UTIAMC — earnings call

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Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to the UTI Asset

We will now begin the question and answer session.

The first question is from the line of Kunal Thanvi from Banyan Tree Advisors.

Please go ahead.

Kunal Thanvi

So, I had 3 set of questions.

First was on the employee cost.

So last year when we started this year out, we had indicated that for FY22 the employee cost to be at same at FY21 level or it was expected to go down.

But fast forward 12 months, we are seeing an increment in the employee cost worth Rs.

27 crores for FY22. Now, we understand there are these variable components and other things that you mentioned, but they will also bear in FY21 numbers as well, right?

So, how should one look at the employee costs from an absolute number basis?

So, will there be actual reduction or it will continue to grow the way it is growing now?

Surojit Saha

I think I've already explained to you the difference between the Rs.

407 crore and Rs.

380 crore, that is Rs.

27 crore difference, right?

And going forward, yes, other than the variable component which is the bonus component, other core employee costs will be coming down, but variable pay, of course, is in tandem with the growth in business.

So, that obviously will increase or decrease with respect to our business growth and plans.

Kunal Thanvi

So when we look at the Rs.

27 crores of difference compared to last year, Rs.

17 crore is the variable.

So, the remaining is like this Rs.

10 crores, right, for the entire financial year.

Surojit Saha

The Rs.

17 crores is in respect of higher provision of variable pay for better performance, Rs.

2 crore was a one-time cost with respect to the COVID, which have been settled and Rs.

8 crore was due to the fixed pay income increase of the Group employee.

So, overall if you see, Rs.

8 crore on Rs.

380 crore comes to around 2.5%.

So, considering that 7% annual increment has happened across our Group, so it was a saving of 4.5% because of the natural retirements and our cost measures.

Kunal Thanvi

So, on an absolute basis, we should assume that numbers would be in this range only, the way they are now or it would come down?

Surojit Saha

Yes.

Obviously, the variable and bonus will depend on the growth of the business, but apart from that, other expenses we expect it to come down.

Kunal Thanvi

And the NPS business, last year what we have seen is in few months the inflows for UTI were lower than the peers like LIC, SBI.

And in last concall, you guys had mentioned that by the end of March, the market share would be restored, like we’ll receive the differential amount that we were receiving lower in the month of say October, November and December.

But when we look at the full year number, that reflection is still not there.

Can you explain to us what has happened in the NPS business and why we had lost that business and like this year as again should we build in for lower number in NPS if you can explain that?

Imtaiyazur Rahman

Kunal, the allocation has been restored.

So, basically it came down from 32% to 16%, it has been restored.

Now, the details Surojit will give it to you.

Surojit Saha

Yeah.

As Mr. Rahman said, it has been restored.

So in Q4 itself, we have seen an inflow of around Rs.

17,000 crore.

So we expect that it will be continuing for the next financial year also.

Imtaiyazur Rahman

For the next financial year, the allocation has already been normalized.

Kunal Thanvi

So, for the few months that we had lost the flow, we didn't receive that money again, right?

Imtaiyazur Rahman

Whatever the allocation was there, lower allocation for three months that cannot be restored, then thereafter it has been restored.

The fresh allocation had started.

Kunal Thanvi

Sure.

Got it.

Moderator · Conference Operator

The next question is from the line of Yashodhan from PPFAS Mutual Fund.

Please go ahead.

Yashodhan Nerukar

So I just had a follow up question regarding the employee costs.

So, I mean, we are to assume that the costs are somewhat going to be on the similar levels.

But would we assume that as more of the older people with higher pay, they resign and the newer joinees with lower pay they join the company, so the absolute cost would sort of reduce from these levels?

Surojit Saha

Yes.

I feel your perception is right.

Yashodhan Nerukar

So in a way, we are to see the cost sort of stagnating at these levels.

And obviously the bonus, I'm excluding the bonus pay for now, because nobody knows how the AUM is going to be like.

But apart from that the fixed costs are going to sort of keep coming down or at least be stagnant?

Surojit Saha

Yes.

You’re are correct.

Already if you see, it has got stagnant for the last 2 years, from the IPO year, it has got stagnant and is going to come down.

Yashodhan Nerukar

Okay.

Got it.

And another question I had was on the international investments.

So, basically, RBI has issued these guidelines, where foreign remittances are not allowed and the entire industry was sort of waiting on the limit extensions.

So, you guys have also been running an offshore funds, right?

So, is that sort of helping to access the international investments side?

Imtaiyazur Rahman

No. These are two different things.

This remittance is the Indian money going outside.

In our case, we are raising the money outside to bring in the country, right, and we have seen the growth in our AUM.

Yashodhan Nerukar

So, what sort of yield do you guys earn on that?

Surojit Saha

Our yield is around 55 bps for international business.

Yashodhan Nerukar

55 basis, and Indian business, you said the yield is around 41 basis points, right?

That’s on a blended basis.

Vinay Lakhotia

Correct.

Yashodhan Nerukar

And what it would be simply for equity funds?

Vinay Lakhotia

For equity funds, for domestic or international?

Yashodhan Nerukar

Domestic.

Vinay Lakhotia

Domestic is close to around 85 to 90 basis points.

Yashodhan Nerukar

And just one last question.

What sort of funds do you have in the pipeline?

Would it be more on the active side or passive side?

Vinay Lakhotia

It will be more on the passive side, maybe a smart beta kind of a product.

However, we have one product gap as far as the Multi Asset Fund is concerned.

There we may launch sometime during this particular financial year.

But apart from Multi Asset Fund, all the fund launches will be mostly on the passive side.

Yashodhan Nerukar

For further questions, I’ll get back in the queue.

Moderator · Conference Operator

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

Please go ahead.

Prayesh Jain

Three questions from my side.

Firstly on the employee cost front again, could you give some clarity as to what number of employees will be retiring in FY23 and what could be their current cost?

That would be one.

Second would be on your OpEx, on your other operating expenses, other expenses, they've also seen a sharp jump.

What is the reason for that and how do you see this trending ahead?

And the last question is on the tax rate, it was significantly higher in this quarter.

What was the reason for that and what should we assume for FY23 and beyond?

Surojit Saha

First I will take question number 2 and 3, or I will go in the reverse direction, let me take tax question first.

If you see the effective tax rate for the full year, it’s almost normal that is around 18% and 19%, respectively.

For Q4, there is a jump basically because of 3 reasons.

One is the proportionate business income has been very high on the Q4 rather than Q3. Q3, there was an FMP maturity for which there is a tax rate of around 11%.

So business income was more for this Q4 and the lower taxation income was nominal in Q4. Secondly from deferred tax asset, a change over to DTL because of the FMP maturity.

And last reason is because of 6.75% yield in respect of actuarial valuation, the income has increased because previous quarters, it was charged around 6.45% / 6.4%.

So these are the 3 reasons basically why the tax has increased in Q4. But if you see the overall 12 month period, it’s around 18% to 19%.

And in respect of your other expenses, if you go by the December figure other expenses was Rs.

147 crore.

That gives us a run rate of around 49 crore per quarter.

Rs.

49 crore into 4 is around Rs.

196 crore should have been the annual expenses but that annual expense is around Rs.

212 crore, that is 16 crore more.

So 16 crore has come from 3 reasons.

One is Rs.

7 crore in case of trail fees of international business, trail fees generally on a run rate is Rs.

12 crore to Rs.

13 crore we pay for each quarter, but in Q4 was Rs.

20 crore in respect of international business because new AUM has come in Q4, so Rs.

7 crore additional trail fee was paid.

Apart from that, Rs.

17,000 crore of money came from fresh allocation in respect of the retirement business for which we had to pay a PFRDA charges of Rs.

2 crore, plus you must have heard Mr. Rahman telling that we appointed BCG.

BCG was paid a fees of around Rs.

2 crore in the last quarter, and the rest around Rs.

4 crore is a normal expenditure of around digital initiatives which have taken place.

That is the reason for our difference of Rs.

143 crore to Rs.

212 crore.

And the first question was in respect of the retirement figure?

Prayesh Jain

Yeah, number of employees retiring in this year and what would be the cost allocated?

And also could you guide us a tax rate for the next year.

Surojit Saha

The tax rate for the annual will be around 18% to 20%.

Prayesh Jain

And on the employee cost, employee front, number of employees?

Imtaiyazur Rahman

96 people will be retiring and the total cost impact will be around Rs.

41 crore over the period of time.

Moderator · Conference Operator

The next question is from the line of Hiten Jain from Invesco.

Please go ahead.

Hiten Jain

Last quarter, you had said that the variable pay that you have allocated for FY22 is around Rs.

35 crores.

And this quarter you are saying that the variable pay has gone up in line with the business.

But the AUM is kind of flat QoQ.

So how come so much of change in variable pay in one quarter?

Surojit Saha

Variable pay is based on the KRA of the full year, it is not on a particular quarter and even the investment team as well as the sales team, they are evaluated over the full year 12 months.

So I'll just give you the explanation for that difference which you are asking.

Employee benefit cost of the entire group was Rs.

74 crore in Q4 21.

The same was increased to 115 crore in Q4 FY22. So you will observe that there is an increase of Rs.

41 crore.

During the FY22, our budget of Rs.

35 crore for the year was made and a proportionate provision was made Rs.

8.75 crore for each quarter.

So for Q4 the impact of Rs.

8.75 crore plus the Rs.

17 crore additional provision which was made comes to around Rs.

26 crore.

And if you remember in year December 20, we made a provision of Rs.

45 crore and then actual payment in March 21 was Rs.

38 crore.

So there is a minus Rs.

7 crore impact.

So 26 plus 7 is Rs.

33 crore.

Apart from that Rs.

2 crore for ESOP amortization, Rs.

2 crore for the medical expenses and Rs.

2 crore for the fixed pay.

So overall that gives an impact of 41 crore.

Hiten Jain

Exactly.

So when you have a variable pay estimated for the full year, till first 9 months, your estimate was lower and you had said that it will be equally spread across the year.

So again it seems like last year again this variable pay is really volatile for us to understand.

Sir, maybe if you can explain it better how do you -- so you plan it out for the year.

So till last quarter you had 9 months of performance in front of you and you would have estimated a variable pay, and suddenly this number changes now so which is where we are finding it difficult to understand.

Imtaiyazur Rahman

You are right.

So we have decided now that this provisioning, we will do our entire provisioning of this one on the actual basis, we will do on a quarter-on-quarter basis and it will be reflected accordingly.

I would like to submit here the performance of our team has gone up substantially and that we'll calculate on a yearly basis.

That is the reason for the higher variable pay.

But I'm very pleased to share with you that the standalone profit of UTI AMC has gone up even after providing this particular bonus, which has gone up from Rs.

351 crore to Rs.

417 crore.

And I am also pleased to share with you that that dividend payout has also increased from Rs.

17 per share to Rs.

21 per share.

Is important for us to look after the employees because the entire industry and all sectors are facing great resignation era.

It is very difficult to retain the team, but we have been fortunate enough to have a stable team with us both in investment and MF distribution.

Hiten Jain

Sure.

And another thing was when you were trying to explain the difference between the employee cost of full year of Rs.

28 crores so you have very nicely have given the breakup, but at the same time you had a Rs.

17 crore of benefit also because the ESOP cost was lower this year.

As per your earlier commentary you had said that the ESOP cost for FY22 was Rs.

13 crores and last year it was Rs.

30 crores.

So there was this Rs.

17 crore of absence of ESOP cost this year, so which means if I adjust for that, then it seems like we haven’t got any retirement benefit which you have been guiding since the IPO.

Surojit Saha

You have to see the employee cost as a whole because there are ESOP, actuarial valuations for gratuity, leave encashment, pension, all taken into account.

The overall employee cost is what you should look into because each factor has an impact on the employee cost.

Imtaiyazur Rahman

But the fixed pay is on the downward trend.

Hiten Jain

And just one clarification.

Sir said that 96 people will be retiring and you said Rs.

41 crore of saving over 1 year.

Did I hear that number correct because that looks quite high?

Imtaiyazur Rahman

96 persons will be retiring on the full year basis, it will be Rs.

41 crore.

Vinay Lakhotia

So the employee may retire gradually over a period of time, the total salary cost of that employees is close to around Rs.

41 crores.

So maybe if I am assuming that if the linear retirement you can very well take half of that figure actually as a saving in employee cost.

Imtaiyazur Rahman

So next year the total impact will be to the tune of Rs.

41 crore.

Hiten Jain

Okay.

So you continue to guide that the total employee cost which is around Rs.

400 crores, it should remain the same for the next 2-3 years given you'll have savings which you'll be able to offset any potential wage hike that you have to give to keep as per the industry standards?

Imtaiyazur Rahman

You are right, and we are also looking forward for the manpower rationalization.

We are not in a position to give you any guidance at this point of time, but we are seriously working for the manpower rationalization, and probably in a couple of quarters we may have some policy for the manpower rationalization, which will help further to reduce the employee cost and have better productivity.

Moderator · Conference Operator

The next question is from the line of Viraj from SiMPL.

Please go ahead.

Viraj Kacharia

Just 2-3 questions.

First broadly in terms of the remuneration structure which we have and also when we started the year the whole idea was that we have an ESOP plan.

We kind of had another ESOP plan which we kind of upgraded and the cost itself will keep on trending down.

And at the same time there is another element of performance linked incentive which communication was will be in the range of Rs.

30 crores, Rs.

35 crores even in 2022.

Now if I look at our overall strategy and our overall payout structure as well, we have been quite aggressive lately in terms of yield as well in the market sales.

And when it comes to the employee part as well, the remuneration structure seems to be very aggressive or more attractive than what you see in the industry.

So just trying to understand what is prompting you to layout such a more aggressive payout.

So that is one.

When you keep on talking about the KRAs, how do you measure those KRA?

So what are the elements you kind of base on?

So is profitability is also one of the KRA?

Just want to understand in that aspect.

So if you can give more detail picture, it would be very helpful.

Imtaiyazur Rahman

Viraj, most of the questions we have answered and if you want to have a detail on the KRAs and other fees, I think you can have one-on-one conversation with CFO and Vinay.

They are there and of course Sandeep is there.

They will give you the complete details of this.

And what I would like to submit that our incentive plan is not an aggressive incentive plan.

It is much lower than the industry.

We are not at the highest percentile of payout.

We are a moderate and reasonably in line with the market.

We are not aggressive and indeed we are not conservative.

But we are not at all aggressive payout master.

And details of KRAs, yes, profitability also is in part, but it is for the senior management team.

For the sales team, it is mainly the share of wallet and net sales.

For investment team it is indeed the performance, the Peer performance and benchmark.

But indeed for the senior management, all the senior management team have profitability as a target.

But as you will appreciate that, the profit has also gone up substantially, particularly the core profit as Surojit has said the core profit of the AMC alone has gone up substantially and these we have detailed in our investor presentation.

Viraj Kacharia

Sir, just 2 questions. why I am kind of emphasizing on this a little more, because if you look at our employee cost in relation to our AUM and also especially in absolute basis and if you compare to all the players, especially the top 5 in the industry, there is of excess cost built into the system for us and the communication at least, what it seemed that this will kind of moderate in coming years.

But if you actually see, it just keeps on moving up.

From an investor, it always seems like the cost management per se is not really kind of coming in place for us, in terms of the projected savings which we were hoping it to be.

Surojit Saha

In the first answer itself I explained that overall if you see, there is an Rs.

8 crore increase in the overall fixed pay which is 2.5% increase, and whereas our annual increment is around 7%.

So even if there was a 4.5% savings and this will continue over the years, our fixed pay will continue to come down.

That is the explanation which I gave in the initial part of it.

So we are continuously monitoring it and already it is stagnant if you see of the IPO years and it’s on a downward trend.

Apart from the variable, of course, this depends on our business growth and business plan.

Vinay Lakhotia

And Viraj just to add, the cost as a ratio is actually declining over the last 2-3 years.

So with a growth in the average AUM, our cost ratio has actually have been improving over the last 2-3 years and this year is no exception.

In fact, this year also the cost ratio as a percentage to average AUM has actually improved by almost around 4 to 5 basis points.

Surojit Saha

And Viraj, if you see our cost to income ratio, which was 67 bps in FY 21, it has come down to 59 bps in FY22 on a standalone part of it.

Viraj Kacharia

Two more questions.

One is you said you paid a fee of Rs.

2 crore to BCG.

So what is the scope of service in the project which we are taking the service for if you can just give some color on that?

Imtaiyazur Rahman

It is for our company, subsidiary UTI Retirement Solutions.

UTI Retirement Solution is currently managing mostly the government pension funds.

We are trying to diversify to target the private sector and in order to have a proper guideline, business plan, we have hired the services of BCG.

The Board of UTI Retirement Solutions hired the services of BCG.

So now we have a business plan and we are rolling it out.

We have already obtained the POP license in the name of UTI Retirement Solutions and we are in the process of building the team.

Viraj Kacharia

And just last question was on the international business.

If you see Q- on-Q, there is a sharp drop in AUM.

And I just want to understand why is that?

And relation question is you mentioned about in other expenses we have paid Rs.

7 crores higher trail fee because we have added new funds but when I look at the AUM for international business, it’s come down from almost Rs.

34,000 crore to somewhere around Rs.

28,000 crore.

So what is driving that that gap drop.

And when you pay the fee, how does it really work for us?

Surojit Saha

You are correct.

The AUM as of December was Rs.

34,000 crore, it came down to Rs.

29,000 crore.

It is mainly because of MTM loss, because of IDEF which is out of Rs.

29000 crore, IDEF itself is around Rs.

10,000 crore fund.

So MTM has impacted that and our money has also come in Q4 for which we had to pay a trail fees which I told you.

So this is mainly because of the MTM impact.

Viraj Kacharia

So of that Rs.

29000 crores, it is right now Rs.

10,000 crore and the rest Rs.

19,000 crore, Rs.

20,000 crore, how is that distribution?

And same is for IDEF, how is the distribution in terms of investor base?

Is it kind of the client concentration is too high because few years back we had faced a similar around one of the large investors kind of pulled down in one of the international funds and we have seen a sharp de-growth.

So any perspective on that?

Surojit Saha

We have a broad investor base.

These are all high net worth investors of European countries and European banks from Switzerland, Paris, France, London.

So we have a broad investor base.

And other than Rs.

10,000 crore, the balance Rs.

19,000 crore, 30% is other equity funds and the balance is Debt.

Moderator · Conference Operator

The next question is from the line of Aditya Jain from Citigroup.

Please go ahead.

Aditya Jain

If you could touch upon the operating yield which is up QoQ versus a decline that we’d seen in the third quarter.

So you already mentioned equity yields on the total book which was 85 to 90 basis points.

If you could talk about the incremental yields that were observed in 3Q versus now?

And so the increase or the normalization which has happened, do you expect it to sustain going forward?

Vinay Lakhotia

We have, Aditya, given a guidance that for the full year, we should be closing around 41 to 42 basis points.

Q3 decline was on account of various reasons because we had NFO.

Then obviously, even the passive funds, inflows had been at a substantial rate and our ratios of gross sales to net sales has actually also increased.

So as I stated in the earlier concall as well, Q4 is normally a period where tax saving products where yields are slightly higher are being sold very aggressively and that’s why that has helped to push our overall yield close to around 41 basis points.

Aditya Jain

But incremental yields would still be below 85 to 90 basis points.

Vinay Lakhotia

That is true for the entire industry.

The incremental inflows will be lower as compared to the top AUM yield of 85 to 90 depending on the sharing formula with whom we are mobilizing it.

So as communicated earlier, the sharing ratio is in the range of around 50% to 80% of the total expense ratio between the IFAs and a national bank or a distributor.

Aditya Jain

So then the 41 basis point of guidance is based on a change as well as maybe more share of direct.

Is that the right understanding?

Vinay Lakhotia

Yes.

Correct.

Aditya Jain

And then just one clarification.

So earlier we used to guide towards Rs.

60 crore to Rs.

70 crore of saving over 3 years or so.

So the Rs.

41 crore number that you mentioned, so it’s essentially a big chunk of the Rs.

60 crore to Rs.

70 crore is expected to come in FY23 itself.

Is that the right way to look at it?

Vinay Lakhotia

No, the Rs.

41 crore will actually come over an entire year, so depending on the month in which the employee is retiring.

So for the full impact of Rs.

41 crore, that will be visible in FY23-24 only.

During FY22-23, depending on the month in which the employee is retiring, the entire benefit may not accrue.

This may be on a conservative estimate, you may say it as a half of that Rs.

41 crore.

Aditya Jain

Just lastly if you could tell us as a period and number by asset class.

Vinay Lakhotia

Period and number by asset class.

You want quarterly average or closing?

Aditya Jain

Yes, closing.

Vinay Lakhotia

So our closing AUM as on 31st March was Rs.

2.20 lakh crore.

Equity and hybrid fund constitute roughly around Rs.

95,788 crore.

ETFs and investments are Rs.

65,809 crore.

Income fund at Rs.

15,454 crore and liquid fund as Rs.

43,125 crore.

Moderator · Conference Operator

Next question is from the line of Sahej Mittal from HDFC Securities.

Please go ahead.

Sahej Mittal

So sir, 2 questions from my side.

First was on the tax rate.

I couldn’t quite understand the reasons for such a sharp increase in the tax rate for this quarter.

So, if you could just repeat that.

And for the next 2 years, what sort of a run rate, should we expect on the operating cost front if you could give some guidance given the kind of sharp increase in this quarter?

Surojit Saha

The first question was in respect of your tax rate, I will just repeat it again.

The tax rate has increased for the full year.

You know that it’ almost 18% to 19%, but for Q4 it has increased because of 3 reasons.

One is proportion of business income in Q4 is much higher than the other quarters because other 2 quarters, Q2 and Q3, lot of FMPs have matured.

So those are taxed at around 10% to 11%.

But in Q4, the total income mostly was in the set of business income which gets charged at 25%.

And the second point is that the deferred tax asset has changed to deferred tax liability in Q4. And lastly because of the actuarial valuation is done on the current interest rate, which is around 6.75%, earlier it was done at 6.45%, so this also had an impact because our income has increased and this has also resulted in our increase of taxation.

So these are the primarily 3 reasons which in Q4 the tax rate was higher, but you can always see that for the full year, it was around 18% to 19%.

And in respect of your query regarding the OpEx rate, yes, we expect the OpEx rate to be around 52 to 53 because for the last 3 quarters that is Q1, Q2, Q3, it was around Rs.

49 crore and this Q4 it was more because of the reasons which I already explained.

So we expect a run rate of around Rs.

51 crore to Rs.

52 crore for the next year.

Sahej Mittal

So just for the clarification, the FMP has maturated as you said, where does this income get clubbed?

And I am unable to understand this.

So does that give the club in the other income or where do we get this from?

Surojit Saha

Yes, it gets into the other income part.

The sale of service is totally AMCs which we receive.

The MTM loss and gain and income from our treasury is part of the other income.

Sahej Mittal

So what I see is that there is a drop, there is a net loss in key other income.

So how could that result in a higher tax rate in this quarter?

Surojit Saha

No, that is because of the MTM loss, the MTM loss is something different.

Sahej Mittal

So where does this income get booked

Surojit Saha

That is notional, the M2M loss is totally notional.

Sahej Mittal

No, but the income from this maturity of FMPs, where could we see this in the financial statements?

Surojit Saha

Income from investments.

Core income is only of the fees which we receive, the asset management fees.

I feel if you see the investor presentation, it is clearly mentioned over there, the breakups are already given in the investor presentation.

Sahej Mittal

Okay.

So I’ll just check and maybe I’ll get back to you on that.

Surojit Saha

breakup is given over there.

Sahej Mittal

I’ll recheck and I’ll check with you afterward.

Moderator · Conference Operator

Ladies and gentlemen, we will take the last question from the line of Akshay Jain from JM Financial.

Please go ahead.

Akshay Jain

Sir, I had a follow-up question on the international AUM part.

So you said that your trail fees is higher by Rs.

7 crore because of the higher net inflows in the international AUM.

So can we get the quantum of the net inflows because the MTM loss of Rs.

6,000 crore plus net inflows of say XX amount seems to be pretty high?

Surojit Saha

That is why I told you that IDEF which is around Rs.

10,000 crore plus the other equities are there which is around Rs.

4,000 crore and the balance is debt.

So in the last quarter, the trail fees is continuous, on the business.

The money which has come in the month of March, you will see the accrual part of it will happen in the next year.

That is why you see the international fees which was Rs.

65 crore in FY21 and it has increased to Rs.

127 crore in FY22 and it will continue next year also.

Akshay Jain

So what should we take the run rate for the revenue next year, so this Rs.

127 crore, what should we build into?

Should it go up further or this has reached its limit?

Surojit Saha

Yes, I feel it should go further because UTI International has plans to launch two new schemes where we have good investors lined up already.

So we definitely perceive that there will be a growth in the revenue income of UTI International.

Akshay Jain

And Sir, you mentioned that your trail fees has increased to say around Rs.

20 crore because of the higher trail fee of Rs.

7 crore.

Should we take this run rate going ahead, this Rs.

20 crore will be recurring from now on?

Surojit Saha

Yes.

Definitely.

It depends on the business, how it will be.

But because of the new business it may increase also.

The new two funds which are being launched that also will have a trail fees definitely.

But it will go in tandem with the increase in revenue.

Akshay Jain

And sir, just one more question.

So you said that annual cost savings will be around Rs.

41 crores, so for example for FY23 it will be say if we take the FY23 budget, it will be say around Rs.

20 crores.

So what will be the replacement cost for these employees?

Imtaiyazur Rahman

It will not be much.

We already have recruited a lot of management trainees and they will be in a position to supplement.

I am not expecting more than 10% as a substitution cost.

Surojit Saha

Just to add, if you listen to our earlier calls like in March 20, we have already inducted around 150 people and even March 21 we inducted fresh graduates and whom we have groomed up to take over these retirement cases.

So we don’t expect much cost to rise at all.

Akshay Jain

And sir, one last question.

I missed one of the part of the other expenses you said.

So there was a large component of around Rs.

4 crore or Rs.

5 crore.

So what that’s about?

Surojit Saha

Out of the difference of Rs.

16 crore which I explained, Rs.

7 crore was trail fees, Rs.

2 crore was in respect of fresh allocation which we had to pay to PFRDA as charges.

And Rs.

2 crore was in respect of BCG.

And the other Rs.

4 crore to Rs.

5 crore was in respect of the cloud and Bloomberg and other digital initiatives.

Because in FY21, there was free period for which we have to pay our normal usage charges for FY22. So that difference is around Rs.

4 crore to Rs.

5 crore.

Moderator · Conference Operator

Ladies and gentlemen, that was the last question for today.

I now hand the conference over to Mr. Imtaiyazur Rahman for closing comments.

Thank you and over to you, sir.

Imtaiyazur Rahman

Thank you very much and let me give you two other information.

One is the allocation from the PFRDA to UTI Retirement Solutions will be for the FY22-23 will be 32.5%.

So one-third will be coming to us.

And so far as the business expansion is concerned of UTI International, we have business plan in place, very shortly we will be opening our office in Paris and we will be targeting more clients.

And thank you very much for the active participation and please continue to support UTI.

Thank you.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, on behalf of UTI Asset Management Company Limited, that concludes this conference call.

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