds we'll work on managing financial impact and on the other hand further optimize alpha for our investors. 20:39 20 minutes, 39 seconds Right sir? 20:42 20 minutes, 42 seconds Yeah absolutely sir. And one final one sir uh what are the plans for the schemes that were managed by Rashi? I know currently those have been allocated 20:50 20 minutes, 50 seconds within the team. So that is how it's going to be or we are looking to hire what exactly are the plans? 20:57 20 minutes, 57 seconds So I [clears throat] mean you you have heard the uh the change in the fund manager post and uh so I mean you would 21:05 21 minutes, 5 seconds also know our uncle Kundri who joined us uh few months back. He was with us for over 15 years. uh left us for few years 21:14 21 minutes, 14 seconds and has come back as senior fund manager uh I think is managing almost like 40,000 crores or so uh across few funds. 21:22 21 minutes, 22 seconds Uh maybe let me take this opportunity to talk about the uh the overall investment team. Uh Dish if you allow me. Uh I'm 21:32 21 minutes, 32 seconds sure many of you would agree because several of you also interact uh with all of my colleagues on the investment side that we are one of the most experienced 21:40 21 minutes, 40 seconds investment team in the industry and uh not only experienced but an enviable long-term track record across market 21:48 21 minutes, 48 seconds cycles. All of them have seen multiple market cycles and have done well. So on the equity side we have head of equities 21:56 21 minutes, 56 seconds and uh senior fund managers who manage the diversified funds. Least experienced among these would would be like 20 21 22:04 22 minutes, 4 seconds years of industry experience and over and above we have a team of analyst. 22:09 22 minutes, 9 seconds Several of them are designated fund managers for their respective sectoral and thematic funds. Um clearly like 22:16 22 minutes, 16 seconds among the most experienced team in the in the industry. We take deep pride in them. uh some of them have started managing more diversified mandates. You 22:25 22 minutes, 25 seconds are aware like RNA has been managing now our value fund. 22:32 22 minutes, 32 seconds So I I think a firm that has been around for 25 years we have seen transitions in the past and our view is that we have 22:38 22 minutes, 38 seconds handled the same extremely well. Uh we continue to expand our team and uh remain like very confident. 22:49 22 minutes, 49 seconds All right sir. Thank you so much and all the very Thank you. Thank you. 22:55 22 minutes, 55 seconds Next question is from the line of Sukrit Dartil from Eyesight Fin. Please go ahead. 23:01 23 minutes, 1 second Good evening to the team. I have two questions. My first question is to Mr. 23:05 23 minutes, 5 seconds uh uh first of all congratulations on the quarter. uh with HDFC AMC's uh strong 23:12 23 minutes, 12 seconds brand and evolving investor uh presence, how do you see the uh next two three years shaping up in terms of product 23:20 23 minutes, 20 seconds innovation and investor engagement? Uh es especially as passive flow rises and 23:29 23 minutes, 29 seconds digital platforms reshape the distribution. uh what uh should the stakeholders ex uh expect as the 23:36 23 minutes, 36 seconds defining theme from your uh leadership in this space? Yes sir, thank you. 23:40 23 minutes, 40 seconds That's my first question. I'll ask my second question after this. 23:43 23 minutes, 43 seconds Sure. So first question is on the overall product pipeline. So if you if you look at our product portfolio, I think it's largely complete across the key categories. Whether you look at 23:52 23 minutes, 52 seconds active equity, fixed income, money market, uh both on the active side, passive side, uh we are more or less 24:00 24 minutes complete. Uh from time to time we may look at select sectoral or thematic funds but only where the investment team 24:07 24 minutes, 7 seconds has strong conviction and uh sees a clear opportunity. And these launches are likely to be like few and and and 24:14 24 minutes, 14 seconds far uh between but otherwise I think we have a best-in-class product portfolio with a long-term track record and uh we 24:23 24 minutes, 23 seconds continue to focus on like all of them and if you're talking about the overall platform then apart from the mutual fund 24:30 24 minutes, 30 seconds we continue to enhance our PMS AF international gift city offering uh because these platforms allow us to 24:39 24 minutes, 39 seconds address a wider range of uh client requirements. 24:43 24 minutes, 43 seconds So I think overall approach is to deepen and strengthen what we already have and add selectively where it generally makes 24:50 24 minutes, 50 seconds sense. Your second question was on uh 25:04 25 minutes, 4 seconds hello Chris. Yes. 25:06 25 minutes, 6 seconds Yeah. Yeah. Uh so my second second question is to Mr. Uh Nazar uh on the financial side beyond margins how are 25:14 25 minutes, 14 seconds you thinking about capital efficiency in this space uh balancing shareholders returns or any tech investment or any 25:22 25 minutes, 22 seconds cost cost structure uh discipline in place. Do you see uh the scope for a shift in deployment pri uh deployment 25:31 25 minutes, 31 seconds priorities as uh digital adoption as digital adoption uh accelerate? 25:40 25 minutes, 40 seconds Yeah. Thank you. 25:41 25 minutes, 41 seconds I think from a deployment of capital towards digital I think that's an ongoing process. We continue to invest in technologies uh and digital platforms 25:50 25 minutes, 50 seconds over the years that's already baked in uh whether it's in the form of uh certain capex or large efx. So that that 25:57 25 minutes, 57 seconds doesn't really change from the balance sheet utilization of cash if uh that's what your uh question is to uh we our 26:06 26 minutes, 6 seconds dividend policy sort of our dividend payout for last two years have been almost close to the entire post tax cash profits that we generate uh as a 26:15 26 minutes, 15 seconds business we have paid out that's what the board has done for the last two financial years we have also used capital to good effect to seed our 26:23 26 minutes, 23 seconds alternate platforms uh so we are a material investor in our alternatives fund of fund that we launched couple of years ago uh you'd have probably read 26:32 26 minutes, 32 seconds and we discussed in the credit fund that uh we have just announced the first close again the asset management company has meaningfully committed around 14% of 26:40 26 minutes, 40 seconds the corpus is committed by the balance sheet of the of the asset management company so we will use the balance sheet judiciously for for seeding businesses 26:50 26 minutes, 50 seconds uh and the third option of strategic uh acquisition stroke any kind of enhancement always is on the table. Uh 26:58 26 minutes, 58 seconds we do have a look at a lot of transactions that happen in the market. 27:01 27 minutes, 1 second So whenever the time and the pricing and and the business works out for us, we we'll look at that as well. 27:08 27 minutes, 8 seconds Uh I think that's uh good guidance from your part and I best and best of luck for next quarter. Thank you. 27:15 27 minutes, 15 seconds Thank you. Next question is from the line of Deep Chan Kosh from City. Please go ahead. 27:22 27 minutes, 22 seconds Hi. Uh good evening everyone. Uh so just few questions. one uh you kind of articulated on your investment management bandwidth uh but let's say 27:31 27 minutes, 31 seconds since the time you know this news regarding uh Rashi exiting some uh the company and some of the funds kind of being in a transitionary phase uh has 27:39 27 minutes, 39 seconds been floating around uh let's say over the last 2 three months in terms of flows into this particular funds uh if you give can give some granular 27:46 27 minutes, 46 seconds understanding uh of how the trajectory has been and also in terms of your communication to the distributor or interactions with the distributor has 27:54 27 minutes, 54 seconds there been any uh back and forth in terms of customer interactions or some uh negative sentiment uh floating around. Uh my second question uh you 28:03 28 minutes, 3 seconds know you mentioned that on the MF circular uh you will be kind of following a similar practice uh to that 28:09 28 minutes, 9 seconds of 2019 and to the finest possibility you will be trying to mitigate uh most of the impact. Um but you know 28:17 28 minutes, 17 seconds internally have you kind of deliberated uh what can be let's say the worst case uh scenario uh despite all the mitigates 28:24 28 minutes, 24 seconds and uh whether you're confident of let's say mitigating the entirety uh like you did in 2019. Uh and the third and last question is on the alternates business. 28:33 28 minutes, 33 seconds Obviously you have launched a few funds over the last uh two or three quarters. 28:37 28 minutes, 37 seconds Uh if I were to take a more of a long-term view let's say over the next uh 3 to five years. uh what sort of aum or revenue mix do you really aspire from 28:46 28 minutes, 46 seconds this segment? Um yeah so those were my three questions. 28:51 28 minutes, 51 seconds Sure. So first on the on the one fund managers if you will appreciate I mean we have 28:58 28 minutes, 58 seconds been around for 25 years and we have seen transitions in the past and I think we have handled it extremely well. you would give us the credit. I mean uh we 29:07 29 minutes, 7 seconds had a legendary CIO uh I always have been and will always remain in in deep gratitude to to him 29:15 29 minutes, 15 seconds for what he has built and and what he has done. But at the same time the strategies that were managed by him uh 29:22 29 minutes, 22 seconds some of them are the ones which have seen the highest growth at our end in last couple of years and uh the overall 29:30 29 minutes, 30 seconds team's experience the pedigree uh the overall quality of our research the quality of our you know the the uh 29:39 29 minutes, 39 seconds risk management governance long-term orientation fundamental research and all of that don't have to I I don't have to 29:47 29 minutes, 47 seconds overemphasize ize on on on that. So uh while we do everything in our power to retain talent across the organization 29:55 29 minutes, 55 seconds and not just in the investment team but we have handled uh few transitions here and there very well and we remain very 30:02 30 minutes, 2 seconds very confident. I also mentioned about about like uh I mean one of the fund 30:10 30 minutes, 10 seconds manager who was with us for 15 years left us and has come back. uh you you 30:16 30 minutes, 16 seconds will see like you'll hear uh some of the uh I mean some of the funds getting managed by fund managers who are I mean 30:25 30 minutes, 25 seconds the the current analysts who are managing sector and thematic funds increasingly managing diversified equity funds because they have handled size for 30:34 30 minutes, 34 seconds for a couple of years and we continue to remain on the lookout for at any point in time we see a differentiated skill 30:42 30 minutes, 42 seconds set uh who fits in nicely within in the culture that we have within the team that we have and the setup we have we 30:49 30 minutes, 49 seconds would continue to build our investment team and we'll share more on this as we as we go ahead. Yeah, 30:56 30 minutes, 56 seconds your second question was on the PR how do we optimize it? 31:01 31 minutes, 1 second Yeah, I I mentioned earlier that I mean 2019 is a classic example. You can you can go back and see the playbook uh how 31:07 31 minutes, 7 seconds we handle the same uh we understand uh the sensitivity around it and and we we'll optimize that to in in terms of 31:16 31 minutes, 16 seconds impact on the margins. Uh yeah also I think Depan if you look at versus 2019 the magnitude this time is much smaller 31:25 31 minutes, 25 seconds right that time we had an impact of nearly 25 or basis points and what Namit touched upon earlier this time there is 31:32 31 minutes, 32 seconds a five basis some of the smaller schemes are seeing realignment of uh expenses and thereby uh the kind of reduction out 31:41 31 minutes, 41 seconds there is virtually very very small or in some cases even zero. So I think netnet this time um in terms of prudently 31:50 31 minutes, 50 seconds managing we think we'll be able to handle it well. 31:53 31 minutes, 53 seconds On your third part on the alternatives etc. So it would be pertinent for me to state that the core business itself 32:01 32 minutes, 1 second where we have done reasonably well over time that continues to grow and we'll put in all the effort time money everything for that to see continued 32:10 32 minutes, 10 seconds growth across equity and that the cross active and passive. But beyond our mutual fund business, we do have our 32:17 32 minutes, 17 seconds eyes uh well set on whether it's PMS, whether it's alternatives, whether it's international business. Uh we've taken 32:25 32 minutes, 25 seconds meaningful steps over the last couple of years to to to build these businesses. 32:30 32 minutes, 30 seconds uh I mean we're building the very very solid foundation uh brick by brick uh and but but you would appreciate like I 32:38 32 minutes, 38 seconds mean we have grown our business with a sharp focus on uh quality uh scale and profitability. Uh so even beyond our 32:48 32 minutes, 48 seconds mutual fund business whatever we are doing we intend to replicate this approach. So in PMS alternative international build meaningful high 32:56 32 minutes, 56 seconds quality and profitable platform that strengthen the overall franchise uh o over the long run. 33:04 33 minutes, 4 seconds Got it. Uh thanks everyone and all the best. Thank you. 33:10 33 minutes, 10 seconds Thank you ladies and gentlemen to ask a question please press star and one on your phone. We'll take our next question 33:17 33 minutes, 17 seconds from the line of Dish Punjabi from Banyan Tree Advisers. Please go ahead. 33:23 33 minutes, 23 seconds Yeah. Hi, thanks for the opportunity. Uh I just had one question. So on the passive segment, we have been seeing good growth momentum. So can you talk 33:32 33 minutes, 32 seconds about the underlying factors that are leading to this from the investors point of view? 33:39 33 minutes, 39 seconds What was the question on passive? What is leading to growth? What is leading to growth momentum from underlying investors perspective? 33:45 33 minutes, 45 seconds I mean a large part of that growth is from some of the uh institutional mandates. Uh as you are aware that EPFO 33:54 33 minutes, 54 seconds uh and and some of the other pension and provident funds uh have been investing into some of the ETFs 34:01 34 minutes, 1 second uh and of course the exempted funds uh also invest in those funds. Then you have some of the insurance companies participating in in couple of products 34:10 34 minutes, 10 seconds and uh recently we have seen a significant growth in gold and silver ETF and fund of fund. Uh so some of 34:18 34 minutes, 18 seconds these are the categories. Uh we have been a pioneer on the index fund side. 34:23 34 minutes, 23 seconds We were one of the first one to to launch those products and they've grown meaningfully. In fact I mentioned this earlier that uh on on on the equity 34:32 34 minutes, 32 seconds index fund our market share on the passive side is higher than what we have on the active side. And then again uh the value of the brand franchise distribution all of that really matters. 34:43 34 minutes, 43 seconds And of course investment performance there is more about the the tracking error than than the uh alpha. So there 34:50 34 minutes, 50 seconds there is uh preference among some of the customers and advisers for mirroring the market and we have very comprehensive 34:58 34 minutes, 58 seconds product portfolio and uh a full setup to make the most of it and I've always mentioned that our our idea is that 35:07 35 minutes, 7 seconds wherever investors and and our partners want to participate uh in the market be it on the active 35:14 35 minutes, 14 seconds side or on the passive side and and I've spoken uh bit about alternatives I mean we we are like fully ready. Uh 35:22 35 minutes, 22 seconds for us the core strength that we have as an organization is our investment management capability, our risk management capability and our product 35:29 35 minutes, 29 seconds management capability and we continue to sharpen that and uh whether an investor come through any route I think we have 35:37 35 minutes, 37 seconds we have the best-in-class product offering for everyone. 35:43 35 minutes, 43 seconds For sure. And from a medium-term perspective, uh any insight on where we see this going like currently it's around 10% of the L1 mix uh for maybe 3 35:53 35 minutes, 53 seconds to 5 year perspective uh like where do we see this going? 35:58 35 minutes, 58 seconds So uh couple of times uh I I don't know on this call or maybe in some other forums I've given parallels between the 36:06 36 minutes, 6 seconds asset management industry growth in US from 80s onwards and what we are seeing in India over the last couple of years. 36:15 36 minutes, 15 seconds I think over the next several years we are going to see significant growth in asset management. So formalization of 36:23 36 minutes, 23 seconds the economy, digitalization of the economy, financialization of savings, financialization of assets, all of these 36:32 36 minutes, 32 seconds are like structural trends and over a period of time you'll see like newer asset classes emerging uh people 36:40 36 minutes, 40 seconds investing one like mutual funds which has been like time tested beautiful product uh with a track record. Some of 36:47 36 minutes, 47 seconds our fund houses like ours have a track record going back 30 years. uh some of the investors may like to participate 36:54 36 minutes, 54 seconds through passive within that uh either the index fund or the ETFs. Uh we are seeing some of the other asset classes 37:01 37 minutes, 1 second whether it's reads, invests, uh private markets. I talked about our plans on the alternative side uh to participate in 37:09 37 minutes, 9 seconds the private markets. Almost all the segments are likely to grow and you can see from 80s onwards how several of 37:16 37 minutes, 16 seconds these segments have grown in US and maybe I think in terms of the size of the economy, size of the market, uh 37:24 37 minutes, 24 seconds structure of the market uh several of of those were like very similar and I think credit to our regulators who've been 37:31 37 minutes, 31 seconds very pragmatic and and have been deeply focused on investor education and investor protection. I think they continue to do a good job on that. there 37:40 37 minutes, 40 seconds is significant growth potential on all segments. So people ask me like active versus passive how this will grow and I 37:47 37 minutes, 47 seconds say I think I I hope that in my lifetime I don't have to answer that question. In my lifetime it will remain active and 37:54 37 minutes, 54 seconds passive rather than active versus passive. Sure. Thank you. 38:03 38 minutes, 3 seconds Thank you. We'll take a next question from the line of Madukara from JP Morgan. Please go ahead. 38:10 38 minutes, 10 seconds Uh hi uh good evening. Uh congratulation on a good set of numbers and uh most of my questions have been answered. Just 38:17 38 minutes, 17 seconds wanted to uh understand uh did you disclose the asset classwise yield uh this time around uh as a data keeping 38:26 38 minutes, 26 seconds question. I wanted that and um um it would be fair to assume that uh given uh 38:35 38 minutes, 35 seconds this uh changes in the whole TER uh calculation system and uh you know the 15 uh basis points 38:44 38 minutes, 44 seconds um uh deduction and you know excluding the statutory levies uh especially on 38:52 38 minutes, 52 seconds that um uh that change would we be able to sort of uh uh would 39:00 39 minutes that be uh neutral um to our P&L especially on on that 39:07 39 minutes, 7 seconds specific change or um my my sense is that it would it should largely be neutral but just I wanted to just confirm that. 39:16 39 minutes, 16 seconds So uh mother repeating again that uh I I explained in detail that larger schemes definitely are getting impacted and and 39:24 39 minutes, 24 seconds I also mentioned that uh you'll be surprised that many of the smaller schemes will see uh increased DR 39:31 39 minutes, 31 seconds at our end. uh I've said that uh while the reduced DR means higher alpha and particularly for the larger size funds 39:40 39 minutes, 40 seconds and uh there is a long-term positive implication of that but on the other side uh whatever little impact of of the 39:47 39 minutes, 47 seconds reduction on account of exit load or or or the expense ratio construct is there uh we will we will optimize it to ensure 39:56 39 minutes, 56 seconds that uh we remain highly focused on the on our profitability. 40:01 40 minutes, 1 second And so if we were just to look at the um you know if we were to exclude the exit load construct and only look at this uh 40:11 40 minutes, 11 seconds reduced TR so uh over there also we would uh see a little bit of a negative impact is what is is that what you're 40:19 40 minutes, 19 seconds saying and then obviously we would take compensating steps but it would be both ways right some of the 40:26 40 minutes, 26 seconds yeah positive impact some of the schemes there will be negative impact so as nit touched upon earlier will uh optimize on 40:34 40 minutes, 34 seconds both sides and make it sure that uh the net margins that we speak of uh remain within the acceptable band. 40:42 40 minutes, 42 seconds Uh understood understood and the asset class wise yield sorry I joined a little late I may have missed that earlier. 40:49 40 minutes, 49 seconds Yeah we we did give that earlier but I'll repeat it for your benefit. So equity uh yields came at 56 57 basis points. It 40:59 40 minutes, 59 seconds includes index funds. Uh debt yields were between 27 and 28 basis points and liquid uh between 12 and 13 basis points. 41:09 41 minutes, 9 seconds Okay. Got it. Thanks and all the best. 41:14 41 minutes, 14 seconds Thank you. Next question is from the line of gojani from Prabhazad. Please go ahead. 41:22 41 minutes, 22 seconds Thank you [clears throat] and uh congratulations on a strong quarter. 41:26 41 minutes, 26 seconds Two questions. One is uh I don't know if you've laid this out. Uh is there a new ESOP issuance and can you just elaborate as to then what what will 41:34 41 minutes, 34 seconds be what will what is the ESOP cost that will look like? 41:40 41 minutes, 40 seconds Yeah I yeah sorry the question is on ESOP cost right? That's correct sir. 41:47 41 minutes, 47 seconds So uh I've given it out in the previous um calls as well. So so the non-cash uh 41:55 41 minutes, 55 seconds expense on account of ESOPS for the full year uh would be about uh 68 crores. The for the first 9 months is about 47 crores. 42:07 42 minutes, 7 seconds So so that doesn't change right? I mean whatever estimates were given that that doesn't change. That's not a new issue right? uh so in we will uh so what so 42:16 42 minutes, 16 seconds the material is eop issuance happened uh last year but as and when you know additional resources and people join us 42:24 42 minutes, 24 seconds we'll have small incremental issuances today also we announced a small uh issuance so that's an ongoing process that will continue but that will not 42:33 42 minutes, 33 seconds change this expense uh estimates we given out previous quarter very materially understood thanks and secondly sir nomin 42:40 42 minutes, 40 seconds sir to you uh you did mention of you know the five basis point impact uh on the overall AMC uh profits. uh just 42:49 42 minutes, 49 seconds wanted to kind of uh uh you know have your opinion as to how are we thinking in terms of passing that on and you know what is the dialogue with distributors 43:00 43 minutes you think how are we looking at doing it no detail it is uh it will depend on the 43:08 43 minutes, 8 seconds size of the scheme and of course uh where wherever there was an an additional uh TR I mean additional 43:15 43 minutes, 15 seconds charge of that uh exit load is But the overall impact of of five basis point on the uh AMC profitability I gave that 43:24 43 minutes, 24 seconds detail I mean uh in detail I explained that in detail earlier 43:31 43 minutes, 31 seconds yeah so you not I think you said the impact for us is five base that's not what has said no no I didn't understand I do I do 43:39 43 minutes, 39 seconds understand that I was just trying to uh gauge as to what's the dialogue with the students uh to how how will the can Can there be some pass through or not? 43:51 43 minutes, 51 seconds Yeah, I mentioned it couple of times that we will try to optimize uh and and uh maintain our our profitability. 44:01 44 minutes, 1 second Sure sir. That is it for Thank you ladies and gentlemen to ask a question please press star and one on 44:09 44 minutes, 9 seconds your phone. We'll take our next question from the line of Abhijit Sakre from Kotak. Please go ahead. 44:17 44 minutes, 17 seconds Hey. Hi. Uh, good evening everyone. I just have one uh slightly hypothetical question. Would you say that uh it's easier to cut commissions uh in better 44:26 44 minutes, 26 seconds performing funds generally rather than throughout most of the funds? I mean just over the cycle if one has to 44:33 44 minutes, 33 seconds understand um you know how easy it is to pass on some of these regulatory impacts or just the initiatives to protect profitability better. 44:43 44 minutes, 43 seconds I mean we always try to make it win-win for everyone. I mean whether for our for our investors, for our distributors and 44:50 44 minutes, 50 seconds and for our profit, I mean for us and we have demonstrated that over a long period of time. You you have uh you have 44:58 44 minutes, 58 seconds watched us over the years and we'll continue to do a good job hopefully on that. 45:07 45 minutes, 7 seconds Okay, got it. Thank you so much. Thank you. 45:13 45 minutes, 13 seconds Next question is from the line of Madukar Lada from JP Morgan. Please go ahead. 45:18 45 minutes, 18 seconds Uh hi uh thank you for taking the followup. I wanted to get a sense of uh what has been the uh ramp up uh from uh 45:27 45 minutes, 27 seconds the HDFC bank channel and uh you know any update on how uh this channel could contribute even more um to to uh AUM. Yep. 45:40 45 minutes, 40 seconds Yeah. uh so firstly as you all know and I think SDFC bank has been vocal about the fact that bank has been and will 45:48 45 minutes, 48 seconds continue to be an open architecture uh whether we like it or not or uh whether this is the right thing to do or 45:56 45 minutes, 56 seconds what other competitors are doing uh this is a given of course there is a positive rub off uh with them being our parent 46:04 46 minutes, 4 seconds and same brand so not only from customer perspective but even from relationship manager perspective perspective there is 46:11 46 minutes, 11 seconds higher comfort in in offering SDFC mutual fund product which is uh visible in our market share 46:18 46 minutes, 18 seconds uh in in in their AUM. So in equity AUM our overall market share at the industry level is 13%. But if you look at what 46:26 46 minutes, 26 seconds SDFC bank has sold in that it is somewhere in the late 20s. 46:32 46 minutes, 32 seconds uh also this whole open architecture leads to material uh so-called event based or seasonal challenges. So for 46:41 46 minutes, 41 seconds example in a particular quarter when some of our peers have large NFOs or uh and then our parent bank participates 46:49 46 minutes, 49 seconds actively it impacts our flow market share in that particular quarter but the team has constantly been working on furthering our ties and offering 46:57 46 minutes, 57 seconds best-in-class products. um SIP in particular continues to be an important area of focus for us and even for this 47:06 47 minutes, 6 seconds relationship uh I mean I I mean SDFC bank SDFC AMC relationship. So our share of SIP flows through the SDFC bank 47:15 47 minutes, 15 seconds channel is meaningfully higher than our overall book share with the bank. Uh that reflects the emphasis on long-term 47:22 47 minutes, 22 seconds investing and uh the quality of customer engagement coming through this channel. 47:27 47 minutes, 27 seconds So this in my opinion will lead to increased AUM market share over time uh because the the the SIP buildup will 47:35 47 minutes, 35 seconds will will only show over a period of time but this aligns very well with our long-term uh objective. So bank 47:43 47 minutes, 43 seconds continues to be an very important distribution partners for us. It is it is a behad and given our relationship we 47:51 47 minutes, 51 seconds work with the bank very closely and u uh at multiple levels and we'll continue to further our our share with them. Uh I 47:59 47 minutes, 59 seconds mentioned in last couple of quarters we have built a dedicated team internally that works only on this channel. Uh and 48:07 48 minutes, 7 seconds then there's lot of I would say uh interaction between our our digital team and bank digital team the marketing 48:14 48 minutes, 14 seconds team so on and so forth. uh apart from the sales channel. So the whole objective of uh of deepening engagement 48:22 48 minutes, 22 seconds and expanding the relationship in a in a consistent sustainable manner. Uh I should also mention that uh our 48:29 48 minutes, 29 seconds relationship with SDFC securities uh on that that DJ and team are working closely with us on various initiatives. 48:38 48 minutes, 38 seconds So as a result our share of flows through SDFC securities is higher than our AUM share uh reflecting the traction 48:45 48 minutes, 45 seconds that uh we are gaining. But overall yeah there has been uh increased engagement 48:52 48 minutes, 52 seconds and uh bank is a is a distribution powerhouse and with the brand familiarity and and the relationship period of time it'll it'll reflect in 49:01 49 minutes, 1 second the numbers but we are happy with the with the SIP buildup. 49:05 49 minutes, 5 seconds Great great congratulations and uh all the best. Thank you. 49:11 49 minutes, 11 seconds Thank you. Next question is from the line of Mohit Mangal from Centrum. Please go ahead. 49:17 49 minutes, 17 seconds Yeah. Yeah. Thanks for the followup. Uh so actually I was looking at the last 10 to 11 quarters market share and you know we have been quite stable in equity as 49:26 49 minutes, 26 seconds well as debt but liquid we have kind of you know kind of lost the ground you know from 13 13 and a half% to around 11 odd percent. 49:34 49 minutes, 34 seconds uh so just wanted to know your thoughts as to how we can increase the market share in that segment. 49:40 49 minutes, 40 seconds I think it gets impacted by few of the large corporate investors or institutions uh 49:48 49 minutes, 48 seconds uh kind of like a any large movement of one client versus the other with one fund house versus the other uh but I I 49:58 49 minutes, 58 seconds don't read much into into that otherwise uh because sometimes I mean share may look lower because some client where we 50:06 50 minutes, 6 seconds are kept out in terms of total amount as per their internal policy have invested further amount and that amount hasn't uh 50:15 50 minutes, 15 seconds come to us and you can also see a reverse happening in another quarter where uh some other large institution 50:21 50 minutes, 21 seconds has has increased uh allocation to us but the overall institution team is on the ball and are focused on getting the 50:29 50 minutes, 29 seconds maximum allocation uh I can also share that uh we have hired a senior person recently who now been made responsible 50:36 50 minutes, 36 seconds for pan India institution business apart from uh some of the other emerging channels that that we are we are setting up. 50:46 50 minutes, 46 seconds Okay, understood. Uh secondly, again on the distribution channel, so we are seeing basically a direct you know the share increasing within the equity. So 50:54 50 minutes, 54 seconds like like you have been uh telling over the last few calls that fintech has a major role to play. So I think I think that story continues. 51:03 51 minutes, 3 seconds Yeah. Yeah. So I think fintex have been growing um uh quite rapidly over the last couple of years and and it's become 51:11 51 minutes, 11 seconds a vital uh distribution channel for the mutual fund industry. They have played a very big role in expanding the reach and accessibility. 51:20 51 minutes, 20 seconds uh in fact fintech as a group have registered 25 million SIPs in the 9 months of the current financial year 51:27 51 minutes, 27 seconds gone by and uh we have successfully built a strong presence on leading platforms securing a notable share both in new 51:35 51 minutes, 35 seconds flows as well as SIP registrations we we share very good relationship with all the larger ones and of course some of 51:43 51 minutes, 43 seconds the emerging ones that question right yeah yeah yeah yeah understood thanks and wish you all the 51:51 51 minutes, 51 seconds Thank you ladies and gentlemen. That was the last question for today. I would now like to 51:58 51 minutes, 58 seconds hand this call over to Mr. Navit Monot for closing comments. Over to you sir. 52:03 52 minutes, 3 seconds Thank you. So to wrap up our total assets crossed rupees 9 trillion with equity assets exceeding rupees 6 52:10 52 minutes, 10 seconds trillion. We now serve over 15 million unique investors with a penetration of 26%. 52:16 52 minutes, 16 seconds Reflecting the uh rest of our our franchise u our objective at SDFCMC 52:24 52 minutes, 24 seconds remains clear to be a one-stop partner for investors across mutual funds, PMS, AIS and international offerings. 52:33 52 minutes, 33 seconds Thank you for your time today and wish you happy Makasanti. 52:38 52 minutes, 38 seconds Thank you sir. On behalf of HDFC Asset Management Company Limited, that concludes this conference.