NAM-INDIANSEQ4 FY22May 04, 2022

Nippon Life India Asset Management Limited

7,837words
96turns
11analyst exchanges
7executives
Management on call
Sameer Bhise
JM Financial
Sundeep Sikka
ED & Chief Executive Officer
Prateek Jain
Chief Financial Officer
Saugata Chatterjee
Co-Chief Business Officer
Aashwin Dugal
Co-Chief Business Officer
Arpanarghya Saha
Chief Digital Officer
Hiroshi Fujikake
Nominee, Nippon Life
Key numbers — 40 extracted
10%
to see steady interest by retail and HNI investors. The industry’s unique investor count grew by 10% to 34 million in Q4. The strong growth in investor base and overall assets indicate confidence by
34 million
steady interest by retail and HNI investors. The industry’s unique investor count grew by 10% to 34 million in Q4. The strong growth in investor base and overall assets indicate confidence by long-term i
Rs. 7.4 billion
you the key performance highlights for this fiscal. NAM India recorded its highest ever profit of Rs. 7.4 billion in FY2022. Our overall mutual fund market share rose by 26 basis points to 7.38%. AUM increased
26 basis point
ts highest ever profit of Rs. 7.4 billion in FY2022. Our overall mutual fund market share rose by 26 basis points to 7.38%. AUM increased by 24% to Rs. 2,833 billion. Along with the steady increase in AUM marke
7.38%
fit of Rs. 7.4 billion in FY2022. Our overall mutual fund market share rose by 26 basis points to 7.38%. AUM increased by 24% to Rs. 2,833 billion. Along with the steady increase in AUM market share,
24%
FY2022. Our overall mutual fund market share rose by 26 basis points to 7.38%. AUM increased by 24% to Rs. 2,833 billion. Along with the steady increase in AUM market share, Nippon India Mutual Fun
Rs. 2,833 billion
2. Our overall mutual fund market share rose by 26 basis points to 7.38%. AUM increased by 24% to Rs. 2,833 billion. Along with the steady increase in AUM market share, Nippon India Mutual Fund added more than 7 m
7 million
ion. Along with the steady increase in AUM market share, Nippon India Mutual Fund added more than 7 million investors and has now the largest investor base in the industry. We increased our share of unique
36%
the largest investor base in the industry. We increased our share of unique investor folios to 36% with a base of 12 million investors. The growth was driven by superior fund performance, comprehe
12 million
stor base in the industry. We increased our share of unique investor folios to 36% with a base of 12 million investors. The growth was driven by superior fund performance, comprehensive product portfolio, s
Rs. 40 billion
ive and industry-first products. Across seven NFOs, Nippon India Mutual Fund garnered assets over Rs. 40 billion from 275,000 investors. Other such unique offerings in the pipeline include S&P EV index fund, th
Rs. 764 billion
profitability. With a key retail focus, we have one of the largest retail AUMs in the industry at Rs. 764 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 28% compar
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Guidance — 20 items
Sundeep Sikka
opening
“We expect the industry to maintain its growth momentum in future also.”
Sundeep Sikka
opening
“We intend to develop responsible investment strategies to build a resilient portfolio that will not only provide superior return to our investors but will also have a positive environmental and social impact.”
Sundeep Sikka
opening
“We are sure with the induction of such esteemed individuals, we would strengthen our board and we will continuously gain from their valuable guidance, specifically in the areas of planning, risk management, awareness and synergies with Nippon Life Global operations.”
Viraj
qa
“So anything further you can elaborate in that sense and the kind of investments will be needed to support that?”
Viraj
qa
“Relatively the performance has also been much better for them if I look at one, three, and five year basis, so just trying to understand what will be our pricing strategy, given that operating environment?”
Sundeep Sikka
qa
“Viraj, as I mentioned in my opening comments, I think our focus will be on profitable growth.”
Mohit Surana
qa
“So what will be the policy in terms of dividend payout going forward?”
Sundeep Sikka
qa
“So, I think as far as the profits are concerned, broadly 100% of the profits will be distributed as dividend going forward also.”
Prayesh Jain
qa
“So, firstly, what would be our mix today in terms of share of those legacy assets in the portfolio which will be the lower trail, and that will be helpful if you could give some color there?”
Prateek Jain
qa
“So all the assets, which will be remaining, are sticky assets.”
Risks & concerns — 15 flagged
Overall industry assets remain stable in Q4 driven by rise in passive and equity segments offset by decline in fixed income assets.
— Sundeep Sikka
These products will give investors more value accretive avenues to diversify risk and generate sustainable returns.
— Sundeep Sikka
Also, in volatile markets, folio with lower ticket size had demonstrated longer vintage and better stickiness.
— Sundeep Sikka
Integration of ESG aspects into strategy, operations and risk management will help us outride the dynamic markets and build long-term relationship with our stakeholders.
— Sundeep Sikka
We are sure with the induction of such esteemed individuals, we would strengthen our board and we will continuously gain from their valuable guidance, specifically in the areas of planning, risk management, awareness and synergies with Nippon Life Global operations.
— Sundeep Sikka
Last two years, we had a little pressure on equity.
— Sundeep Sikka
Yes, of course, there has been pressure on the yields.
— Prateek Jain
So, there has been slight pressure on the yields.
— Prateek Jain
This clearly demonstrates that despite a decline in the overall revenue to AUM yield, we have been able to improve our net yields and therefore operating yields are better as compared to last year.
— Prateek Jain
Whatever decline in yield would be there, the operating leverage will take care of it.
— Prateek Jain
Predominantly, it is the impact of mark-to-market and that too was on the last day.
— Prateek Jain
It will be difficult to put an exact number, but it clearly remains a very important focus area for us.
— Sundeep Sikka
From a business model perspective, obviously due to the composition of ETFs or passives, the overall yields will be under pressure, but we do not see in that way.
— Prateek Jain
Except for the one quarter, there was no decline in the industry AUM, which speaks volumes.
— Prateek Jain
Number two, on other expenses if I look, we have been continuously seeing us sustaining a decline in this number and there are Rs.
— Prayesh Jain
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Q&A — 11 exchanges
Q
Thanks for the opportunity and congratulations for good set of numbers in such a challenging environment. I just have a couple of questions. The first is if you look at our B30 share as a share of our own AUM and if they compare it to the industry trend, the gap between us and the industry seems to be shrinking and that is the trend that is evolving and if I also look at a broader launch pipeline which you have shared in the presentation, most are in the passive space. So you have ETF or index fund and not much in active equity space per se. So just trying to kind of understand how we are kind
Sundeep Sikka
Viraj, I will take a part of some of the question and for balance, I will invite Prateek. Firstly, let me take your question on B30. We continue focusing on execution and the fact that we have added nearly 70 lakh new investors is a testimony towards that. While the gap that you talked is on the AUM, we continue building on retail and there may be a lag effect. With these new investors, you will see them topping up in times to come. Number two, your question on equity. Yes. Last two years, we had a little pressure on equity. As you would appreciate and, you can see, our equity performance has
Q
Congratulations on the results. The first question is in terms of dividend policy. This year you almost paid out 90% kind of a payout on dividend. So what will be the policy in terms of dividend payout going forward? Secondly in terms of revenues, our revenues are flat quarter-on-quarter whereas if you see the markets as well as AUM, there is hardly any growth. So I just wanted to know if there is any lumpy revenue that is included in this quarter?
Prateek Jain
For the second part Mohit, last year also this question had come. This quarter has actually two days less as compared to the previous quarter, and the average AUM actually has fallen on the equity side because of the mark-to-market. So, obviously, since equity contributes for a large part of it, there is a flat growth. But effectively if you take the two-day more revenue, you would have seen some improvement in the revenue as well. So that is one answer for it. I will ask Sundeep to talk on the dividend policy piece here. Mohit, as we have demonstrated in the past, as per our dividend policy,
Q
Good evening again and congrats on a good set of numbers. Sir, could you just explain the point on the yield discussion. So you mentioned that you think legacy assets to newer assets transition has created an impact. So, firstly, what would be our mix today in terms of share of those legacy assets in the portfolio which will be the lower trail, and that will be helpful if you could give some color there? Secondly, do you think that the intensity of this transition would reduce going ahead, given that the bulk of the asset will reduce going Nippon Life India Asset Management Limited April 26, 2
Prateek Jain
In terms of ageing, we do not disclose the exact composition of the ageing. But if you see the last few years, we have seen significant amount of outflows. So all the assets, which will be remaining, are sticky assets. The recent assets, what we have got in the last two years, have been the new assets. In terms of the overall, I would say that still it would be in the range of closer to 50:50. But I do not see that the old assets to go out because most of them are now part of the SIP area, and hence those assets will continue. You are right that incrementally whatever assets we gain, will be o
Q
The question I had asked on the B30 strategy in terms of physical versus digital and the investments, I think got missed. So just wanted an update on that?
Sundeep Sikka
I think, broadly at this point of time because we are present at 270 locations, there will not be a lot more expansion, new branch expansion. Even if we do, it would be very minor. So there will not be any major investment into that. But we will continue investing in the digital space. We have already gone vernacular in that. So that strategy of investing in digital will be continuous. But, at this point of time, we are in 270 physical branches. After 270 branches, we feel maybe few could be added, but it will not be any significant number. What kind of investments we are making in the digital
Q
Thank you and congratulations on good set of numbers. I had broadly two questions. One was on our SIP market share. While you did mention that we have started seeing inflows but still our market share continues to trend down. Any thoughts on that, and secondly while you did talk about the fact that the falling yield in equity would be taken care by the operating leverage that we see in the business. Whereas if you look at an overall basis, the recent launches and the upcoming launches would be on the passive side of the business, right? So, if one were to look at the overall yields from a thre
Sundeep Sikka
I will request Saugata Chatterjee to take the first question and after that, Prateek will come back for the second question please. With regard to SIPs, if you see the trend line this year, quarter-on-quarter, our SIP market share, both from the SIP addition point of view, which is the actual SIP numbers coming in and, the SIP input value, have seen an increasing trend. As we speak, we are also tracking Nippon Life India Asset Management Limited April 26, 2022 the market share we are getting in that space. Going forward, the way our trend line has been reflecting in the last two to three quart
Q
Thanks a lot. Just wanted to reconfirm. Did you say that in case the yield softens further from hereon, you will be able to manage expenses and accordingly revenue to profit should be somewhere around 50%? Is my understanding correct?
Prateek Jain
In terms of the operating revenue, net operating revenue to the revenue is about 58%. So that is what I have mentioned and, if assets keep growing and there is no incremental cost, whatever we are earning on an incremental asset and, there is no incremental cost, operating revenue goes up by that much. So we have that much flexibility at this point of time, given that opex growth will be more or less in line with the inflation and thereabouts, while asset growth would continue to be in excess of 20% to 25%. So even if you see the last decade, the industry has grown in excess of 20% CAGR despit
Q
Just one question Sir, if I heard you correctly, did you say that the transition of the AUM to full trail has been 50%? is that what I picked up when you were answering to an earlier participant?
Prateek Jain
It is not transition because our overall assets have grown. So, as of March, we were close to 62,000 crore. Today, we are about Rs. 1,15,000 crore odd. There has been substantial market increase as well. So, if I capture that number and there has been addition to the AUM and, of course, there has been outflow happening. So, predominantly at this point of time, the old assets would be about 50% odd of the total equity assets. Got it, so just to get a sense qualitatively as well. So, of the total AUM, what percentage or what share would be based on trail fee and what would be that number. Not a
Q
Good evening Sir. Congrats on a good set of numbers. Most of my questions have been answered. Just one question, the company's passive fund strategy has been playing out quite well, so any proportional limit in mind for the passive fund as a percentage of the AUM?
Sundeep Sikka
From our perspective we see it in isolation. I think these are different business lines and the investors will decide. We do not have this thing that what percentage can be passive and active. We clearly believe both active and passive are taking care of different needs of investors and have opportunity to grow multiple times from here. Okay. Thank you, sir.
Q
Thanks for the opportunity again. Just a couple of questions on the cost front. So, if I look at your other expenses, that is like at the lowest level for past many quarters. So are there any one-offs or this kind of run rate can sustain? Secondly, on the fees and commission expenses, those are at a significantly higher level, I mean, is there any one-offs there?
Prateek Jain
This is just from PMS and AIF side. When we pay some expenses related to the acquisition of assets, those get accounted in here, whereas for all the mutual fund expenses, it is completely on trail model. So no expenses are accounted in this line item. Number two, on other expenses if I look, we have been continuously seeing us sustaining a decline in this number and there are Rs. 30 crore. Is the run rate for this quarter, do you think, sustainable? No. I have been mentioning it for the last two or three quarters now that going forward, we will try to reduce our expenses as much as possible, b
Q
Thanks for the opportunity. I just wanted to confirm one thing that the dropping yields in Q4, was purely because of managing the TER and, the Q1 of next year we are seeing better investment yields?
Sundeep Sikka
The revenue has declined because of the two days. The TER change is to comply with the SEBI regulations where all the expenses of the scheme have to be borne by the scheme itself, and therefore, for the entire year, we keep reviewing it. So there will be cases where there will be something deficits, there will be cases where there will be surplus. So cases where we have a buffer, we will take up the additional management fees and cases where we have a deficit, we have to decline or reduce our management fee. In Q1 FY2023, in the month of April, are we seeing some reversals on this number? That
Q
Thank you everyone for joining this call today and thank you to the team, Nippon Life India Asset Management for giving us this opportunity to host the call. Thank you and goodbye.
Sundeep Sikka
Thank you everyone. Thanks for joining.
Speaking time
Sundeep Sikka
19
Prateek Jain
17
Moderator
14
Viraj
8
Prayesh Jain
8
Ronak Chheda
7
Jignesh Shial
6
Kunal Thanvi
4
Ravi Purav
3
Mohit Surana
2
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Opening remarks
Management
Mr. Sundeep Sikka - ED & Chief Executive Officer Mr. Prateek Jain - Chief Financial Officer Mr. Saugata Chatterjee - Co-Chief Business Officer Mr. Aashwin Dugal - Co-Chief Business Officer Mr. Arpanarghya Saha - Chief Digital Officer Mr. Hiroshi Fujikake - Nominee, Nippon Life Insurance Nippon Life India Asset Management Limited April 26, 2022
Sameer Bhise
Thank you Neerav. Good evening everyone and welcome to the 4Q FY2022 earnings conference call of Nippon Life India Asset Management. From the management team of Nippon Life India Asset Management, we have Mr. Sundeep Sikka, Executive Director & CEO, Mr. Prateek Jain, Chief Financial Officer, Mr. Aashwin Dugal, Co-Chief Business Officer, Mr. Saugata Chatterjee, Co Chief Business Officer, Mr. Arpanarghya Saha, Chief Digital Officer and Mr. Hiroshi Fujikake, Nominee from Nippon Life Insurance. I would now like to hand over the floor now to Mr. Sikka for his opening comments post which we can open the floor for Q&A. Over to you Sir! Thank you.
Sundeep Sikka
Thanks Sameer. Good evening everyone and welcome to our FY2022 earnings conference call. We have with us our CFO, Prateek Jain, Co Chief Business Officer, Saugata Chatterjee and Aashwin Dugal, Chief Digital Officer, Arpanarghya Saha, Head of Elite Partner Group, Nitin Gupta and Fujikake-san, Nominee of Nippon Life Insurance from Japan. Overall industry assets remain stable in Q4 driven by rise in passive and equity segments offset by decline in fixed income assets. The industry continued to see steady interest by retail and HNI investors. The industry’s unique investor count grew by 10% to 34 million in Q4. The strong growth in investor base and overall assets indicate confidence by long-term investors in mutual funds. We expect the industry to maintain its growth momentum in future also. At Nippon India Mutual Fund, our priority is to be future ready and capture the long-term opportunity. As stated earlier, we are confident of regaining our market positioning as well as recreating or
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