FY 22-23 Transcript
Q1:
Industry:
1. In the latest quarter, the industry received Rs. 783 billion in net new equity investments. This is
Lower than the Rs. 968 billion seen in the March 2022 quarter (so inflows dropped compared to
the previous quarter). But much higher than the Rs. 251 billion received in the June 2021
quarter (meaning overall investor sentiment and activity have grown compared to a year ago).
Investors continued putting a strong amount of money into equity mutual funds this quarter.
Although the amount was slightly lower than the previous quarter, it was still much higher than
the same quarter last year, showing a positive trend in market participation.
2. AUM of debt index funds stood at Rs. 23 billion as of June ‘21 and that number now is 417
billion, so nearly a Rs. 400 billion increase. As this is pure fixed income, material part of growth is
in form of inflows. Fixed income funds continued to see outflows. This quarter, industry lost Rs.
1,178 billion. The number for the previous quarter was Rs. 1,046 billion. It would make logical
sense to add debt index fund numbers here. Liquid funds saw net new flows of Rs. 133 billion for
the quarterSIP flows for the month of June was similar to that of March '22 at around Rs. 123
billion.
3. We closed the quarter on an overall AUM of Rs. 3,966 billion, market share of 11.1%. Excluding
ETFs, our market share is 12.4% on closing AUM and 12.3% on quarterly average
Firm:
1. Our market share in B-30 AUM is 11.4% and that makes us a distant number 2. In terms of
systematic transactions, we processed over 3.73 million transactions totaling up to Rs. 12.8
billion in month of June 2022 as against Rs. 12.3 billion in March of 2022
2. We have approvals for nine ETFs
Revenue from operations grew by 3% year-on-year and 1% on a quarteron-quarter basis. Other
income for the quarter is materially lower due to lower MTM gains in debt mutual funds on
account of increase in interest rates as well as the MTM loss attributable to market volatility on
mandatory equity mutual fund investments
3. Employee cost for the quarter was Rs. 780 million versus Rs. 835 million (Excluding ESOP)
4. Other expenses have increased by 27% year-on-year basis. First quarter of the last financial year
was in time of lock down or say reduced operations
5. Profit after tax fell by 9% both year-onyear and quarter-on-quarter basis with lower other
income being the key contributor
6. You would know that our dividend payout ratio for the last financial year was just a shade under
65%
7. There were zero NFOs in this quarter
8. The other thing that I notice in the numbers is that the other income has fallen dramatically and
so has the tax amount and your tax rate has come off to about 18.4%. Now this probably
suggests a loss in the other income or realized loss in the other income and you creating a
deferred tax asset:
- Other income we also explained earlier, it is lower largely due to lower MTM gains on debt
mutual funds and MTM losses on account of the equity mutual fund exposure, thanks to the
skin in the game circular
9. So, on the cost as we discussed, the increase in other expenses is largely attributable to business
promotion, technology spend and life going back to normal. We will have the distributor
training. We have travel etc. We've mentioned on the call earlier. So, over the three years, June
2019 quarter we spent about 40 crores of expenses. In the current quarter, it's 52 crores and
that's the rough CAGR of 9%
10. The employee expenses if you see excluding the ESOP expenses, so that has grown sequentially
13%. So, I think one is, of course, we had our appraisals which have sort of flown through. Also, I
think you must see it in context of the fact that over the last three years, the expense has only
grown by 6% per annum
Q2:
Industry:
1. So, industry closed the quarter with an AUM of Rs.38.4 trillion and equity AUM of Rs.19.3
trillion. Quarterly equity net flows for industry continue to remain strong at Rs.504 billion
2. The AUM of debt index funds stood at Rs.575 billion for quarter-ended September '22,
increasing from Rs.417 billion at the end of last quarter, that's the June quarter, a net addition
of Rs.158 billion to the AUM. As this is fixed income, large part of this growth is through inflows.
If we net this number off from inflows, quarterly inflows into equity and equity-oriented funds,
including equity index funds, but excluding AUM growth in debt index funds was Rs.346 billion
for quarter-ended September '22. The comparable number for quarter-ended June '22 was
Rs.642 billion. Of this number of net flows, excluding debt index funds, which is 346 billion,
NFOs contributed to the tune of Rs.104 billion
3. Individual investor folio now stand at 137.3 million, and individuals as a category are
contributing to the larger part of the AUM and now account for 57%. SIP flows for the month of
September remained robust at Rs.129.76 billion
Firm:
1. We closed the quarter with an AUM of Rs.4,222 billion
2. In terms of actively managed equity-oriented AUM, our market share stood at 11.5%, same as
that of quarter-ended June 2022, and this is despite a flurry of NFOs during the quarter. We did
not have any NFO in this category. Of the industry net sales that came in during the quarter,
nearly Rs.104 billion was contributed by NFOs
Our systematic transaction book saw a healthy growth. We processed 3.91 million transactions,
totaling to Rs.14.3 billion in month of September 2022, up from 3.73 million transactions,
totaling up to Rs.12.8 billion in month of June 2022
3. During the September quarter, we launched six ETF, including a Silver ETF. Even in the current
month, we actually closed two more Smart Beta ETFs
4. For the first six months of the current financial year, we have reported revenue of Rs.11,818
million and profit after tax of Rs.6,783 million. Revenue growth of 3%, with operating revenue
rising by 2%. Total profit degrew by 2% while the operating profit from core asset management
business was flat
5. It would also be pertinent to mention that the employee benefit expense includes non-cash
charge, the number for the current financial year is Rs.212 million, and the corresponding
number for last year was Rs.343 million
6. Our OPEX-to-AUM ratio is possibly higher than what we've seen in the past on 13-plus bps - it's
been like that 13, 14 basis points, maybe over a period of time as AUM increases, there would
be scope for improvement there, but otherwise, as we have been guiding that there are a few
items like technology, people, business promotion, as the travel is back, some bit of expenditure
has gone up and we are investing in future, we are very optimistic about the industry in general
and for us to gain market share over a period of time, so we would be very keen to invest at this
point in time
7. Just related to that, PMS business and we are fairly clear in our mind on how we want to build
that business. And in line with this, we launched India Ascent Strategy in addition to the All Cap
Strategy that we launched last quarter
8. We will have a business cycle fund in this quarter.
9. In terms of your employee OPEX ex of ESOP cost for the past two quarters it's up 21% if I
compare 2Q of this year versus 4Q of last year. So, just wanted to know where are we investing
more in terms of our manpower cost or I'm reading it wrongly that the 4Q base was very low to
start with
10. Our business depends heavily on people, so keeping and attracting the best talent is very
important to me.
Before COVID, in the 6 months ending Sept 2019, our employee costs were ₹1,145 million.
For the 6 months ending Sept 2022, it increased to ₹1,618 million.
If we remove ESOP-related costs, it's ₹1,406 million — that's a 23% increase in total, or about
7% per year on average.
This rise is normal in our industry, and we believe it's worth investing in good employees instead
of losing them to competitors
11. Coming to the alternate, again, this time we have lost the AUM out there. Which fund have we
lost, which led to a sharp decline in our PMS AUM and what was the financial impact of that?
One large institutional investor has taken money off the table, we had one large client
relationship, a large global institution, they've closed the mandate. Of course, relationship with
the institution is strong and we'll continue to engage with them. On the other side, we definitely
are working through various modes to build on our international business. I mentioned earlier
about our set up in GIFT. That will be a big step in that direction.
Q3:
Industry:
1. The industry crossed the milestone of Rs.40 trillion and closed the quarter with AUM of Rs.39.9
trillion and equity AUM of Rs.20.1 trillion
2. Net new equity flows during the quarter summed up to Rs.205 billion, materially lower than
what we have seen in the previous few quarters
3. Debt funds continue to witness outflows. During the quarter, debt funds for the industry
experienced an outflow of Rs.152 billion. However, the rate of outflows decreased from Rs.293
billion in quarter-ended September 2022
4. Liquid funds for the quarter saw net outflow of Rs.12 billion as against net inflow of Rs.191
billion for the quarter ended September '22
5. Individual folios for the industry crossed 140 million mark and individual investors contributed
57.8% to industry's monthly average AUM for December '22
6. Inflows through SIPs continued on their upward trajectory to be at Rs.135.73 billion for the
month of December 2022. The number for September 2022 was Rs.129.76 billion
Firm:
1. At the end of quarter ended December 2022, our total AUM stood at Rs.4,481 billion, with a
market share of 11.2%
2. We closed the quarter with an actively managed equity oriented AUM at Rs.2,314 billion, with a
market share of 11.8%. On debt, our market share for the quarter-end stood at 13.5%, while for
liquid it was 14.9%
3. Our unique investors grew to 6.3 million in current quarter as compared to 6.1 million for
quarter ended September 2022. Inflows through systematic transactions continue to remain
robust as we process 4.13 million transactions, totaling to Rs.15.7 billion in month of December
2022 versus 3.91 million transactions, totaling to Rs.14.3 billion in the month of September 2022
4. Our SIP book commitment for more than 10 years, stands tall at 77% and our SIP AUM as of 31st
December 2022 stood at Rs.848 billion
5. Our asset mix further tilted towards equity. Contribution of equityoriented assets to a closing
AUM for the quarter ended-December 2022 stood at 54.5%. During the quarter, we launched
the thematic fund, that is, HDFC Business Cycle Fund. The fund saw healthy interest both from
distribution partners and investors. We got over 110,000 applications and the AUM of Rs.23.4
billion during the NFO.
6. We also launched multiple debt index funds. For our wholly owned subsidiary, that is HDFC AMC
International (IFSC) Limited, in GIFT City
7. For the first nine months of the current financial year, we have reported total revenue of
Rs.18,448 million and our operating revenue increased by 2% year-on-year
8. We reported operating profit of Rs.11,600 million versus Rs.11,595 million for the nine months
of last fiscal, and profit after tax of Rs.10,478 million as compared to Rs.10,496 million last year.
In terms of quarterly numbers, revenue from operations increased by 2%, while profit after tax
reported an increase of 3% on YoY basis. Our operating profit margin as a basis point of AUM,
stood at 36 basis points for the nine months ended December '22 with operating revenue
margin at 50 basis points, that is of AUM
Q4:
Industry:
1. QAAUM for quarter ended March 23 was Rs.40.5 Trillion a 6% growth on YOY basis. The net flows
during the year in equity-oriented funds added up to Rs.1801 billion of which Rs. 1618 billion was in
actively managed equity-oriented funds
2. During the year, Industry collected approximately Rs. 342 billion via active equity NFOs ie nearly
21% of net flows into actively managed equity-oriented funds during the year
3. SIP flows continued their growth trajectory and came in at Rs. 143 billion for the month of March
2023 vs 123 billion a year ago. SIP flows for FY23 clocked Rs. 1.56 trillion, nearly 35% of the
industry’s gross active equity flows, the comparable number in FY22 was Rs. 1.25 trillion and nearly
23% of industry’s gross active equity flows
4. Liquid fund QAAUM grew by 8% YOY adding Rs 0.42 trillion. Net outflows during the year were to
the tune of Rs 510 billion
5. Industry recorded 37.7 million unique investors at the end of the fiscal year. Individual investors
contribution came in at 58% of the monthly average AUM for March 2023 and the folio count for
individual investors increased to 145 million from 129 million a year ago
Firm:
1. We closed the quarter with a quarterly average AUM of Rs. 4,498 billion, a growth of 4% YOY. Our
market share in Quarterly Average AUM was at 11.1%.
2. Our actively managed equity-oriented market share based on quarterly average AUM is 12.0% and
11.9% on closing basis. Our quarterly average Liquid AUM market share stood at 13.1%.
3. Our asset mix, further shifted towards equity and it now accounts for 54.4% of our QAAUM,
relatively better than the industry. We recorded 6.6 million unique investors at the end of the
quarter ended March 2023. 13.14 million systematic transactions (like SIPs – Systematic
Investment Plans). These transactions added up to ₹50.4 billion.
4. In continuation of our commitment to expand product portfolio, we launched 2 equity oriented
thematic/sectoral funds, 1 long duration debt fund which saw healthy interest especially in end of
March and range of passive strategies both across equity and fixed income side during the year
that went by
5. But, you know, if I look at your ROEs that have come down from 35%, 36% range to now 25%, how
should we look at this, you know, from the profitability of AMC say, two years, three years down
the line?
Return on Equity is a key measure of how efficiently a company is using its capital to generate
profit. A drop in ROE usually signals:
Either profits have decreased
Or the company’s equity base has increased without a proportional rise in profits
Company A had ₹100 in equity → ROE = ₹10/₹100 = 10%
Company B had ₹40 in equity → ROE = ₹10/₹40 = 25%
Even though both earned the same ₹10, Company B looks more profitable (higher ROE)
just because it started with a smaller base (₹40). So, the bigger your equity (the “base”),
the harder it is to show high ROE, unless profits grow a lot too. Lower margins are also a
reason why ROE has decreased, not just because the balance sheet (equity base) grew.
6. Our equity mix is better than the industry. I think on the closing AUM, the equity was 56% of the
total assets. On average, it was 54% of total assets. Industry would be 49%, yes, it is better than the
industry
