UTIAMC — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to UTI Asset Management
Questions and answers
Moderator · Conference Operator
Thank you very much.
We will now begin the question-and-answer session.
The first question is from the line of Viraj Kacharia from SiMPL.
Viraj Kacharia
So just have couple of questions.
First is on the domestic mutual fund business.
If you kind of look last few months we have seen a very significant normalization of commission payouts by various competitors, especially the ones who have been very aggressive in last few years in the market.
But still if we can see our overall yield in the domestic market, we still see a pressure on the yield.
So just wanted to understand what will be the drivers of that and going forward how should one understand the yield movement for us in the domestic mutual fund business.
So that is one.
Secondly is again on the domestic mutual fund.
We have seen some moderation in our domestic mutual fund market share, especially in active equity.
If we look at our performance ranking, some of our major schemes like Flexi Cap, they have also kind of moderated in last one year.
But at the same time when you look at our share of SIP that has been kind of stable at about 4.5%.
So just wanted to understand what is driving this moderation and how should we understand our market share play going forward?
What kind of levers you think you have to drive the market share up?
Vinay Lakhotia
I'll take the question on the yield.
As far as the competition pricing are concerned, I stated in the earlier call as well, the ratio of pay out between a manufacturer and the distributor is close in the range of around 50% to 80%.
50% being the lower end of the spectrum that is being shared with the individual financial advisor and 80% to 85% in case of a normal high-end distributor like a bank and a national distributor.
Things hasn't changed much as far as this sharing is concerned.
Yes, while the industry had witnessed lesser NFOs where the pricing structure gets distorted but as far as the open-ended schemes are concerned the pricing ratios between the manufacturer and the distributor remain the same.
We do have some impact on our yield as well, so as compared to the last quarter the AMC margin yield has actually fallen down by 1bps and we expect some dilution in the yield going forward as well of maybe around 1 to 2 basis points, primarily because of three factors.
Firstly, as you all know equity inflows that is actually coming, the fresh inflow is coming at a lower yield as compared to the stock AUM yield which is close to uti R UTI Mutual Fund around 85 to 90 basis points.
That drag the overall yield.
Secondly, the industry has witnessed exponential growth in the ETF and Index AUM over the last 2 to 3 years.
We see that trend to continue in near future as well.
As you are aware that ETF, our AMC yield is in the range of around 5 to 6 basis points and we have a sizable share of ETF AUM and with AUM growing, it kinds of drag our overall yield number.
The third reason is we are witnessing some kind of uptick in the performance of our fixed income fund, which has been demonstrated in the one-year and the three-year return and our focus is to increase our market share which we have lost in last 2 to 3 years.
Since you are all aware the AMC yields under the fixed income category is in the range of around 25 to 28 basis points.
So, any growth in the fixed income category and the market share may have some kind of an impact on the overall yield number going forward.
So yes, we may see some bit of dilution in the management yield number going forward but as stated earlier, the core PAT yield remains strong at around 20 basis points and we don’t see much of dilution in that, primarily because of the cost reduction exercise that is happening and because of operating leverage the, core income should support our PAT yield number and the profit margin number actually has been improving quarter-on-quarter over the last 2 to 3 years.
With respect to your second question that is on the market share we have seen some bit of a dilution or reduction in our equity market share which has fallen by roughly around 17 basis points.
Actually, overall, the Net sales percentage as compared to industry for UTI during this quarter was 4% which was lower than our 5.2% market share which has impacted.
But this we believe primarily is due to the lumpsum redemption.
In the SIP book, our market has actually improved by almost around 22 to 23 basis points over FY 22 as being presented in our investor presentation.
So, while we are seeing some bit of traction in the SIP book but because of some lumpsum redemption the market share under the equity category has slightly fallen.
Viraj Kacharia
This is a follow up on the first part, on the yield part.
I understand there the impact of new money coming in at a much higher profit sharing than the old book.
But last one year as you rightly said we have seen a lot of many NFOs and the intensity was also quite high from the competition.
Since that is also normalizing, one would probably think that there's avenue to kind of increase the yield or normalized the yield back to the levels they were, 3-6-8 months or a year back.
But that is not really happening anymore.
Why is that?
Vinay Lakhotia
Viraj you need to appreciate that the AMC margins on the NFO is at the significantly lower rate.
However, for the ongoing scheme as well, the yield that the AMC is earning vis-à-vis a stock AUM there is a differential.
So, because of that the downward pressure on the yields remain.
Yes, I do agree the number of NFOs have actually slowed down, but still since the fresh uti R UTI Mutual Fund inflows is coming at a lower yield as compared to the stock AUM yield of equity fund which is close to around 85 to 90 basis points there'll be some kind of impact on the overall yield number as well.
Viraj Kacharia
One last question and I'll come back in queue.
Of the total book especially in active equity, how much will be new versus the old book, just any indicative?
Just to get a sense with this kind of when we should kind of expect this to settle down in the increment number?
Vinay Lakhotia
No, we don't have that kind of numbers available here.
Moderator · Conference Operator
Next question is from the line of Kunal Thanvi from Banyan Tree Advisors.
Kunal Thanvi
My first question was on UTI International.
Can you throw some light on the AUM, it continues to be under pressure?
I understand we had raised some money in the last quarter which is not visible.
On the other side if we look at the profitability it has improved on a QOQ and YOY basis.
If you can throw some light both on the AUM and the profitability for this quarter and going ahead, how should one look at it?
Second was on employee cost.
Again, if you see this quarter, there's of course a reduction QOQ basis but that's more of variable cost going out.
We had talked about reduction in employees and a reduction in cost.
By when should one expect it playing out in the P&L, will it be this year or next year?
Surojit Saha
In respect of the UTI International business, let me just tell you that in the space of India dedicated offshore fund, UTI is amongst the top three Indian AMC.
It is because we started our offshore, 20 years back and we have dedicated teams in the different cities around the world and these are local people which gives us very good connectivity with the international market.
While FII has sold $25 billion from India in last 9 to 10 months, in our offshore fund UTI have a net positive to the extent of $250 million from 1st April ‘21 till date and $2 million from Jan ‘22 to till date.
This mainly includes UTI’s investment in the IDEF corpus.
Overall, we are very confident in respect of the growth in AUM of the UTI International and we have new funds in the pipeline.
We have seen lots of traction in respect of our good performance in the international market.
Kunal Thanvi
And on the profitability?
Surojit Saha
Profitability you must be seeing, our revenue has been continuously increasing over there.
But it is mainly because of the mark to market loss which has happened in respect of one of the schemes that is IDEF.
With respect of IDEF I can tell you in the offshore business whenever we launched funds the investors always ask us about our skin in the game.
Therefore to uti R UTI Mutual Fund show our conviction about the fund we invest our own money as seed capital.
While IDEF has shown a negative return, it has almost doubled since inception.
Like today cost wise it is Rs.
116 crores is outstanding, it values to around Rs.
257 crores.
Thus, we get a good fees from it.
To add to that, this is the corpus which has been invested in basically quality and growth strategy stock.
Portfolio is exactly same as UTI Flexi Cap and since the growth stocks have declined in the last six months, the NAV of IDEF has also seen a sharp decline.
But we feel is a temporary impairment and we are confident of a positive impact on the fees as well as the AUM.
Kunal Thanvi
What I meant was not MTM loss.
I was more of looking at the operating profits.
So if we see this quarter we have reported a loss of 15 crores versus say 1 crores and 4QFY22.
From an operating profit point of view how should one look at it going ahead because is it like with the flows coming back, up fronting of commission, the operating profit will come down or it will continue to be the way it is in this quarter?
Surojit Saha
The operating profit will definitely go up.
You see the rise in revenue which has taken place in the last three months as well as in the last year.
With respect to operating profit of around 15 crores in INR; because of the mark- to-market you are seeing a 16 crores negative loss in the PBT position.
So, we are very confident of a good performance and operating profit in the international business.
Kunal Thanvi
And on employee cost.
Surojit Saha
UTI International, we are restructuring the business.
You want the employee cost of the UTI group as a whole or for the UTI International?
Kunal Thanvi
Group.
Surojit Saha
For the group the quarter-on-quarter employee cost you would see a decline of 12% to Rs.
101 crores in Q1 FY23 from Rs.
115 crores in Q4 FY22. The annual appraisal cost was already factored in the quarter’s financials on a proportionate basis.
On the year-on year basis the employee cost has increased by 7% mainly on account of increase in the staff cost of UTI International and UTI Retirement Solution due to the restructuring of the business.
That you all know that because of the Brexit we have opened a new office at Paris which will be looking into the European business and for UTI Retirement Solution, after the study done by BCG we are doing some restructuring of the sales force, because of which the cost has increased.
The employee cost is dependent on the four pillars that is core employee costs, variable costs, insurance costs and ESOP expenses.
The core employee cost is on a stabilizing trend even after considering the annual increment wage hike, uti R UTI Mutual Fund the variable cost will be in tandem with the revenue growth and AUM growth.
The insurance cost should be on a declining trend based on the increase in the interest rate movement.
The ESOP expenses however will be dependent on the management decision.
However, at this point of time we don't have any plan regarding this.
On the overall we see a stabilizing trend in the employee costs even after the incremental annual wage hike.
Kunal Thanvi
My question was more on the reduction part, we have laid down a strategy to reduce our absolute cost of employees by reducing number of employees.
Will we on the same path for FY23?
Surojit Saha
Yes.
Definitely, there is a natural retirement which we have already told you in the last few calls and that is already there.
We are also rationalizing our cost to the extent possible.
Kunal Thanvi
The last one if I can squeeze in is on, if we look at our balance sheet, we have quite a sizable of cash on the balance sheet.
Any thoughts on buyback at this point of time?
Surojit Saha
We are deliberating different options but we have not yet taken the decision, at the management level, we are on the job.
Moderator · Conference Operator
Next question is from the line of Madhukar Ladha from Elara Capital.
Madhukar Ladha
First again, going back on the employee costs.
They continue to remain high despite employee reductions.
Can you give us some breakdown of the four elements in this quarter?
Surojit Saha
Madhukar, the cost of employee includes Core employee cost, variable and insurance cost.
For this quarter variable cost we have considered around Rs 11 crores.
The managerial cost is around Rs.
47 crores and the non-managerial is around 17 crores on standalone basis.
Overall variable as I told you, we have taken around 11 crores and the insurance cost is around Rs.
5 crores and the ESOP cost is around Rs.
4.5 crores.
The above numbers are on standalone basis.
Madhukar Ladha
So, the core salary bill is 47+17 now on a quarterly basis, 54-64 crores and this should reduce?
Surojit Saha
Yes, definitely with the natural retirement which is in the pipeline during the next nine months this will be on a reducing trend. uti R UTI Mutual Fund
Madhukar Ladha
Do we have sort of this number of the core salary cost number for Q1FY22 and for the last quarter?
Surojit Saha
Yes, we have it.
For standalone basis it's around 85 crore.
Madhukar Ladha
I think consolidated basis is better.
Surojit Saha
Yes.
I will give you in the four different pillars which I have informed you.
Madhukar Ladha
This quarter if I do a little bit of a back of the envelope calculation then have equity yields improved on a QOQ basis?
Vinay Lakhotia
No. It's actually in the range of around 84 basis points Madhukar.
Very much similar to last quarter.
Moderator · Conference Operator
Next question is from the line of Dipanjan Ghosh from Citi.
Dipanjan Ghosh
Just a few questions from my side.
First is if you can give some color on the gross inflows that you're seeing from the top 10 to 25 distributors and how this would have changed over the past 1-2 or 3 years?
The second one is just a data keeping question, if you can give the number of unique investors and not the overall accounts as of date and how it has changed YOY and QOQ?
My third question is more on the subsidiaries.
I mean if I look at the core profitability, just from a ratio perspective and compare it with your standalone business, the core profitability on some of these businesses are definitely quite low compared to a standalone business.
Given that a decent part of the profit stems from mark to market or other income on these businesses, your overall profitability for the consolidated entity is to some extent kind of tend to be volatile income when we compare it with some of the other listed peers.
So, any thoughts on how you see the subsidiaries going ahead?
What are your thought processes on some of them?
These are the three questions.
Sandeep Samsi
To reply to your first question.
If you look at some of the key distributes like the banking channel, our gross sales with respect to equity which is the more important category because the other categories are more—if you look at liquid its more—direct.
If you look at banks then in the last quarter which was Jan to March my share of wallet was about 2.74% while in this quarter it has improved to—from the bank - it has improved to 3.20%.
So, there is an improvement which we are seeing.
Similarly for the mutual fund distributors who are the large mutual fund distributors it has improved from 6.60% in the last quarter to 6.85% in this quarter.
So, these are some of the important parameters.
Again, if I look overall, it has remained steady at 3.92% in the last quarter to 3.90% in this quarter.
So that is the overall trend in the gross sales. uti R UTI Mutual Fund We have the number of the total number of folios and which I mentioned that it is about 1.20 crore folios on an overall basis.
Dipanjan Ghosh
Do you have the number of unique investors amongst that?
Vinay Lakhotia
No, that de-duplication exercise we haven't done yet.
We are disclosing the number of folios only.
Dipanjan Ghosh
Just one follow-up on the first question, I was more trying to understand given the fact that your distributed pay-outs will vary between smaller distributors versus larger ones.
So, while we look at the wallet share and it is clearly showing a good picture.
Wanted to get some color on how the mix of flows is between the top distributors in the MFDs versus the smaller distributors and how that would have shaped up, both MFDs, national distributors and banking channel.
Sandeep Samsi
If you look at the banking channel generally the banking channel the payout is on the higher side.
So, when I give you those numbers, these are generally on the higher side because the banks are the main distributors.
So, there we are seeing increase in our share of AUM as well as gross sales and mutual fund distributor, it’s a mix but if you see the recent trends, we’re seeing that large distributors have been distributing a higher amount as compared to some of the smaller distributors.
So, there also we have seen an increase in the gross sales share of wallet.
Dipanjan Ghosh
On the last question on the subsidiary.
Any thought process is more from a long-term perspective on some of them and how do you see them let’s say growing or delivering in terms of profitability or margins?
Imtaiyazur Rahman
Good question Mr. Ghosh.
So far as subsidiaries are concerned there are three subsidiaries and the most profitable today, the UTI Retirement Solutions and margin is very good.
We are further building this particular subsidiary and we are going to develop competencies in-house for the distribution of the NPS product.
This particular company will continue to grow and continuing to contribute in a better way.
UTI International is also a very stable subsidiary and this subsidiary will make a lot of money but whenever there is a M2M gain or loss it affects the profitability.
But going forward, it appears as the outlook is, the market volatility will settle down and this company will continue to have the core profit very strong.
We are building the UTI Capital and therefore UTI Capital will take couple of more years to start contributing.
We have very strong business plan; we have built a very strong track record in the fixed income product at credit side and we have built a very good team.
We have very good processes and now the team supervises, the entire investment operations.
So therefore, I believe that going forward UTI Capital, uti R UTI Mutual Fund another subsidiary will also be equally strong.
All subsidiaries will contribute meaningfully to the parent company as a whole.
Dipanjan Ghosh
Just one question if I can squeeze in.
What is the product pipeline looking like in the standalone business for the remaining part of the year?
Sandeep Samsi
If you see we have recently launched the Gilt 10 years constant maturity fund.
Apart from that we have filed certain papers with SEBI in various categories.
One for the passively managed debt index funds, then for ETF and we are also planning to launch an international fund of funds.
These are some of the funds in the pipeline and we will be launching them in the coming quarters.
Moderator · Conference Operator
The next question is from the line of Prayesh Jain from Motilal Oswal.
Prayesh Jain
My first question is on the yields again.
If you spoke about debt, it is being in the range of 25 to 28 bps. So how would they have pended in the last 4-5 years?
What I have been trying to understand is that these are possibly the lowest yields what we've seen in the past few years.
And now with kind of the 10-year yields the kind of closer to topping out there will be incremental flow towards a higher duration asset, the longer duration assets.
Do you think that the debt segment yields can move higher and provide some cushion to the falling or to the decline in yields?
That will be my first question.
Secondly, could you give some thoughts about the other expenses in line item wherein we've seen a sharp decline on a sequential basis on how to look at that number going ahead and thirdly if you could break down your cash investment into the compulsorily held which you have to regulatory follow the investments and what is the free available cash?
Vinay Lakhotia
I will take the first question on the debt fund yield.
So, debt fund yield yes, I had stated earlier its currently in the range of around 25 to 28 basis point and that has been the trend over the last 2 to 3 years as well.
But if you see, we believe that the interest rate cycle is actually peaking up, there may be a scope of a higher duration yield fund where the AMC yields can be slightly higher than the 25 to 28 basis points.
The high duration product will have a higher AMC yield of around 30-35 basis points but equally the market is also there for a shortened duration or a ultra-short duration product where the yields are in the range of around 15 to 20 basis points.
Overall, we do see at least for the next 6 months or so fixed income product should be in the weighted average yield of around 25 to 28 basis point only.
Surojit you can take on the PAT.
Surojit Saha
Can you repeat your next question please? uti R UTI Mutual Fund
Prayesh Jain
My second question was on the other expenses line wherein we have seen a sharp decline on a sequential basis.
What were the reasons from the same and how do we see it in terms for the full year?
Surojit Saha
The decline if you see is mainly because of the two-three reasons like if you see on the last quarter our variable pay was much more compared to what we anticipated.
Because of that and this year we have considered in the range of 45 to 50 crores and we as an institution have agreed to do an actual calculation on a quarterly basis and so that Impact has come in the cost for this Q1FY23 because of the current scenario which is existing in respect of the market as well as industry scenario.
But our specific other cost, if you see the Q1 FY23-Q1 FY22 those are in almost on the same range as well as on a consolidated basis.
For certain reasons like Q4 it was around 65 crores and for Q1 FY23 its around 49 crores, the difference is mainly because of the BCG expenses if you remember which has come in respect of UTI Retirement in the last Q4 of around 3 crores.
CSR expenses the MoU execution is in process for the first quarter, the CSR expenses has not been accounted to the full extent because as per Ind-As we cannot accrue that CSR expenses.
Lastly because of the trail fees which you remember in the Q4 the trail fees for UTI International was on a higher side and this quarter it is around 5.3 crore.
We expect that to maintain this run rate for the financial year ‘22-23.
Prayesh Jain
The third question was on the PAT break up between your requirement to maintain your investments in the fund as per the regulation, what would be that amount?
Surojit Saha
Yes, as per the regulation inclusive of the risk-o-meter we had invested our around Rs 160 crores as per the statutory requirement.
Prayesh Jain
The last question is on the Retirement Solution business.
We are now at a market share of around 27%.
If I remember correctly it was supposed to be almost equal between the three government entities and we have done lower than that.
We had seen some slow down and closed the first half.
How do you see this business, do you see that there can be an incremental market share gains or how do we see this business in terms of growth from here on?
Surojit Saha
No, if you see UTI Retirement Solution on a year-on basis it has grown up by 14.5%.
That is to Rs.
2,03,786 crores from Rs.
1,76,338 crores and during the year-on-year the inflow was i.e. from June ‘21 to June ‘22, it is around 36,675 crores.
On the quarter-on basis the flow has been normalized and we are getting like from December ’21-March ‘22, each quarter we are getting around 7,000 to 9,000 crores AUM. uti R UTI Mutual Fund
Prayesh Jain
What will be your share in the flows?
I think that the share in the flows is decided by a particular formula by the NPS authority, right?
So, what is the share in the flows currently?
Surojit Saha
Share of the flow is now almost 33%.
Moderator · Conference Operator
The next question is from the line of Jignesh Shial from InCred Capital.
Jignesh Shial
Just going quickly first on this, the businesses of yours apart mutual fund.
So, what will be the yields that we will be making from all these businesses?
And is it part of your total revenues or it gets clubbed in the other income if you can just give me some idea on that?
Vinay Lakhotia
Come again with your question.
Didn’t get it.
Jignesh Shial
The international businesses and the retirement fund, the yields that you make it out; is it part of your total revenues or it gets clubbed in other income?
Surojit Saha
It's part of the sale of service shown in the balance sheet, in the line item.
Jignesh Shial
Secondly just out of curiosity you had this investment losses that you recorded 37 crores under OPEX.
Generally, most of the other AMCs has been doing it up as a part of other income and all.
So, any specific reason because if I exclude that then if I can see sequentially there is roughly around 20% dip on the overall OPEX side.
Anything to read about it or its general practice that we guys are having with us?
Surojit Saha
Our auditors are BSR LLP (KPMG) and we follow the Ind-As very clearly.
So according to that whenever there is income it has to be shown in the total income and if there are any loss it has to be shown in the as a part of the expenses.
It is more of a presentation purpose followed as per the guideline.
And we have clearly mentioned as a line item so I don't think there will be any problem for you as such in reading the financial.
Jignesh Shial
This is pretty clear but then when we compare to the OPEX we have to specifically exclude that line?
Surojit Saha
So that’s why I have clearly mentioned over there that the net loss there is 37 crore.
We have clearly mentioned so accordingly you can always take your judgment.
Jignesh Shial
Other way around also had been that, I understand that we have been consistently pushing hard for overall employee charge to get reduced and all.
Having said that, if you see even last year numbers also, we are roughly uti R UTI Mutual Fund around our total expenses 61% to 63% kind of charge comes up from employees’ side whereas for the rest of AMC which would be somewhere between 45 to 48 or somewhere around.
So gradually do we see that we will also be able to reach out to that kind of levels whereby your overall employee charge would be somewhere between 45%-50% kind of a level of the total expense or how do we see it up?
If that is a journey how long do we think that the normalization of employee charge will be happening over a period of next 2 years-3 years, how do we see it up?
Vinay Lakhotia
It will be a 2 to 3 years kind of a journey at least.
Jignesh Shial
This will be happening through, the majorly will be through the old and retiring employees will not be getting replaced and all.
So overall additions would be relatively lower, is that correct?
Vinay Lakhotia
Yes, correct.
Jignesh
Lastly from my side I mean that I do understand that old equity had been a higher yield and incrementally equity flows were coming up are genuinely I mean gradually we will get a better old yields and all.
How do we see it up I'm specific for because that already you have explained that once it starts long tenure debt coming in you will see that debt yields will be improving?
How do we see that good yields would be improving?
What will be the strategy to improve equity yields for us?
Anything which is there in your mind or anything that uses a kind of a way to see that yields will improve even on the equity side.
Anything from your perspective?
Vinay Lakhotia
That depends on the rationalization of the commissions structure across the industry.
Jignesh Shial
So, for now the commission, I mean the competition hasn’t yet built in so it's difficult to see that the rise would be happening at least in near-term?
Is it a fair assumption?
Vinay Lakhotia
Yes.
Moderator · Conference Operator
Next question is from the line Kaushik Agarwal from Haitong Securities.
Kaushik Agarwal
I have three questions.
Firstly, the question is relating to slide #27 so where we are basically highlighting geographical reach across the country.
The numbers which are mentioned across the employees’ core sales team and the mutual fund distributors; these numbers are quite different or they have significantly changed from the last quarter.
How do we read this, number one?
Number two is on the debt schemes.
The composition of the debt AUM uti R UTI Mutual Fund as part of overall mutual fund quarterly average AUM has actually come down and the only category which has seen significant decline in the AUM is debt schemes.
So, which kind of schemes are seeing redemption pressure?
And lastly on the employee cost, earlier if I remember you have mentioned that the cumulative employee ESOP cost would be of around 58 crores odd and as per my calculation we have already booked a cumulative ESOP cost of about 63 crores till FY22 and another 4 crores has been booked in this quarter.
So, how much amount is still left of this employee ESOP cost and till what period shall we continue booking it?
So, these are the three questions.
Sandeep Samsi
I will just take the first question.
If I come to slide #27, so if you see the total number of employees that we are giving, we have just given a qualification that these are the total number of employees including the UTI Mutual Fund employees which is 1,328 and which was the number we were giving till last quarter and 55 employees of our subsidiary.
So total number of employees is 1,383 which is under the UTI AMC.
And the other numbers are same I mean my number of UFCs were 167 in the last quarter also.
Mutual fund distributors keep on changing here and there.
Other sales number is also similar.
So, the only thing which was different was the total number of employees which till last quarter was the only for the standalone.
This quarter we have given for the consolidated and we have mentioned that as a qualification.
Vinay Lakhotia
And on the fixed income side yes, it’s an industry wide phenomenon where there have been an outflow in the fixed income categories.
We also lost money but that primarily because of the closure of the fixed maturity plan that has not actually been rolled out.
There have been a series of fixed maturity plan that has redeemed but because of the interest rate, the fixed maturity plan is not currently that much in flavour but with interest rate, peaking up ; we believe that a longer duration product will become attractive and that is an area where we believe that we should be able to improve our market share going forward.
On the employee cost I will ask Surojit to respond.
Surojit Saha
Yeah, I think your last question was regarding the ESOP cost.
For ‘22-23 the ESOP cost to be charged is Rs 12.93 crore on Consol basis in FY 22-23 out of which Rs 4.72 crore has been charged in Q1. For ‘23-24 it will be Rs.
3.78 crores and for ‘24-25, it will be Rs.
0.84 crores.
The Tranche 1 where there was Rs.
29 crores which has already been charged off and the balance which is for the new one which has been given in ‘19, that is a Rs.
16.85 core.
Out of that Rs.
12.93 crore will be in ‘22-23 and ‘23-24 will be Rs.
3.78 crore and ‘24- 25 it will be Rs 0.84 crore and Q1 FY 23 we have already charged Rs 4.72 crore. uti R UTI Mutual Fund
Kaushik Agarwal
Just a follow-up question on the first question which I have asked.
This on slide #27, this 722-core sales team, this is part of my 1,383 UTI AMC employees’ number or is it different?
Sandeep Samsi
Yes, part of that only.
This is not additional; this is part of that.
Moderator · Conference Operator
Next question is on the line of Akshay Jain from JM Financial.
Akshay Jain
I have a question on your investments balance.
So, if I do a rough calculation, you have close to Rs 3,000 crores worth of cash and investments.
If I exclude say the PE and the offshore investment of around 600 crores and say 160 crores odd of a regulatory requirement into your own schemes.
Even if I take say additional 500 crores to that, it still leaves around 1,500 to 1,800 crores odd worth of cash on your balance sheet.
Lot of investors have been raising questions that why so high cash balance on your balance sheet rather than you can use this cash balance to say either pay out as dividend or a buyback.
We have been listening to a lot of answers that you are deliberating on this but is there any timeline on when this cash will be utilized?
And number two on the dividend policy, dividend policy one of the so I'm looking at the UTI consol.
It's the dividend payout has been in the range of around 50% while some of your competitors are paying in excess of 60% and one competitor is even paying in excess of 80%.
Why not pay higher dividends?
And number two why not utilize this excess amount of cash on your balance sheet?
So, these are my two questions.
Imtaiyazur Rahman
Let me answer first on the dividend.
This time we have paid 67% dividend and we have a baseline in our policy that the Board may approve minimum 50%.
Last year we had given the 61% dividend, there is an improvement in the dividend payout and we will be consistent in paying the dividend.
Regarding this utilization of the cash, yes this is the cash is kept to have any acquisition, that didn't work out and (b) is whether we should do the buyback?
We are still exploring; on the dividend payout we will discuss this with our board and take an appropriate decision in due course.
But we are cognizant that we are sitting on cash and we are exploring the strategies how do we service this cash better in the interest of the shareholder.
Akshay Jain
If we can get some timeline on this because your cash is like around 3,000 crores, your market cap is 8,000 crores odd like it’s a more like around 35% to 40% of your market cap is sitting in cash.
It will be very helpful if we can get some time line on when this cash can be utilized.
Imtaiyazur Rahman
Good suggestion.
We will discuss internally with the Board and hopefully in the next call we will be in a position to deliberate it better. uti R UTI Mutual Fund
Moderator · Conference Operator
Thank you very much.
I now hand the conference over to the management for closing comments.
Imtaiyazur Rahman
Thank you very much for organizing this call and thank you very much indeed for your active participation.
UTI AMC needs support of all of you.
We are committed to serve all our stakeholders and thank you very much once again.
Moderator · Conference Operator
Thank you very much.
On behalf of UTI Asset Management Company Limited that concludes this conference.
Thank you for joining us.
You may now disconnect your lines.
Thank you. uti R UTI Mutual Fund