ABSLAMC — earnings call
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Prepared remarks
AND CHIEF EXECUTIVE OFFICE · MR. PARAG JOGLEKAR – CHIEF FINANCIAL OFFICER
MR. PARAG JOGLEKAR – CHIEF FINANCIAL OFFICER MR.
PRAKASH · BHOGALE
BHOGALE –
HEAD, · INVESTOR
INVESTOR
RELATIONS · Management
Aditya Birla Sun Life AMC Limited April 28, 2023
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to Aditya Birla Sun Life Asset Management
Thank you very much.
We now begin the question-and-answer session.
The first question is from the line of Devesh Agarwal from IIFL Securities.
Please go ahead.
Devesh Agarwal
My first question is, in the equity segment although you did share multiple things that you are doing to get the market share and increase AUM but still we’ve been losing market share.
So, if you can give us some sense, which are the segments or particularly which investor category we are losing market share?
Aditya Birla Sun Life AMC Limited April 28, 2023
A. Balasubramanian
Devesh thanks for this question.
As far as the equity is concerned of course our endeavor has been to one, stop the leakages, at the same time improve the overall momentum in the equity in terms of improving the market share.
You have seen we have collected close to about ₹1572 crores in the last quarter through the launch of a multi-asset allocation fund, which again reflects our ability to raise funds and improve overall market share.
And second, SIP is another route through which we continuously put effort to increase the overall market share in equity, but the segment in which where we have seen, somewhat lower participation is in the HNIs category where we have seen lower participation in the last one and a half, two years, especially in the equity space which we believe that we need to catch up.
Second, the category in which we are losing assets are those assets where we have seen the performance-related issue which we have witnessed from last one and a half, two years in two, or three categories which are ELSS and a few of the categories in the equity space where we have seen some bit of outflow with the change of fund management responsibility in the last six months to one year, we are seeing those funds now getting stabilized and coming closer to the benchmark as well as coming closer to the peer group on the near term basis, as we see that improvement coming in, we should see those asset classes which remained relevant and we should see the flows coming back.
But as I speak today, more than losing the lack of participation in whatever the growth that is coming in the industry, which has been for the whole year would have been somewhere in the range of about 79,000 to 80,000 Cr. then will be the participation being missing is one which was leading to the market share lag rather than absolute redemptions coming and losing market share.
Devesh Agarwal
Understood sir.
And sir if you see at the distribution side, again I am talking about the equity asset, we see that the share of the banking channel has been going down and in the last year, it has come down by 200 basis points.
So, is this a decline that we are seeing across banks or there are selected banks where our sales have slowed down?
A. Balasubramanian
No, in the case of banking channels because we have all the banking channels whether it is the leading bank, private sector bank, whether HDFC, Axis, we have only seen a marginal improvement in terms of our participation, especially a channel like Axis we have seen increased participation coming in SIPs including HDFC Bank and these assets are largely in the some of these foreign banks used to get a significant market share such as the Citi Bank with the general reduction in the mutual fund flows.
And we used to enjoy a very high market share from them, anywhere between 15% - 16% market share.
We have seen a marginal dip, which again, I don’t see as a big challenge.
Of course, some of the banking channels goes by the product recommendation.
In fact, some of our products which are not part of the recommendations temporarily would have seen lesser participation coming from that channel compared to their own selling would have happened, but otherwise if you look at historically our market share is about 48% to 50% from IFAs roughly about 23% from banking channels, and roughly about 24% - 25% coming from NDs.
The direct channel is one of the channel where general flow is also coming in, where we have seen flat growth under the direct channel as well.
These are a combination of things I would say is the dynamics rather than the single channel not giving inflows or something.
Aditya Birla Sun Life AMC Limited April 28, 2023
Devesh Agarwal
Okay.
And lastly, sir if we see that over the last two years, although the share of equity has gone up in the overall mix, our yield has remained under pressure.
Now there would be some generic reasons for those.
But other than that, specifically I wanted to understand how the distributor’s payout intensity changed for you between say FY21 and 23.
A. Balasubramanian
I will ask Parag to answer that once again.
Parag Joglekar
So, Devesh the distributor payout on an overall basis as a general principle remains that we share in the range of around 65% of our overall DTR, that continues, but as you know and we have been mentioning earlier also wherever there are NFOs generally in the first year of NFO the payout is slightly higher than the 65% due to two reasons - one is that there is a B30 brokerage which is there and there is some additional payout which happens in the first year which has the impact of a slightly higher sharing against the normal thing.
So that is the only change otherwise some of the NFOs which have happened have just elevated the cost a little bit but otherwise on the normal BAU sales it remains in the range of around 65%.
Moderator · Conference Operator
Thank you.
The next question is from the line of Lalit Deo from Equirus Securities.
Please go ahead.
Lalit Deo
So, the first question is again on the market share, so in this quarter we have seen some improvement in our SIP flow market share now, but in terms of AUM market share, we have been losing market share.
So, just wanted to understand in the lump sum flows, we have seen some major dip.
So, what could be the reasons for the same as you alluded to that part?
And also given that we are looking to launch funds in the PMS and AIF categories in FY24, how is the OPEX trajectory for us in the coming two years?
A. Balasubramanian
Market share loss is largely on account of one or two categories in which flows have come, which I mentioned in my speech as well, which is essentially small and mid-cap space and ELSS category and large & mid-cap space.
These are the three spaces that predominantly big flows have come for the industry, infact our flows in these three categories, except we have got money in the small and mid-cap fund during the same period, whereas other schemes we did not get as much as flows which normally get every year.
So, to the extent our market share loss was on account of flow coming in, we saw an outflow in a few of those schemes and whatever the flow that came in the big category like small and midcap, our flow was relatively lower than the industry.
These are the primary reason but these flows in industry also come through the combination of lumpsum and SIPs.
And then SIP flows in these small and mid-caps are also relatively higher than what we historically have seen.
Therefore, to the extent our deserving participation was less, which again I would attribute to the reason I just mentioned earlier which is what currently we have only reversing it, which I think should help us in the next few quarters to get back on track.
As for your AIF thing concerns, is that we have planned to line up AIF products there is one which we will be closing in the month of April, and we planned two more AIF this financial year both in equity and fixed income.
In terms of team strength, we already have, if at all we Aditya Birla Sun Life AMC Limited April 28, 2023 have to add one person, we will add one with the long-short kind of capability, as far as the equity is concerned, we may add one person on the credit side for the launch of our credit fund.
Otherwise, you don’t see a significant addition in terms of adding people that’s the only main part that we have and that will be opex with respect to the AIF would not be anything significant except people may have to just go for a travel to promote this product, which I call it as a business as usual.
Lalit Deo
Sure sir.
On the yield side, could you highlight the difference between the stock, yields on the stock basis and the flows which we are getting as an overall segment wise particularly in equities?
Parag Joglekar
Lalit, basically as you know the stock wise little lower on the sharing basis, and the new money which comes in has slightly higher which is in the range of around 65%.
So, the yield on the stock is higher than the yield on the new flows, which is coming.
I don’t have a handy number on the differentiation but that is the case and over maybe the next couple of years that get merged.
The differentiation between both of them is not very significantly high there will be some differentiation, but that will merge over maybe the next two or three years period of time.
Lalit Deo
Sure, sir.
And sir just last one data keeping question, can you share the SIP AUM as of March 23, the overall SIP AUM?
PRAKASH · BHOGALE
It’s 51,203 Rs Cr
Moderator · Conference Operator
Thank you.
The next question is from the line of Prayesh Jain from Motilal Oswal.
Please go ahead.
Prayesh Jain
Firstly, could you give us the yields that you would have made in FY23 on equity, debt, liquid, and ETF, some ballpark numbers?
A. Balasubramanian
Yes, I will ask Parag to give you the numbers.
Parag Joglekar
So, equity more or less is in the range of around 70-74 odd basis absolute.
On debt, debt is in the range of around 25-26 basis, 25 odd basis and on liquid is in the range of around 12 basis.
Prayesh Jain
Okay, that’s helpful.
Apart from that, if I look at your expenses in this quarter, other expenses in particular, they were higher both on a sequential basis as well as on a Y-o-Y basis, what was the reason for that?
Parag Joglekar
So, the main reason which has contributed to the higher expenses for this quarter is NFO which we launched in the current quarter, the multi-asset allocation fund, on which we spend some of the amounts on marketing and sales promotion on that NFO which is contributed mainly for that, other than that, there are some of the other infrastructure expenses like we opened some of the new branches and all, so that has slightly gone up.
Other than that, there are normal regular expenses generally in the last quarter which are slightly higher than the other quarter on Aditya Birla Sun Life AMC Limited April 28, 2023 traveling, business promotion or any other spend on marketing.
So, those are the expenses that have come up
Prayesh Jain
And how should we think about the expenses from next year’s perspective?
What kind of growth do you envisage in expenses both on employees and employee costs and other expenses also, if you could throw some light as to, how much of the cost is on the ESOP front and how you see it in FY24?
Parag Joglekar
So, generally we are looking at the expenses to be in-line, growing maybe below the overall AUM growth, which we will have in the next year, that is the intention.
Generally, it will be in the range of inflation plus some uptake on employee cost, which we will look at it even on the administration side, similarly on the rentals or any other expenses, which we may have.
If there is any depreciation on the rupee-dollar that may have an impact and escalation especially on the technology side, that may have a little bit of impact on the overall expenses because we are highly dependent on these technology platforms and technology service providers.
So that is on the expense side we are looking at.
Prayesh Jain
On the ESOP front employee cost?
Parag Joglekar
So, the ESOP plan generally is going down because there are 40, 30, 20, 10 that are generally hit which we get on the ESOP plan.
Currently, this year it was around 30 plus odd crore so we can see some drop in the next year on the ESOP side.
A. Balasubramanian
With respect to the employee things, while we have more or less fully in place with respect to our employee goes, a few additions could come in terms of employee addition, most strengthening the team, especially on the investment side, as well as on the sales and alternate investment side which again I guess that there will be of course some compensation will also come in the form of realigning the responsibility of people and so on and so forth, but I don’t see a significant increase as far as employees cost is a concern, but of course annual increment that we normally count anyway around 7% to 8% to the extent one can expect.
Prayesh Jain
And Bala sir, while there are no regulations that are out yet, at some point in time SEBI is going to give some clarity on what the TERs are going to be, what costs are going to be subsumed in the TER, what are your thoughts in the sense, how are you guys preparing for this and what could be kind of sharing mechanism this time around, that would kind of and also on this is case of broking is kind of subsumed into the TER, what could be the strategy of Aditya Birla Sunlife AMC, how that kind of payout?
A. Balasubramanian
Yes.
Prayesh the way we see it, it is still under discussion stage with SEBI while most of the expected announcements have already been appearing in the newspaper in some form or other, I presume 40%-50% of those expectations would come, and from a business point of view, our overall vision to be scale players, that remains and is not going to be taken away as a result of this.
And second is ensuring our product positioning, the investment performance is the key for us, while we are seeing improvement but we still have more work to do which we are currently Aditya Birla Sun Life AMC Limited April 28, 2023 driving that.
And third is in order to increase our retail penetration while we have been predominantly working with the B2B model, at the same time we are stepping up our engagement in terms of direct customer connect, both through the sales as well as service.
And that’s something we are putting in place to ensure that direct customers connect and at least the top 10 markets improve quite significantly the efforts help in building our AUM.
And fourth, we also identified a few more areas that could support the retail sales, which we call it a VRM model.
So far VRM model used to be used only for the activation of IFA.
They are moving away from activation to converting into sales so that every activated IFA contributes to the success.
That’s something we are doing. we are going granular in order to ensure that, that we bring up the overall contribution to us.
And an emerging market where we are seeing significant growth created for us for about two, three years back.
Once again, we are stepping up our focus in terms of increasing the penetration on the geographical footprint.
As far as the distribution-led economic model, I’m sure that will evolve depending on how the entire new TER structure are going to evolve.
Again, I would assume the way we currently have a 65-35 kind of model that we have, I would assume we’ll have to stick to a similar kind of model to ensure we can maintain somewhat discipline.
At the same time, ensure growth comes and at the same time we’re able to maintain the profitability.
May not be necessary in terms of absolute numbers at least on the basis point level, that’s something we will work on it.
But again, Prayesh we have to play it as it comes, it’s too early to at this point to jump the gun.
At the same time, we broadly know what all things would come and we start preparing ourselves as I just mentioned like for example, we have been really good active players on the DMA side which gives us the experience to be prepared for some portion of the trades could go through the market but at the same time, we also believe that intermediation cannot be completely removed even from an equity trading point of view.
Therefore, we have to look at that, mix and mix both models, but that’s something that will play it as we come closer.
Moderator · Conference Operator
Thank you very much.
As there are no further questions, I will now hand the conference over to the management for closing comments.
A. Balasubramanian
Thank you.
Thanks very much, ladies and gentlemen, for tuning in.
With this, we conclude our Q4 FY23 Earnings Call.
And do feel free to reach out to Mr. Prakash Bhogale for any query that you may have.
And all of you have a nice long weekend and thank you.
Moderator · Conference Operator
Thank you very much.
On behalf of InCred Equities that concludes this conference.
Thank you for joining us, you may now disconnect your lines.
Thank you.
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