ANANDRATHI — earnings call

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Prepared remarks

Anand Rathi Wealth Limited

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to Anand Rathi Wealth Limited Earnings Conference Call for Q4 and FY25. As a reminder, all participant line will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.

Please note that this conference is being recorded.

I now hand over the conference to Mr. Jugal Mantri, Group CFO of Anand Rathi Group.

Thank you, and over to you, Mr. Jugal.

Jugal Mantri

Thanks, Sejal.

Good afternoon, and thank you, everyone, for joining the Earnings Conference Call for the quarter and year ended 31st March 2025.

With me, we have on this call, our Product and Research Head, Mr. Chethan Shenoy; CFO, Mr. Rajesh Bhutara; Investor Relationship Head, Mr. Vishal Sanghavi; and our Deputy CEO -- yes, before I forget, let me congratulate our Feroze Bhai for his elevation to Joint CEO from Deputy CEO in recognition of his outstanding leadership and transformative contribution.

And we have Feroze Bhai with us.

And now I request Feroze Bhai to give business highlights for the quarter and year went by.

After him, I will give highlights of financial performance.

Over to you, Feroze Bhai.

Feroze Azeez

Thank you so much, Jugal sir, for your wishes.

It is the guidance of seniors like you in the company, which has helped me also contribute in small way.

Thank you so much for your wishes and all the guidance you have provided over the last 30 years to me as an elder brother.

Now getting to the call, during FY 24-25 our consolidated revenue grew by 30% year-on-year to INR 981 crores.

Profit after tax also grew by 33% year-on-year and ended at INR 301 crores.

We started the year saying we will do INR 285 crores (actual number is INR 280 Crores), we revised it to INR 295 crores and we finally, with God's grace, ended at INR 301 crores.

The total AUM grew by about 30% year-on-year to INR 77,103 crores as on 31st March 2025.

Share of equity mutual funds in AUM rose to 53% as of March 2025 compared to 51% in March 2024.

We have emphasized in several public interactions, as you would have noticed, that we are expecting a PAT growth between 20% to 25% for several years to come, as you would have heard our CEO, Rakesh Rawal, also mentioned.

And that's the consistency, we pray that we are able to deliver to our shareholders who deserve to see consistency in a business like ours.

With God's grace, we have been able to do that for 14 quarters in sequence.

We have done always in this range and above.

Now there was a small study conducted, which we are very curious because consistency is something, which we aspire to deliver to our shareholders.

We did a small study to find out of the top 1,000 companies as per market cap, how many have been able to deliver greater than 20% every quarter for a year-on-year growth of the same quarter last year.

And, the number to our surprise, with 6 companies have been able to deliver for the same 14 quarters we have been listed.

Only 6 companies could have delivered 20% growth Y-o-Y every single quarter.

And we are fortunately one of them with your support as a shareholder and God's grace.

It is generally believed -- the second point which I want everyone's attention, if I can humbly request for it, it is generally believed that wealth management businesses, which is linked with capital markets have earnings volatility in line with market volatility.

However, during the short

Moderator · Conference Operator

Thank you.

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

Please go ahead.

Lalit Deo

Sir, I have two to three questions.

Sir firstly, in this particular quarter, we have seen that the other income has increased materially.

So what were the reasons for the same?

Second, with respect to the guidance, which we have given for FY26. Now if you just calculate it, then what we find is that the -- to achieve the PAT guidance of about INR 375 crores, the EBITDA margin

Moderator · Conference Operator

The next question is from the line of Amansingh from Profit Gate Capital Services.

Please go ahead.

Amansingh

I have two questions.

First is in this quarter and full financial year as well, our structured product AUM has increased by 50%, but the revenue that comes from it has increased by 15 - 17%.

So is there any moderation in the yields of structured product?

This is one.

And second, your thoughts on how Anand Rathi Wealth as a company would be seeing the SIF as an opportunity for distribution?

And what do you think how the industry is taking it as of now?

Feroze Azeez

Yes.

So the answer is no, sir.

AUM is a picture and yield is a movie, generally when it comes to mutual funds, for example, and structured products, if you -- yield is generally calculated per annum, however, it's accounted.

So our structure product yield at maturity, if you backwards calculate what is the mutual fund equivalent, it generally comes to 1.18% per annum on market value -- average market value and that remains, and that has remained for really long periods of time, if not more than a decade.

So does that answer, sir?

So we don't see any compression there.

Amansingh

And on SIF?

Moderator · Conference Operator

Thank you.

The next question is from the line of Sunil Shah from SRE PMS.

Please go ahead.

Thank you.

The next question is from the line of Siddhant Gupta from RV Investments.

Please go ahead.

Siddhant Gupta

Good afternoon sir and congratulations on a good set of numbers.

So my question was regarding -- I was searching for the TAM of the -- like the TAM we operate in and I could not like generally get the number.

So could you just address that for me like what is the TAM of our products?

Feroze Azeez

What is TAM in the sense of -- can you tell me what it is?

Siddhant Gupta

That is on the structured products?

Feroze Azeez

Sir, if you can paraphrase your question again.

You want me to explain structured products?

Siddhant Gupta

So what will be the addressable market size regarding

Feroze Azeez

Okay.

I am sorry I am not familiar with this lingo.

So -- but yes, the total addressable market, I personally think here you don't take a market share, you create the market.

So there is hardly any structured products, unlisted structure -- non- principal protected structured product selling is -- we would be as of now 70 - 80% of the market.

We create the market.

Anybody who has wealth, 35% of that money is -- if I have INR1 lakh crores of aspiration for this year end, INR 35,000 crores is the market size.

Are you with me, sir?

Siddhant Gupta

Okay, sir.

Moderator · Conference Operator

Thank you.

The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services.

Please go ahead.

Prayesh Jain

Yes, hi.

Congratulations a good set of numbers.

Sir, just one when you give your guidance, what is the kind of mark-to-market and flow assumptions that would have got built into your forecast?

Feroze Azeez

When it comes to guidance of revenue and PAT, we do it very differently.

AUM guidance is generally an aspirational number.

Revenue and PAT is always bottom-up.

So Rakesh sir and I would have spent an hour with each RM over the last few days to understand their business plans.

We go -- if there are 31 clients, the leader looks at some then he brings it to the unit head.

It's always bottom-up targeting.

So that's how we arrive at a guidance because if we say we have an entrepreneurial culture, then the target cannot be top-down.

So we put some buffers as genuine management intellect and then give the guidance.

So it's not on the basis of market.

It's on bottom- up as much as we have clients sheets automated, which helps the person understand what is the maturity coming, what kind of new clients you will have, what kind of penetration you will have and that's how it bottom-up 382 numbers get added minus some degree of conservatism, which is again told to us by our elders we do that.

Prayesh Jain

Just trying to understand this, even when we are sitting with the RM to discuss his end of FY'26 aspiration of an AUM, he would have or he would want to see from you what is the kind of market returns we should build for his AUM numbers.

And he would give you a flow number that he would be able to get from his existing customers or from the new customers.

Moderator · Conference Operator

Thank you.

The next follow-up question is from the line of Bhavin Pande from Athena Investments.

Please go ahead.

Bhavin Pande

Hi.

Thanks for the follow up.

So in terms of flows, what would be from the vintage customers and what would be from a new family?

Feroze Azeez

Yes.

63% from existing clients and 37% from new clients.

Bhavin Pande

Okay.

And secondly, Feroze, just expanding on the structured product, so we said when there's a period of high volatility, we would look to sell options because of higher realization as compared to buying options depending on our view.

So in this kind of an environment where VIX could move capriciously, how do we sort of navigate our way through this kind of environment?

Feroze Azeez

So the first part of the question which was a hypothesis that you buy and sell puts is not right.

So let me clarify how it works it.

Bhavin Pande

No, no. I got an option when you are bullish, you buy calls or you sell puts and the other way around.

Feroze Azeez

See, now if you design a product.

Now if we have a product, which we have been designing the same thing for 1,300 times - 1,500 times, there you sell put spread.

You sell -- hypothetically, you sell put spread of different expiries, but all those are not liquid.

So you synthesize it using futures.

So if futures have a larger volatility for an issuer, generally in the products we currently construct, be it Nuvama or Anand Rathi Global Finance, higher volatility implies higher futures buying and selling.

So coming back, once the product is issued, we have not changed the product for the last 10 years.

We think we are in a high interest rate, high volatility environment for the last so many years, that’s why put spread selling is what is embedded in a structured product.

Does the first part -- am I clear in the first part, then I'll go to the second.

Bhavin Pande

Yes.

Moderator · Conference Operator

Thank you.

The next follow-up question is from the line of Sunil Shah from SRE PMS.

Please go ahead.

Sunil Shah

Just one point.

I have spoken about it earlier also in the last call.

But out of this about 11,700 odd families that we have, how many of those would be NRIs or clients who are out of India?

Feroze Azeez

Sunil sir, I will just tell you.

Sir, just give me a minute or two, I will tell you the precise number.

Sunil Shah

Yes.

Sure.

My point here is about GIFT City because the income that we earn from them would be tax-free for us.

So if we can put up a subsidiary at GIFT City and serve those clients from that platform, the income earned in the subsidiary would be tax-free for us.

Hence, we could generate some bit of more alpha, maybe it's a 10% number of our clients or 15% or whatever that number is, but that would help us.

So we -- I think if we can evaluate that as an option to serve our NRI clients.

Feroze Azeez

Absolutely, sir.

Sunil sir, it's a very, very good suggestion, and we have been examining that.

But I don't want to commit today.

And when it comes to NRIs, NRIs might in numbers could be a smaller proportion, values are larger than the numbers for sure.

I will give you to precise numbers.

But it's a great suggestion.

Now that you are bringing it up, we will take this up a lot more seriously, and then we will move up the priority list.

I will do that.

Sunil Shah

Sure, sir.

I mean even if it is 10% or 15% of our AUM, it certainly helps us to save on those tax line.

That's the only thing.

Feroze Azeez

Absolutely, and it also opens up a larger part of the balance sheet.

And what I am very thrilled about is see, when we have a Dubai office, we did a survey to figure out how much of the total wallet do we have for an Indian client based in India and a Dubai client investing in India, the apprehensions of completely converting capital into rupee exists.

So this dollar denomination also brings in a certain larger penetration possibility depending on -- so yes, so taxation, larger penetration possibility.

So we are working on it.

But have we done adequate progress?

I am sorry to say, no, but we will definitely move this up the priority list.

Sunil Shah

Thank you.

All the best.

Feroze Azeez

Thank you, sir.

Moderator · Conference Operator

Thank you.

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

Feroze Azeez

I like to thank everyone for being a part of this call.

We hope we have tried to answer your questions.

If you need more information, please feel free to contact Mr. Vishal Sanghavi, our Investor Relations Head, and our CFO -- beloved CFO; Rajesh Sir.

Thank you, everybody.

And Sunil sir, I'll just tell you the number, it's about 10% to 12% is NRI clients' AUM.

Thank you.

Moderator · Conference Operator

Thank you.

On behalf of Anand Rathi Wealth Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

Questions and answers

System · Call Header

Q4 & FY25 Earnings Conference Call Anand Rathi Wealth Limited Now I will take you all through Q4 FY25 financial results.

Our consolidated total revenue for the Q4 FY25 stood at INR 241 crores compared to INR 197 crores in Q4 FY24, registering a 22% Y-o-Y growth.

Trail revenue was INR 103 crores, registered a strong Y-o-Y growth of 28% from INR 80 crores during last year’s same quarter.

Our profit after tax stood at INR 74 crores, registering a 30% Y-o-Y growth compared to INR 57 crores in Q3 FY24. Profit after tax margin for Q4 FY25 was at 30.5%, which has improved from 28.8% for Q4 FY24. For FY 25-26, we have given the revenue guidance of INR 1,175 crores and PAT guidance of INR 375 crores.

Now let me transfer the call to Ms. Sejal and open the floor for questions and answers.

Over to you, Ms. Sejal.

Moderator · Conference Operator

The first question comes from the line of Bhavin Pande from Athena Investments.

Bhavin Pande

Feroze, congratulations on a well-deserved recognition.

First question would be around how are we placing a structured product given the market scenario?

Also, how is our strategy around mutual fund distribution being tweaked because the scenario so far looks weak from a market perspective, at least in the near term?

Second question was around incorporation of the U.K. subsidiary that happened in Feb 2025.

So is it stepping stone towards expansion of the offshore business?

And third would be a brief idea on RM team expansion?

And also, we could see that metric in terms of AUM per RM and clients per RM are looking productively high.

So how do we look at it on a sustainable basis?

Feroze Azeez

Thank you, Bhavin sir, and thank you for your wishes.

Very kind of you.

Now if you look at structured products, fortunately, in times like these, structured products become easier for a client to accept because of recency bias.

When markets do very well, clients just want to buy mutual funds, that's how human emotion is designed with recency bias.

So structured product and all of people on the call and Bhavin sir, you will also be happy to note that all the 147 products, which matured last year, all of them delivered the maximum coupon because they look at a modest Nifty requirement to deliver a capped return of 13%-15%.

So structured products relevance becomes easier for us to communicate to a client and keep them to 65, 35 and 20 allocations.

So point is different market situations help both the products, Plan A and Plan B, which we count as mutual funds being the Plan A and structures being the Plan B, become easier to position to a client, point 1.

Point 2, we think that these kind of adverse times are best times when people should buy.

Of course, there's uncertainty and that's the nature of the piece, which is market.

We did a small study again for the last 24 years, if God were to tell us, which was the lowest level of Nifty, if one were to buy on that day for that specific financial year, what would be the return?

One year from then, just out of curiosity, we checked, it was 44% average, worst was 11% and highest was 92%.

And the last financial year's lowest level was 21,885 on the election day, counting date.

So we are very close to the lower levels of the last financial year.

So buying at these times may not disappoint you, even with 2, 3- year timeframes is our belief.

That's point 2.

So we are trying that why you see our net