Ladies and gentlemen, good day, and welcome to the Q2 FY27 Earnings
Conference Call of HDFC Asset Management Company Limited. From
the management team, we have with us Mr. Navneet Munot, Mr. Naozad
Sirwalla and Mr. Simal Kanuga.
As a reminder, all participant lines 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 this
conference call, please signal an operator by pressing star then zero on
your touch-tone phone. Please note that this conference is being
recorded.
I now hand the conference over to Mr. Simal Kanuga. Thank you, and
over to you, Simal.
Simal Kanuga:
Thanks. Good evening, everyone, and thank you for joining us. Let me
begin with a quick overview of the industry. The quarter began
positively with Nifty 50 gaining about 2% in July, followed by a modest
decline in August and a sharper 6% correction in September. Overall,
markets ended the quarter down around 5%.
Equity-oriented funds attracted net inflows of INR1,161 billion during
the quarter. September marked the 67th consecutive month of positive
equity flows, a remarkable streak dating back to March of 2021. SIPs
continued their steady growth with monthly contributions reaching a
new high of INR325 billion in September compared with INR294 billion
a year ago and INR318 billion in June of 2026.
During this quarter, contributing SIP accounts crossed the 100 million
mark. And over the last decade, monthly SIP contributions have
multiplied almost 10x.
On fixed income, debt mutual funds recorded net outflows of INR607
billion, while liquid funds saw net inflows of INR457 billion. ETFs
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attracted INR367 billion. Arbitrage funds garnered inflows of INR63
billion during the quarter.
Turning to our performance. Our quarterly average AUM stood at
INR9.69 trillion, up 10% year-on-year and 4% sequentially. Equityoriented assets stood at INR6.51 trillion, representing 67.1% of our
AUM compared with 57.5% for the industry.
Within this, actively managed equity AUM grew by 14% year-on-year
to INR6.08 trillion with a market share of 12.7%. On fixed income, debt
AUM stood at INR1.62 trillion with a 13% market share, while liquid
AUM grew 10% year-on-year to INR860 billion.
Our live individual accounts increased to 32 million from 26 million a
year ago. Our unique investor base stood at 17.7 million, representing a
penetration of 28%. In other words, 28 out of every 100 mutual fund
investors in India invest with us. Over the last 1 year, we have added 3.2
million unique investors, while the industry has added 6.3 million. Our
systematic flows comprising of SIPs and STPs, that is systematic
transfer plans, stood at INR48 billion in September, up 6% year-on-year
across 19 million transactions.
During the quarter, we also launched 2 new AIFs, a Category II equity
fund focused on private markets. We are anticipating first close in this
quarter and also launched the Category III fund, investing in listed
securities, which achieved first close during the last quarter. We have
started managing EPFO fixed income mandate during the quarter that
went by.
With that, I now move to financials. Revenue from operations for the
quarter was INR11.7 billion, up 14% year-on-year. Operating profit was
INR9.1 billion, up 16% with an operating margin of 36 basis points of
AUM. Profit before tax stood at INR9.8 billion, up 12%.
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Also, please note that the reported PAT is not directly comparable yearon-year as the September 2025 quarter benefited from INR468 million
reversal of income tax provision, which resulted in an additional credit
to the tax account and the PAT. So that's where I would put a pause.
Thank you very much.
We can now open it up for questions. Navneet, Naozad and I are happy
to take them. Thank you.
Moderator:
Thank you very much. We will now begin the question-and-answer
session. First question is from the line of Devesh Agarwal from IIFL
Capital.
Devesh Agarwal:
Sir, my first question is on the blended yield. We see a sequential
improvement in the yields. So just wanted to understand what are the
drivers for this? And also, if you can share the asset-wise yield?
Naozad Sirwalla:
Devesh, I'll share the yield for the quarter. So, for active equity, our yield
were 61 basis points. For overall equity fund, this was 58 basis points.
Debt is around 28, 29 basis points. Liquid, 13 basis points.
Devesh Agarwal:
And what has led to this improvement on a sequential basis? Is it only
the asset mix change or something else as well?
Naozad Sirwalla:
Largely asset mix change. It's not like a material movement. It's slightly
upwards from previous quarter.
Devesh Agarwal:
Okay. And sir, on the alternate business, we see an increase. I understand
a large part of that is the debt mandate that we have won. But two things
I would want to know what is the revenues that we are targeting in this
and the pipeline on the alternate? So by when we can reach INR100
crores of revenues from the alternate business? And what is the pipeline
going forward?
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Navneet Munot:
Devesh, we don't give guidance like this when will we reach a certain
amount. All I can say is that beyond mutual funds, now the alternative
platform is working as a full stack. So this quarter, we launched two new
funds on alternative side.
First is the HDFC AMC Select Opportunities Fund. This is a Category
II fund investing in late-stage venture and early-stage growth
companies. We have been in the process of raising money, have seen a
very good encouraging reception from some of the global institution as
well as domestic institutional investors, family offices, and HNIs.
Second is the HDFC AMC Emerging Opportunities Fund. This is our
first Category III fund, and it has also seen a strong traction and
fundraising continues. On the PMS side, you rightly said that a large part
of the AUM is on account of the EPFO mandate, which has gone live.
And together with SPFO mandate, it shows the depth of our fixed
income capability. So idea is like building a one-stop platform where an
investor can stay with HDFC AMC for every need across mutual funds,
PMS, AIF, et cetera.
On the margins question, AIF is a margin-accretive business. Fees here
sit above what we earn on our mutual fund equity book in the range of
80 to 90 basis points depending on the product. Discretionary PMS earns
broadly what our equity mutual fund business does. Nondiscretionary
PMS is a strategic play. And government mandates like EPFO and
SPFO, they are highly contested and the pricing reflects that. So we run
them for the institutional credibility and capability they build. But those
mandates open doors well beyond these mandates. So these are like
highly prestigious. But on all the other part of alternative and PMS, they
would be margin accretive.
Devesh Agarwal:
Right, sir. And sir, one last question. If we see your SIP share, it has
always been higher than your equity AUM share. Now do you think this
would continue like this or there is a risk to the market share number or
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the flow itself, given that some of the newer AMCs are now completing
one year and three years of operations, and they would kind of have this
now track record of one year and three years and that the flow can shift
to some of the newer AMCs?
Navneet Munot:
Devesh, we have been one of the earliest players to talk about the merits
of investing through SIP mode. And much before the whole SIP
momentum gathered pace, we have been highly, highly focused on
building the SIP book. And while I mean, at every point in time, we have
seen this is a highly competitive industry from a number of players
perspective, at various points in time, various funds would have done
well.
But at the same time, I think thanks to the long-term track record of
products, the product range, the pedigree, the partnerships that we have
built with all the channel partners and the focus that we have on SIP, SIP
share has been growing. And we remain confident. I think this is one of
the biggest area of focus for us and remain very confident on our SIP
book.
Moderator:
Next question is from the line of Mahek Arora from Goldman Sachs.
Mahek Arora:
Just one question. If you could tell the share of non-mutual fund revenue
in the overall revenue mix, please?
Naozad Sirwalla:
It's quite a small number actually. It's not really material as of now.
Moderator:
Next question is from the line of Ronak Chheda from Awriga Capital.
Ronak Chheda:
Just one question. This is not apples-to-apples, but if you were to look
at your SIP number or the systematic numbers and you have to compare
with the industry number, in the last three quarters, we've seen some dip.
Can you just directionally comment are we losing some share on the
systematic flows, especially on SIP or this is just the STP adjustment?
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Navneet Munot:
So I think I must clarify this. So what we report, Ronak, is systematic
transactions, which combined SIP and STP. The industry number you
are comparing it with is SIP only. So the two are not like-for-like. The
softness we have noticed has come from STP. And systematic transfer
are mostly set up by wealth managers who actively manage when money
moves into equity.
So they put money in a liquid fund or a money market fund and
gradually transfer that to equity. And particularly when markets get
choppy, which happened in the last couple of months, some of them
paused these transfers. And that's a tactical call taken by these investors.
If you strip out STP and look at SIP alone, our market share has actually
gone up. I repeat. If you strip out STP and look at only the SIP, our
market share has actually gone up. If you look at number of transactions,
that will tell you the same story.
So our systematic transactions rose from about 17 million in June to
nearly 19 million in September. And if we step back for a moment,
monthly systematic transaction book has grown nearly 5x in about 5
years to around INR48 billion and industry in the same period would
have grown 3x.
Ronak Chheda:
We've been long behind your team to just kind of split this number so
we could analyze this number better. That's just a request.
Navneet Munot:
We have noted it.
Moderator:
Next question is from the line of Shreyas Pimple from Nomura.
Shreyas Pimple:
My first question was on opex. This quarter, we have seen quarter-onquarter decline both in staff cost and non-staff cost. What has been the
reason for that, if you can explain, please?
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Simal Kanuga:
Shreyas maybe what we can do, if you want, is give an overall
perspective on how we are looking at cost. Do you want to do that or
you want like a cost number? Maybe we can just let Navneet run you
through, because I think this is one question that comes to us very often
on this whole cost thing saying that are our costs higher, lower,
whatever. Navneet, if you can just address that from a macro base.
Navneet Munot:
In fact, in this quarter, I thought we'll be complimented for a very, very
tight control on cost. But the question of cost, I think we address almost
every quarter. So again, let me take a step back and explain how I think
about cost and investment in our business.
Firstly, let me reiterate something that you have heard from us many
times before. We watch every rupee we spend. We watch it very closely.
Naozad is often like quick to push back even on expenses that I would
like to incur. That should give you a sense of the culture we have built
around cost discipline.
And I think when you look at our overall cost base relative to the size,
scale, complexity of our organization, that discipline is quite evident.
But there is another point I've made consistently, while we are extremely
disciplined on cost, we will never shy away from investing in the future
of our business. People are very important and so we will keep investing
in the future.
So let me explain how we distinguish between the two. So the regular
growth in operating expenses, if you look at some of this is like inflation
linked. So some of it is driven by the growth of business in terms of size
and broadly speaking, these are like routine costs that we continuously
monitor and manage.
The second is the expenditure which I believe that's far more important
to understand, which are in the nature of investments we make today to
build the capabilities and the capacity that we will need tomorrow. For
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example, somebody asked about what we are doing on the alternative
side.
So between alternative and PMS, when I say alternative, both private
equity and private credit, we've got more than 20 investment
professionals now and significantly expanding our capacity on investor
servicing, on operations, on the whole sales and then the distribution
side, so on and so forth.
Same thing is on the international side, where the AUM is not very large,
but we are investing upfront because we see a lot of potential in that
business. Same thing goes for all our investments on digital, technology
and then those capabilities. So all of those, I take as investments.
I told you about the number of people that we have built on the
alternative side. But even on the mutual fund side, team till a couple of
years back was like 30 professionals. Now number is like closer to 40,
and this will continue to grow.
And we keep thinking that business is let's say INR9 lakh crores, INR10
lakh crores it will go to INR20 lakh crores, it will go to INR40 lakh
crores. And we have to constantly invest in people and technology and
in distribution, so on and so forth.
And then, of course, the technology where a team of engineers working
on AI-led capabilities across major business functions. So this is like
upfront investments, but in terms of the cost saving, potential cost saving
or the potential higher revenues will occur over a period of time.
So I think when you look at our quarterly cost numbers, I would
encourage you to look at them through this broader lens. But I mean,
I've always said this, we are not compromising on cost discipline, and
you have seen in this quarter and have always seen this, seen us
maintaining like a very, very tight leash on cost. But at the same time,
in a calibrated manner, we continue to invest in future because we don't
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want to compromise on investing for growth. Does that answer your
question?
Shreyas Pimple:
Yes. It's very clear. Just wanted to understand how do we think about
cost and opex growth in that sense. So year-on-year, of course, we have
always maintained operating PBT yields in the range that we always see.
But how do we think about growth in the cost? That is what I wanted to
understand?
Navneet Munot:
So I mentioned, I think it's split into two. One is like the regular, the
operating expenses that should be like inflation linked as the business
grows and in line with the growth in the business in terms of size and
broadly speaking, these are like routine costs that we continuously
monitor and manage.
Shreyas Pimple:
That could be, sir, 60%, 70% of the total cost?
Navneet Munot:
We don't split like, this is for future and this is for like current business.
But I think about it, the scale of operation that we have, managing INR16
lakh crores of AUM, INR9 lakh crores on the mutual fund side, another
INR6.5 lakh crores on the PMS side, the capability we are building on
the Alternatives, on the International. I mean, look at our website, look
at the quality of app that we have got, the entire footprint that we have
got, both physical and the digital and the capabilities that we have put in
place. And relative to that, I think, people should be appreciating the
way we run our business.
Shreyas Pimple:
Yes. So I was very surprised positively this quarter.
Navneet Munot:
How should we look at it? One way to look at it is, I mean, go back and
see our history over the last 5 years, 10 years, how the costs have
increased and how conscious we have been of both, I mean, ensuring
that we run a very tight ship, but at the same time, keep investing as
markets give us the opportunity to do that.
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Shreyas Pimple:
Point taken, point taken, sir. Thank you for that answer. Second, just a
bookkeeping question. What was the ESOP or noncash expense for the
quarter?
Naozad Sirwalla:
So for this quarter, it's already disclosed, it's about INR186 million for
the quarter. So INR18.6 crores. Yes, it's already, as a footnote on Page
27.
Shreyas Pimple:
Sure, sure. My second question was on SIF. Where are we in the process
of expanding into SIF? When can we expect new products in that
category? Many of the competitors have already been in this space. And
they say that it is very lucrative opportunity as such. Where are we in
the process there?
Navneet Munot:
So it's a category definitely gaining prominence and some of the funds
that have got launched have done well through the period, though it is
too short to talk of performance. We have taken our time to set up
systems, processes, putting the right people in place. This is a new
category. Some of them are complex strategies. So we have also hired
like two senior investment professionals.
We've got Ihab Dalwai and Paul Parampreet Singh. We are now well
set, and you will see a couple of product launches in this space over the
next couple of quarters. So all the ingredients are in place. I have been
working a lot in terms of continuous training of our people on the sales
and distribution side. Similarly for our distribution side and should be
able to get our share over the next few quarters.
Shreyas Pimple:
Got it, sir. As such, the question was on specifically small and mid-cap
space. What we have seen in last 5, 6 months is that most of the flows
has been anchored towards this space. While we do have a huge and
large mid-cap fund, the small cap fund is comparatively smaller. The
flows in those funds have been decent, however, not to the industryleading mark.
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Where do we see -- the point was, first, in terms of HDFC AMC, how - I mean, the flows that come into these schemes, how do you see that
as an industry? Do you think that these flows will continue to be like
that? And how these flows will turn around? What is your outlook on
small and mid-cap flows?
Navneet Munot:
So first, I think we must give credit to investors for showing a lot of
resilience and discipline in the way people are investing. We have seen
like two years of muted returns. There are still people not only
continuing their SIPs, but even topping up or taking advantage of falling
market. So that's positive.
On the other side, we see some bit of momentum chasing. Earlier, I
mentioned about how money came into silver funds when prices were
high or in some of the sector and thematic funds when those themes had
done well.
At our end, all our fund managers, our large investment specialist team
and everybody on the ground in sales and distribution, they constantly
guide our distribution partners as well as investors on focusing on the
long term, focusing on asset allocation, focusing on the discipline and
not falling prey to the recency bias. Particularly on the small and mid,
because you made a comment about that mid-cap is like very large. So
fund size has grown due to long-term performance. In fact, it's our 20th
year of the mid-cap fund. It's more than INR1 lakh crore. And I think
we take deep pride in what we have delivered over the last two decades.
But fund size appears in every fact sheet and you see it.
The market cap of the underlying universe does not. And that is where
the misconception starts. What matters is size relative to the opportunity.
So if you look at, for example, the small cap fund and some of the people
have heard saying that now it's INR40,000 crores. But it was 0.5% of
the small-cap universe market cap in June '19, if I remember correctly.
And it's still like 0.5% of the market cap universe today.
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And also the other thing that we constantly look at both for our mid-cap
fund and small-cap fund is the weighted average market cap of that fund
vis-a-vis the benchmark and vis-a-vis the category average. And our
weighted average market cap in that sits below the category average. So
which tells you that size has not pushed us up the curve or narrowed
what we can own.
Fund managers feel very comfortable. Investor behavior is something
where one is the institutional response, the view that we communicate.
And second is what investors and distributors prefer. In fact, of late, I've
heard some of my fund managers speaking that the large cap valuations
have been like below long-term average, and that's something investors
should not ignore.
Simal Kanuga:
Also, I think Navneet touched upon the size, our small cap fund is like - okay, so one small cap fund is materially larger. But at the second
position, third position, it is us and one of the other AMCs both of us are
at 40. So we are not small even in the small cap category.
Navneet Munot:
I thought, you mentioned that your mid and small cap funds are still
large.
Simal Kanuga:
No, he is also saying that mid-cap, we are larger but small cap, we are
small.
Navneet Munot:
That's an opportunity for us to grow.
Simal Kanuga:
Does that answer your question?
Shreyas Pimple:
Yes, yes. Thank you. Thank you so much. Those were my questions.
Yes.
Moderator:
Next question is from the line of Jaspreet Singh, Individual Investor.
Jaspreet Singh:
So, my question is, our passive product portfolio appears to have
relatively lower market share compared to other peers. And when I also
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look at our products, I mean we don't have so many products in passive
to provide to an investor. So how do you look at that?
Because if you believe in active to passive shifts in the long term, so
how are you positioning yourself regarding that? How are you looking
to expand your product offerings and all? That's my first question.
Navneet Munot:
So we have almost 50 products on the passive side across market capbased indices and smart beta, across plain vanilla indexes versus sector
thematic, and across index fund, and ETFs and of course, some of the
fund of funds, which feed into these ETFs. So we have a fairly wide
bouquet of products.
Of course, we keep looking at the product basket and take a view from
our investment team. On the other side, we always assess whether a set
of distributors or investors have a certain need for a product. And
accordingly, we launch a product. So I think we have one of the best-inclass. And also, I must mention, we have been one of the oldest players
in the passive category. So our first index fund was launched in 2003
when I mean, hardly people were talking about passive funds. So it's
been now 23 years of building this category. And yes, so we have the
full product bouquet.
Simal Kanuga:
And actually, just to add, index funds, our market share is very high. So
I think you talked about market share, a large government of India
mandate, which we are not part of. But otherwise, our market share is
high.
Jaspreet Singh:
Even sir, retail, like some of the peers have like more market share than
us, right?
Simal Kanuga:
Sir, actually, in index funds where large retail participation is there, we
are the second highest in the industry.
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Jaspreet Singh:
And my second question is, how are you looking to make HDFC as a
one-stop solution and one-stop platform over time in the long term?
Navneet Munot:
So we are a one-stop solution house. I mentioned about the wide bouquet
of products we have got on the passive side. Similarly, on the active
fund, you would be aware of the SEBI classification and across almost
all categories which are permitted to be launched by an asset manager,
we have those categories.
There could be like a few funds here and there in the sector and thematic
category that we will be launching over a period of time. But otherwise,
yes, there are fewer new categories that have opened up with the recent
changes in SEBI classification norms. So for example, a contra fund or
life cycle funds. And over a period of time, we would be launching that.
On the other side, non-mutual funds, we have got a fairly wide bouquet
of products on PMS, both discretionary and nondiscretionary. On the
Alternative side, we've got a fund of fund. We have got now a new
private equity venture fund and a private credit fund and then, of course,
on the International side, we have just concluded the NFO of two
outbound funds, and we have got a 6 inbound funds. So I think it's one
of the best-in-class platform where every investor should be able to meet
most of their investment needs through one single platform.
Jaspreet Singh:
And sir, my last question is what are the areas where we are investing
for future?
Navneet Munot:
I think I mentioned earlier, so I wouldn't repeat all of that, but yes, across
newer categories of products and also as the market opens up, SEBI has
been over the last several years, have continuously been coming up with
newer categories of products or the opportunities. We launched a REITs
passive product. That's a new category that's building up.
I talked about the opportunity on the non-mutual fund side. But to be
very honest, I see tremendous growth opportunity in our core plain
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vanilla equity products where we have been a leader and have got a track
record over 30 years.
Jaspreet Singh:
Does new players present a threat to us or not?
Navneet Munot:
No, I think that the entry of newer players only validates our thesis that
industry has a huge growth potential. And I mean, for us, it is not
appropriate to comment on any particular name or firm, but we have a
comprehensive platform across active, passive, alternatives. We are
continuously expanding, building deep relationships and extremely
well-developed distribution network. So we have our strengths, and we
continue to build on that.
Moderator:
Next question is from the line of Aadit Vaish, Individual Investor.
Aadit Vaish:
So on flows, with the mid and small cap categories outperforming this
year, could you give some color on how gross sales and redemptions are
trending in your large cap and hybrid schemes compared with the rest of
your equity book?
Simal Kanuga:
We don't specify flow data category-wise for HDFC AMC.
Moderator:
Next question is from the line of Saurabh, Individual Investor.
Saurabh:
So my question is on last year, you have launched three new funds in
the GIFT City. So any plan to launch any further funds over there?
Navneet Munot:
Yes, so continuously been expanding the product bouquet. We have got
six funds for inbound investment that is investment by global investors
in India. And recently, we have launched two products for outbound
where there's an opportunity for Indian investors to invest globally.
One product is a developed market feeder, another is an emerging
market feeder. And as the market evolves and we see the demand from
the investors, we continue to keep evaluating our product bouquet and
come with the right solutions.
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Saurabh:
Specific numbers will you be able to?
Navneet Munot:
Like how many products we will launch?
Saurabh:
How many schemes or funds?
Navneet Munot:
No, no, we don't think like that. I mentioned earlier that it's a
combination of many things, what our investment team believes in. We
look at the need of a particular product or a solution from a set of
investors or distribution partners and in our capability. These are early
days, I mean, from our GIFT City subsidiary potential. We have
launched a couple of inbound funds and have just launched two
outbound funds, and we would like to keep growing these strategies.
Saurabh:
Okay, sir. And my second question was on any improvements on capital
efficiency because being the third largest AMC, the capital, the return
on capital ratios are lesser than the peers. So can you throw some light
over there?
Naozad Sirwalla:
So that is a function of how much cash we have on our balance sheet.
Last three years, the Board has distributed almost all the cash
distributable profits that we have generated in the business. Rest of the
balance sheet that we actually have has been built over the years from
internal accruals after paying dividends for each of the years we are in
existence. So that's a function of cash on the balance sheet, which we
are using for various investments, including in our AIF platforms.
Moderator:
Next question is from the line of Mayank from Emkay Global.
Mayank:
Sir, so if we look at the distribution mix, particularly in the equity AUM,
the contribution of direct as a channel has been increasing. So largely
given the market volatilities, do you see any concern on the stickiness
of the direct AUM? Because generally, we have -- I mean, seen that
because of handholding, regular AUM has largely higher stickiness. So
that was my first question.
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And secondly, I just wanted to confirm whether the ESOP cost for the
whole year stands at around INR79 crores to INR80 crores? Or is there
any change there?
Navneet Munot:
So on the investor behavior, I mean, people keep asking me like are these
flows sustainable? I think many of us in the industry, and I very much
include myself and my colleagues in this who have a long experience
have consistently underestimated the maturity and resilience of the
Indian retail investors.
So for years, we have built our assumptions and forecast around the
belief that retail investors would slow down or withdraw from equity
investing when markets turn challenging. But the Indian investor over
the last several years have repeatedly challenged that thesis. And I think
it is time we acknowledge that the investors have evolved much faster
than many of us anticipated.
And you can clearly see in the SIP flows over the last several years. 10
years back, the monthly flow used to be 30 billion, and now we are
talking about 325 billion. So there has been a consistent increase during
this period. We have seen a lot of volatility in the market at various
points in time. So I think that was your question whether these investors
would continue. I think there is a lot of resilience. The good part of this
is structural.
Another interesting aspect to look at is if you look at the net flows into
equity and hybrid funds and compare that with the SIP flows, a large
part of the flows are now coming in the form of SIPs. So that gives it
more predictability and makes it less volatile. So I wouldn't say that
industry is completely immune to market cycle.
I mean, of course, if there is an extended or a sustained bear market for
a long, we will see in the investor behavior or the resilience will get
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tested. But the experience of last few years has taught us that we should
be careful not to underestimate the Indian investor.
Mayank:
Got it, sir. And secondly, on the ESOP expense, if you can just confirm
whether the number is closer to INR79 crores, INR80 crores for the full
year.
Naozad Sirwalla:
Yes. So the noncash expense for ESOP cost for the full year FY '27
would be around INR79 crores, INR80 crores.
Moderator:
Next question is from the line of Rajit Aggarwal from Nilgiri Advisors.
Rajit Aggarwal:
My question is related to the overall market share. I believe there was
some discussion at the start of the call, and I joined a few minutes late.
Is that correct?
Navneet Munot:
Yes. But please ask.
Rajit Aggarwal:
No. Okay. So for the last many quarters now, I think our share has kind
of not grown. I mean the best, I think, was 11.5%. And in this current
quarter, it's 11.1%. And in the near future as well, there are a lot of other
fund houses which are coming up, which are going to launch their
scheme. And some of them have really caught the fancy of investors
through their own PMSs or AIFs. So do you foresee a scenario where
our market share could jump by, let's say, 20, 30 basis points?
Navneet Munot:
I think we look at longer term, I think on a quarter-on-quarter basis or
now even month-on-month basis, I mean, people track the numbers very
closely. The market share number gets impacted by two things. One is
the mark-to-market and second is underlying flows. So I wouldn't really
spend too much time going through all the details.
I think we all recognize that in a business like ours, some amount of
movement in market share is inevitable and very much part of the
journey. For example, in some of the hybrid funds, we have seen some
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bit of correction in our market share, but we have taken the right steps.
Our balanced advantage fund is very large, it's got a great long-term
track record and which is like quite enviable.
But some of the other categories like multi-asset fund or aggressive
hybrid fund or equity savings, we have taken some steps. We have acted
on it. We have reviewed our approach. And in fact, we have brought in
an expert fund manager on that, Dalwai, who has an excellent track
record in managing hybrid strategies and he has delivered very strong
outcome. And from sales and marketing perspective, we are looking at
some of those categories, and we think there is tremendous potential for
us to grow on that.
On the competition side, I mean I mentioned earlier that increased
competition, we perceive positively because it just reflects the
expanding investor base. It reflects the rising awareness about mutual
fund products across the country. The penetration is still very low. And
over a period of time, we see tremendous potential for industry to grow.
We have got the best-in-class platform from a product perspective, from
a distribution network, both physical and digital, enviable track record.
I think six of our strategies go back 30 years plus in terms of
performance track record. Another six, seven would be 18-, 20-year
plus. So I think very few fund houses, not only in India, but in the world
can boast something like that.
We have launched many more products in the last couple of years. So
we remain very confident of our capabilities apart from the strength of
the brand and the distribution franchise. So yes, there's a lot of potential
for us to grow. I think these are very early days of financialization of
savings in India, and we are very, very, very well placed to capture the
opportunity.
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Moderator:
Next question is from the line of Divij Punjabi from Banyan Tree
Advisors.
Divij Punjabi:
I had two questions. One was, can you speak more about the size of the
opportunity that you're seeing on the PE/VC side now coming with the
launch of the Select fund. So that is question one. And the other one is
there was a slight increase in equity yield. So just wanted to confirm, is
it because of decline in AUM during the quarter? Those are my
questions.
Navneet Munot:
Yes. Sure, sure, Divij. First, on the size of opportunity on alternatives,
there are many ways to look at it. One way to look at it is the total size
of AUM in Alternatives, which is like 16 lakh crores across category I,
II and III. And for us, these are like early days. I mean, we just made our
first foray into Category III fund. You know the industry size.
Category II, we had a fund of fund, which saw very encouraging
response. Money is almost fully committed to 13 general partners. And
then we have made a couple of co-investments alongside them and have
created a few opportunities and continuum funds.
Based on that experience and the network that we have built and the
understanding that we have got of investing in that space, we have
launched a new product Select Opportunities Fund, which again is
seeing very good response from the investors and the private credit fund
that we are in the process of doing a final close and have made a couple
of investments there.
So we see a lot of opportunity, but we have mentioned earlier that when
it comes to the Alternatives, this is less about the scale, but more about
creating a great outcome for the investors. And over a period of time,
the size of opportunity is very large, and we'll continue to build our
strength. We have the pedigree, we have the network. We have the
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distribution capability, and we'll fully leverage on that to keep building
a great franchise on that front.
Divij Punjabi:
Sure. And on the other question regarding the yield.
Naozad Sirwalla:
I think it's just a marginal increase. You're just talking of yields for the
quarter, right? For equity.
Divij Punjabi:
Yes. So I think there was a 1 bps increase in equity yield. So was that
due to the decline in AUM?
Naozad Sirwalla:
No, not a decline in AUM. I think it's just a marginal increase.
Simal Kanuga:
See, actually, that also depends on which products saw what kind of
flows and the mark-to-market changes. So, multitude of those factors
have led to a marginal increase.
Moderator:
Next question is from the line of Shovan Dey from Reva Private Wealth
Managers.
Shovan Dey:
My question would be, first question would be, your blended equity
yield is around 58 bps, if I am not wrong. Like key peers are something
around 67 bps or something. If that gap is from the product mix like
hybrid versus, pure equity or purely on a pricing choice? Or do you see
that as your Balanced Advantage Fund keeps growing, do you expect
the yield to be more closer to peers?
Simal Kanuga:
Actually, our Balanced Advantage Fund is the largest in the country.
Sorry, the question is exactly, can you...
Shovan Dey:
Okay. I'll repeat the question again.
Simal Kanuga:
Yes, please.
Shovan Dey:
Yes. Your blended equity yield is around 58 bps, if I'm not wrong. And
while the key peers are about in 67 bps.
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Simal Kanuga:
Sir, are you saying peers or peer? Because there are not peers in 67, 68.
So are you referring to a particular peer? And I think, yes, there are
differential yields.
Shovan Dey:
Referring to particular peer.
Simal Kanuga:
Yeah. Because there are peers also at 30 basis points. I think there is
whole range then. Because of the size of our funds. So some of our funds
are large in size. They have grown very well. So we are the only asset
management company which today has three funds, well above the 1
lakh crores in terms of AUM. As you know, right? The SEBI formula,
as the AUM grows larger, the TER keep coming down. So the
effectiveness because of that is where we are today.
Shovan Dey:
Okay. Like any sort of further guidance or like how you will achieve
towards kind of more than 65 bps or something growing the equity much
more higher?
Simal Kanuga:
Sir, we don't hazard a guess on anything that is in future. I think we have
been able to build a strong franchise over time. We'll obviously do our
best to optimize it to the fullest.
Shovan Dey:
Okay. My next question would be like almost INR8,700 crores in
treasury investment. So like has Board has decided to reconsider
anything to do with it like buyback or any kind of special dividend? Or
what sort of are you expecting to deploy this treasury investment over
this?
Naozad Sirwalla:
So I think I was just mentioning on the previous question. For the last
year, the Board has declared a dividend, which effectively where we
have distributed the almost entire post-tax cash profits that we generate.
The balance sheet that we have, currently, we are using for seed capital
for all our alternate platforms. And that's where we are currently using
the balance sheet to work.
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Shovan Dey:
Okay. So how much I'm seeing like how much time it will take to like
distributing the seed capital and all -- any sort of time horizon would be
appreciated.
Naozad Sirwalla:
So the investment schedule is already disclosed as part of our investor
pack. You'll see how much has been deployed across different
investments.
Navneet Munot:
It is a continuing process. As we keep seeding new strategies, this will
require seed capital.
Shovan Dey:
Okay. It is a continuing process. Got it, sir. Thanks, sir. I do not have
any more question left.
Moderator:
Next question is from the line of K. D. Raj, Individual Investor.
K. D. Raj:
Yes. First of all, congratulations for the good set of numbers. Actually,
just a follow-up question on the question asked previously. As we could
see the net expenses on a quarter-on-quarter basis, it is having a
degrowth of approximately 4%. I'm excluding the fees and commission
part.
While on a Y-o-Y basis, quarterly basis, whatever you're talking about,
it's approx. 6%. And accordingly, also H1, it is approx. 16%. So can I
get a bit guidance on that respective to that? Anything clarity for that?
Any reason specific or something like that? That's the question.
Simal Kanuga:
Sir, actually, we had mentioned this in our last quarterly call. There were
some CSR expenses which were taken up in the first quarter. And
because of that, you are seeing the H1 numbers getting kind of a bit
skewed. Having said that, sir, we would request you to look at our total
cost on an annual basis. And if you see the trend, I think Navneet earlier
touched upon about the long-term trend and how things have been. So
we would just request you to -- because of the very nature of the business
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and the kind of certain expenses, we would request you to look at the
full year expenses.
Moderator:
Ladies and gentlemen, we'll take that as our last question. I'll now hand
the conference over to Mr. Navneet Munot for closing comments.
Navneet Munot:
Thank you so much, and wish you all the very best for the festive season.
Moderator:
Thank you very much. On behalf of HDFC Asset Management
Company Limited, that concludes this conference. Thank you for
joining us, and you may now disconnect your lines. Thank you.
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