EAAA India Alternatives Limite (EDELALTS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good evening and welcome to the H1 F527 Earnings Conference Call of EAAA India Alternatives Limited. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Sujaya, Managing Director, Capital Markets and Investor Relations, EAAA India Alternatives Limited. Thank you, and over to you, ma'am.

Thank you very much, Rayo. Good evening, everyone, and a warm welcome to our first earnings call, following our successful listing earlier this month. This is indeed an important milestone in the journey of our institution, and we are delighted to welcome our shareholders and list and the wider investment community to today's interaction. We have with us our CEO, Mr. Amit Agarwal, and our CFO, Mr. Hemel Mehta. Today's discussion will provide an overview of our business model and financial performance. For the half-year ended 30th September, 2026, the investor presentation has been filed with the stock exchanges, and we will refer to it during the discussion. After the management's opening remarks, we will open the floor for questions. Before we begin, I would like to draw your attention to the forward-looking statements disclaimer in Safe Hardware, which forms part of our earnings communication. With that, I hand over. Mr. Amit Agarwal.

Over to you, Amit.

Good afternoon, everyone, and I once again welcome all of you to our first earnings call post-listing of our company. First and foremost, I would like to thank all of institutional, non-institutional, H&I, retail investors, as well as equity analysts for being part of our IPO and making it a success. We thank you for the trust you have placed in our company and in the alternative industry in India, which in our view is poised for a multi-decadal growth. Since this is our first earnings call, I would like to spend the first few minutes talking about the alternative asset industry in the country with a specific focus on yield and income segment where we operate. The Indian alternative industry is significantly under-penetrated as we speak, and I would refer to slide 6, where you can see at least the GDP ratio is 4% penetration for the alternative industry, which is significantly smaller when you look at the North American industry, which has almost a 30% penetration. As India moves to a $10 trillion economy, We do believe that alternative asset investments will become mainstream, will form part of the portfolio of almost all asset allocators, whether institutional or H&I and family offices. As per our industry study, which you can see on slide 8, it is clear that yield and income strategies are growing at a faster pace. And we'll become nearly 42% of the alternative industry, up from current 33%. And we do believe that this is an asset class which will see a significant growth as the overall industry goes to a 25 lakh crore AUM. The key attraction for an asset allocator inside income and yield strategies are the strong cash flows that he is able to get out of these strategies, the attractive risk-judge return profile, and the non-equity correlated nature of this asset class. There are three macro trends in the Indian context, which, if you see our slide 9, defines the wealth creation inside India. Which is the rise of private wealth, the penetration of wealth managers who will focus on asset allocation and not having over emphasis on any one asset class, but distribute it to diverse asset classes. And all apart from everything else, there will be income and yield strategies will form part of everyone's portfolio as they look for generating returns. The institutional capital penetration is at a very, very nascent stage in this category, while globally, institutions are one of the most highly allocating asset class in this income and yield segment. We are an asset managers of the private market, and private market represents a very attractive opportunity in this country's landscape. Whether it is our infrastructure strategies, whether 17 lakh crore of national monetization plan puts a good amount of asset availability or our commercial real estate strategies. Where we find nearly a billion square feet of grade A office space needing institutionalization and aggregation around players like us. Or it is the special situations and performing credit strategies which can finance over 25,000 plus private companies which are needing this capital to finance their size and scale. So, we think that all of these bring together a very attractive alternative industry in the country. I would like to now focus on what we have built at Edelweiss Alternatives over the last 17 years, and as we get listed, what will be our key focus areas. We are today an institutionalized platform looking to channel patient asset classes, To diverse asset classes that generate income and yield solutions for our clients. We are one of the largest alternative asset managers today in India and have a fee paying AUM of nearly 49,100 crores as on 30th September. As you can see on slide 17, this AUM is spread across our multiple strategies. Including the strategies where we own and operate nearly 5.6 million square feet of completed office space, nearly 7,700 kilometers of roads, 1.73 gigawatts of solar, and nearly 1,800 circuit kilometers of transmission lines. So when our clients invest in our funds, they receive the cash flow from these underlying assets which we own and operate, whether it is the annuity or the toll from the roads or the rental cash flows from the underlying commercial office spaces. These assets provide predictability to the cash flows being real assets and hard assets. Similarly, for our credit strategies, we have an established track record of over 17 years. We have invested nearly 43,000 crores across 190-plus companies, but have also realized more than 46,000 crores in capital bank. This is the same capital which delivers the income and yield as interest income or principal repayments to our clients. Good morning, everyone. One of the key highlights for managing such a diverse portfolio of investments is by building capabilities. It has been our motto, capabilities before capital. And we have our in-house operating platform called Secura, and it has 66 plus domain specialists. Across sectors with expertise, delivering high-quality portfolio operations and management, which helps create returns for our clients. We have decided to keep this capability in-house, even though in the short term it might look costlier, but we do believe that in the long term, this is a significant strategic advantage for us. We are not dependent on external partners for managing our assets, and we believe this will provide us a competitive edge as we scale. I would now like to give you some details for our investors in the funds who are called limited partners or LPs in alternative fund terminology. Our LPs comprise of institutional clients like Global, Pensions, Insurance, Domestic Insurance companies, and we have nearly 49% of our AUM arising from these institutional clients. 51% of our AUM comes from large, sophisticated family offices. We have ultra-high net worth and high net worth clients who are looking for opportunities to invest in diverse asset classes, giving them the income and yield for their portfolios. We now have nearly 5750 plus unique client relationships across our fund strategies. I would like to highlight here that nearly 77% of our AUM comes from repeat clients who have not only experienced the fund returns over long durations and have seen fund vintages, but have also invested across our diverse investment strategies. We have a very high-quality platform that focuses on transparency, governance, and risk management, which is very important for attracting and retaining clients. We are thankful to all our clients for participating in our fund strategies, and we look forward to serving them. Our business as an alternative asset manager has got three key pillars. Fundraising. deployment, and realizations. All these three factors combined together lead to a sustainable growth in our fee-paying AUM. We have always focused on our fee-paying AUM on a three-year CAGR basis. It is important for me to emphasize here that we manage six to eight years close-ended funds. We channel patient capital to various asset classes across private markets. Therefore, the three-year fee-paying AUM CAGR is a good matrix to track for us. We have grown, as I said earlier, at a 23% CAGR on a three-year rolling basis, and which is what is also the number for 30th September 2026. Our FPEM has risen from nearly 26,000 crores in September 2024 to now nearly 49,000 crores, which represents this 23% CHER. When you look at our one-year growth, it is 28% from 38,500-odd crores, but we would still like to focus on the three-year CHER number for our purpose. As I said, out of the three pillars, fundraising, deployment, and realization, our platform has been doing significantly well across these verticals. Our fundraising has seen strong momentum across all our flagship strategies in the first half. Our funds across special situations, infrastructure, private equity have raised nearly 8,250 odd crores in H1 of FY27. He said it. We've also raised nearly 20,000 crores in our listed strategies, which are in-width in the first half of the year. And together, we have raised close to 20,000 crores of capital in H1. We will be raising funds over the next quarters across all our flagship strategies, including specialization, infrastructure, commercial real estate, and private. Private equity is one of our latest strategies, which is now entering its second vintage. Our first vintage fund, which was four years old, we have already listed three companies inside that, Rento Mojo being the latest one in that segment. On the deployment side, we have recently been awarded the Toll-O-Operate Transfer, or TOT-19 bundle, which was part of the National Monetization Plan, where we won the bid at 2,259 crores. These road assets have been acquired, contributing to nearly 600 lane kilometer of roads on the Madurai-Tutikore in Tanjavotritchi stretch in Tamil Nadu. We have also recently acquired a 95% occupied Grade A office park in Pune of nearly 1 million square feet with marquee clients as tenants. This is added to our commercial office strategy. We have also given growth capital to companies like Science Semiconductors, Gujarat Simis, and Great White across our performing credit and special situations strategy. Our realizations, which are the source of the income and yield for all our clients, have also been strong across all our funds, and we've collected upwards of 6,300 crores across all our strategies. These cash flows ultimately result in delivering the cash flow to our clients. We have also exited our infrastructure fund one in the first half of the year and the fund has completed its full life cycle. We do believe that these sort of experiences enhance the retention, attraction, and delivery of returns to our clients. The Q1 numbers include the impact of the entire exit of this fund as well. And there are income and expenses that actually add up whenever a full life cycle exit of a fund happens. I would now like to highlight the financial summary of the business. Our financial numbers are pretty much in line with our business plans. Our fee-paying AUM has grown at a CAGR of 23% on a 3-year basis and reached 49,164 crores. Our total income for the first half of the year was 616 crores, which was a 35% growth year on year. Our management and advisory fee has also touched 333 crores for the first half, a growth of 24% year on year. Our PAT for the first half was 169 crore. Again, a 35% growth from 125 crore PAT in a similar period in the previous financial year. Our PAT yields are stable at around 0.72% of fee-paying AUM for us. Our quarterly pack was 88 crores. And the same is a 28% growth on an annual bio-wide basis, while it is a 9% growth over Q1. Our fat yields for the quarter were also similar at 0.71% off the fee paying AUM. Our ROE has improved to nearly 29.5% up from about 25% a year ago. Our cost-to-income ratio remains steady in the range of 64% to 65%. We are pleased that the company has announced a dividend of 140% of face value at Rs. 7 per share. Our aspiration is to distribute around 50% of our annual earnings on a long-term basis, and we will welcome any views around the same. To summarize the key highlights of our business, we would like our fee-paying AUM and PAT to grow in the 20 to 30% growth range over the medium to long term. We aspire our PAT yields to be in the 65 to 70 basis point on the fee-paying AUM. Our VAR-related earnings are now spread across seven funds and five strategies, making it recurring and regular after a 17-year journey, and we expect that the VAR pack will be within 25 to 30% range of our overall pack. We aim to operate at a 30% ROE and are looking to distribute around 50% of our profits. With that, I would like to open the call for questions, and thank you, everyone, for your patient listening.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Also, before we begin... A request to participants to please limit your questions to two at a time so that everyone gets a chance. You're welcome to rejoin the queue for follow-up questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from Bipanjan Ghosh from Goldman Sachs. Please go ahead.

Hi, good evening, everyone. So, just a few questions from my side. You know, first, if I look at your overall fee-paying EVM, a decent portion as of date comes from income and yield strategies, which you articulated. Now, as from my understanding, you know, when you're doing a fundraise in income or yield strategies, There is a fair bit of certainty or understanding of deployment strategies that you might have over the next few years. And consequently, the sort of hurdle rate expectations that are inbuilt probably has a little bit of higher visibility compared to maybe a private equity strategy or some other venture capital strategies. Now, on that backdrop, if I were to think of more from a long-term perspective, So how does the visibility of VAR or variable returns in an income or yield strategy differ from, let's say, private equity or venture capital strategies? And on that context, is it fair to assume that the visibility that you have on your book in terms of the VAR is fairly high? So that's my first question. The second question was on your distribution mix. It would be great if you can give some color on the quantum of business that comes through direct business, as in your relationships maybe with institutions or other existing clients, given that a lot of it comes from repeat clients, and how much of it comes from external distributors. And within the external distribution front, if there is any concentration of top three or top five distributors, that would be useful. And just two data-keeping questions. If you can give the – sorry, one data-keeping question. If you can just spell out the overall commitments as of – or overall AUM. including the non-fee-paying one, the commitment part, as of September 30th.

Thank you so much for that question.

And yes, you are right. The visibility of variable additional returns in our sort of strategy is fairly high. So if you see as a strategy, most of the funds which are these closed ended six to eight years fund, they have a hurdle return to meet. And given that income and yield strategies pay out significant cash flows on an annual basis, the hurdle returns do not compound. Similarly, secondly, the strategies are non-equity correlated. So therefore, the interest income which the company has to repay or the principal income that the company has to repay does not need to come out of any equity events. So, the likelihood of generating the variable additional return in our sort of strategies is fairly higher and much more visible. Also, for our own and operate strategies, most of these assets are high-quality assets completed with 20-year cash flow visibilities from contracted revenues. So most of the assets have a very different visibility profile across these assets. I would like to also take you to the slide which we have put on our variable additional returns where they have been across strategies got created. This is slide number 14, the slide number 14, where diversified and recurring income across strategies have got created. To your second question, in terms of our distribution mix, we have adopted an approach to reach out to our institutional clients on direct basis. While the HNI and the UHNI segments are catered to a distribution strategy. So when I say that my 49% of our AUM is from institutional clients, those clients are being approached directly, while the 51% of the AUM that is coming out of HNI, UHNI, and family office universe comes through a distributor-led approach for us. I would also like to highlight that we are a standalone pure play alternative asset manager on the income and yield. And therefore, there is no. On the data point that you mentioned, is nearly 49,160.

Thanks for the detailed answer. Would it be possible for you to quantify that overall number, including the dry powder or including the commitment specifically?

So our AUM is 95,000 crores, overall AUM. Part of this AUM will be a dry powder that will come into the fee-paying AUM strategy.

And, sir, is it possible if I can squeeze in one more question?

Sure.

So on the selling and distribution expense, you know, which you had to amortize, or not upfront, you had to amortize in one queue because of the closure of one of your funds. Just wanted to get some sense, was it because the fund achieved its closure and the deferred distribution cost had to be booked in the P&L, or is it like when any of your funds closed, there is a sort of revenue or VAR sharing with distributors?

Say that all our funds, we have a plan. And sometimes when we are exiting, we could exit ahead of the scheduled exit of the fund. This is the same thing that happened with our infrastructure fund one, where even though the fund life was still left, full exit of the fund was achieved. The distribution costs are amortized over a period of time, along with the the entire life of the fund. So given that it was Actually achieved earlier, there was a forward period distribution cost which would have amortized, which came directly into Q1. There is no VAR sharing with any distributor.

Got it. Thank you, sir, and all the best to the team.

Before we take the next question, a reminder to participants that you may press star and 1 to join the question queue. The next question is from Siddharth Shah from SRS Capital. Please go ahead.

Yeah. Hi. Congratulations to the ICO, and thank you so much for taking the question. Yeah, I just brought it on the years and then the carry. Certainly, yields, you know, it seems, of course, real assets in UAM has now, you know, become a larger portion of the mix versus the special situation in credit. Like, what are the, broadly, the differences in yield or might earn for real assets versus the credit side?

We like to look at all our funds as risk-adjusted returns. Some of these assets, which are very long-term completed assets, are actually sort of half-beta assets in that sense. And the risk on these assets is significantly different. And as I said, we have Sakura, which is our asset operating and management platform with significant domain expertise. We are able to own and operate these assets at scale. So, the yield that our clients expect, as I was saying, is an alternative industry. This is where they can make 7-8% fixed income.

I mean, you know, the years we might earn as the asset manager.

Sorry, I was

coming more from the perspective of the revenue yield we might earn as an asset manager from the rural asset segment versus the state credits of things.

So, I would like to draw your attention to slide 15, where we have given our unit economics. Which is what we are focused upon when we look at any of our product categories or fund strategies. So all our funds that we try and raise, we are looking at a fund level or an economics level, we should have very similar unit economics from all. Commercial real estate strategy from a fund manager perspective.

Okay. I'm going to carry, you know, it seems that a book underlies carry and then, you know, as it's paid. I'm going to deal by deal.

For carry or VAR purposes, a model where all the client and their hurdle returns are paid off, given that a large part of our hurdle returns get paid off annually, there is far more certainty on generation of carry. And the carry gets paid off over a period of time once the client hurdle returns are paid off. Multi-strategy funds and multi-strategy sort of fund and multiple funds across vintages deliver continuous carry realization after a long period of time. And that is an illustrative example on slide 42, which may help you understand why for a platform like us, which has been there for now 17 plus years, multiple vintages of funds has a more recurring VAR.

Got it. Thank you.

Thank you. Participants who wish to ask questions, please press star and one. The next question is from Praesh Jain from Motila Noswar. Please go ahead.

Yeah, hi, good evening, everyone. Just, you know, if we look at the distribution, how would the distribution be different between, say, real assets that we manage versus private credit? So, in a way, trying to understand the distribution mix in both of these. So, you know, this would probably help us to understand more on unit economics because if my understanding is correct, we earn slightly lower on the real assets versus the private credit. So, you know, just trying to marry those, you know, how does the eventual unit economics kind of turns out to be similar for both the fund, both the category of funds that we manage.

Preish, when you say mean distribution like distribution to clients for fundraising or distribution from the underlying funds to the investors.

So basically, I'm trying to understand you on the yield front, it would be different, slightly different when both the classes because of the nature of LPs that would be different, who will be investing in it. And yeah, so basically, and where one would be distributed, if there is more institutional focus in the real asset side, then probably the distribution fees are not there, but the yields are lower. The yield that EAAA earns from those funds, management fee yield, would it possibly be lower? So just trying to understand the unit performance differential between the two that eventually brings down it to be similar for both the categories.

So, Brayesh, as I said, and if you see, as I mentioned, most of our strategies are trying to generate the attractive risk-adjusted returns. And if you see, as I said, infrastructure fund one also generated a 19% return, 19%, 19.3% actually, percent return on a gross basis. So for our strategies, despite having lower beta assets, many times the returns are quite attractive for our underlying clients. So what we as asset managers focus, we like to distribute our funds to both institutional clients, which is a direct distribution strategy, and to H&I family office clients on a distributor basis. There are some very sophisticated family offices who are also saying that they have become direct in some sense. Bye. There is a focus on net yields for us as an asset manager. The gross yields could be different for our special situation category or the infrastructure category or the commercial real estate category. But overall, on a long-term basis, we are focused on what is the net of distribution cost that is coming to us. So for institutional clients, in some cases, we are able to get the full fee without any distribution cost, while in some cases on the very, very large family office also, it could become a similar trend. But we as an asset manager, as I said, whenever we launch a product, whenever we launch at a fund, we look at what is the net return to the client, net of all costs, and what is the Return that we are adding because of the capability, because of our in-house asset management capabilities, because of our ability to source and deploy capital effectively. All of that we look at. And then I would go back to slide 15 of unit economics, which is what.

The question was on, you know, the dry powder that you kind of alluded to. Again, you know, from a mixed perspective, how would it kind of shape up in the next two, three years, you know, or from the fundraising that you guys are planning, how much of it will be more, whether it will be more private, credit-oriented or your real estate-oriented?

So to give you a very broad sense, Priyash, over FY26 and first half of FY27, we have raised nearly 31,000 crores of capital, of which around 11,000 capital will be raised on our listed strategies, which is on the Invis side. The rest 20,000 crores would have been raised on the fund side. Most of this capital would be available as dry powder for us.

Got that, got that.

So my question was more on the split of that 20,000 crore, if it is possible to give some indication and plans to launch new funds in private credit or on real estate, what are the plans for new launches?

Broadly, this is spread across our strategies, and obviously, we can look at a breakup, and our team will provide that to you separately. But from our perspective, all our three flagship funds will be in the fundraising over the next few quarters. Our special situations fund, our infrastructure yield fund, as well as the second vintage of our commercial real estate fund. Even our private equity fund has seen significant traction, mostly attractive performance of fund 1, and we do believe that the private equity fund 2 will be nearly 3x of the previous fund that we raised on private equity side.

Got that. Thank you and wish you all the best.

Thank you. The next question is from Mohit Surana from HDFC Asset Management. Please go ahead.

Hi. I have three questions from my side. First is that when you say that the distribution cost is roughly 30 to 40 basis points, and given that 50% roughly is distributed AUM, does that translate into 60 to 70 basis points per distribution cost on an annual basis? And, first, is that misunderstanding correct? And, secondly, in terms of the actual cash flows relating to the distribution costs, how they behave in the sense that they are up-fronted or they are also, in terms of the actual cash flows, distributed payouts are also amortized. And secondly, when I look at the management fee growth, it is a little lower than the fee paying premium growth. So, why is there, you know, sort of a compression in the management fee? And thirdly, when you say that... Your AUMs are 95,000 crores versus a fee paying AUM of roughly 49,000-50,000 crores. creation of overall AUMs into keeping AUM, how that translation happens, any idea of that.

Thank you for the question, Mohit. The distribution cost on an average, as we mentioned, is close to 30 basis points for us. And given the mix is 50-50, your understanding is correct. The distribution cost is 60 basis point on the P&L side. If you look at this as an amortization over six to seven year period, this will turn out to be between three and a half to four percent of distribution cost. As a matrix, this cost is paid from a cash flow perspective, one third upfront. And two-thirds over the trail period of the fund life. So that is how the distribution cost gets paid. The amortization is at this rate, and the payment is one-third up front and two-thirds over the balance fund tenor. Your next question was on management fees. So, I would like to say that our Our fee-paying AUM grew from nearly 38,500 crores in Q2 of FY26 to nearly 49,100 crores today, which is a 28% growth. In the same period, the management fee has grown from nearly 136 crores to 166 crores, which is 23% growth rate on a YOY basis. Typically, the management fees is computed on SPAUM based on actual number of days, and hence the impact of recent fund get raises gets reflected only over a few. Question around the gross AUM and ePaying AUM. We would like the focus to be kept. On a three-year rolling basis. We have nearly 26,000 crore today to 49,000 crore as we speak. The difference... Part of the fee paying. capital that has been repaid, and therefore, it will be part of Funds have been significantly repaid, and as I explained on the previous question, We are investing over the coming quarter.

Sir, one follow-up. Thanks for your responses. Of the 95,000, the difference between the 45,000 crore, which is the difference between the EM and the fee-paying EM, how much is the dry powder within that EM?

So that number will be closer to 20 to 25,000 crores. I will request our finance team to provide you that number.

Thank you very much. Participants who wish to ask questions may press star and 1. Well, as there are no further questions, I'd now like to hand the

conference over to Ms. Sujaya for closing comments.

Thank you, Rayo, and thank you all for joining us today. We appreciate your insightful questions. For anything further, please write to us at investors.eaa.in. Thank you, and wishing you and your family a joy to receive it.

Thank you.

Thank you very much. On behalf of EAAA India Alternatives, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.