NAM-INDIANSEQ1 FY23August 04, 2022

Nippon Life India Asset Management Limited

6,857words
80turns
9analyst exchanges
7executives
Management on call
Jignesh Shial
InCred Equities
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
Chief Planning & Business
Key numbers — 40 extracted
2%
had an impact on the Indian asset management industry. The industry assets declined marginally by 2% in this quarter after witnessing a positive momentum for seven quarters. The decrease was mainl
rs,
tor additions, continue to remain steady. The industry further expanded its base of unique investors, which grew by 1.6 million in this quarter, representing a 5% increase over March 2022. The growth
1.6 million
tinue to remain steady. The industry further expanded its base of unique investors, which grew by 1.6 million in this quarter, representing a 5% increase over March 2022. The growth in the investor base and
5%
expanded its base of unique investors, which grew by 1.6 million in this quarter, representing a 5% increase over March 2022. The growth in the investor base and consistently higher quarterly SIP f
16 basis point
ity is to be future ready and capture the long-term opportunity. Our overall market share rose by 16 basis points to 7.40%. AUM increased by 16% to Rs. 2,794 billion. At Nippon India Mutual Fund, “investor inte
7.40%
ready and capture the long-term opportunity. Our overall market share rose by 16 basis points to 7.40%. AUM increased by 16% to Rs. 2,794 billion. At Nippon India Mutual Fund, “investor interest” rema
16%
ong-term opportunity. Our overall market share rose by 16 basis points to 7.40%. AUM increased by 16% to Rs. 2,794 billion. At Nippon India Mutual Fund, “investor interest” remains our only constant.
Rs. 2,794 billion
m opportunity. Our overall market share rose by 16 basis points to 7.40%. AUM increased by 16% to Rs. 2,794 billion. At Nippon India Mutual Fund, “investor interest” remains our only constant. We added 1.3 million
1.3 million
794 billion. At Nippon India Mutual Fund, “investor interest” remains our only constant. We added 1.3 million investors in Q1 and continue to have largest investor base in the mutual fund industry. We increa
37%
vestor base in the mutual fund industry. We increased our share of industry’s unique investors to 37%, with a base of over 13 million investors. In line with the “Investor First” motto and prudent go
13 million
fund industry. We increased our share of industry’s unique investors to 37%, with a base of over 13 million investors. In line with the “Investor First” motto and prudent governance philosophy, Nippon Indi
23%
sets. Majority of the funds are jointly-managed, and no individual fund manager manages more than 23% of equity assets and, that too is spread across funds which have other co-fund managers. System
Advertisement
Guidance — 19 items
Prateek Jain
qa
“What we have done is we have anticipated what is the Nippon Life India Asset Management Limited July 28, 2022 likely yield, which will be going to be the end of the year and, we start building up on that basis.”
Prateek Jain
qa
“So we always try to estimate what would be the yield, what would be the average brokerage cost and what would be the average margin, which will be realized, and based on that, we peg our fees.”
Prateek Jain
qa
“But more importantly, what we also expect that, once the yield curve reaches the peak, from thereon when the yield curve changes or when the interest rate cycle changes, lot of money will come into the long tenure and the credit side of the fund and, that will lead to the change in the asset mix again.”
Prateek Jain
qa
“Then again, we have seen that when the money will flow into those asset categories where we have a propensity to a higher yield, you will see that there will be an overall increase in the yields.”
Prateek Jain
qa
“Hence, the impact going forward will not be significant unless we also start sharing a significant portion of our fees with the distributor.”
Mital
qa
“Got it and on the passive side, given that most of these new vintage companies are coming up with a plan to launch schemes on the passive side and given that these schemes are sort of quite easily replicable by the other AMCs, what sort of innovation do you see on the passive side going ahead again, like we are seeing in this segment?”
Prateek Jain
qa
“Clearly, India still remains highly underpenetrated and I think there will be more players and more competition.”
Prateek Jain
qa
“I think, at the appropriate time, we will be able to migrate them to the higher yielding assets.”
Prateek Jain
qa
“We will like to build on that momentum and, going forward, we are likely to see higher market share in the equity asset as well.”
Saugata Chatterjee
qa
“From banks and the larger wealth counters, we will be slightly less, maybe around 5% to 6%.”
Risks & concerns — 15 flagged
Also, in volatile markets, folios with lower ticket size have demonstrated longer vintage and better stickiness.
— Sundeep Sikka
So, on an overall basis, there has been some decline on the fixed income side also, and you have to understand that because of the skin-in-the-game requirement, we have to invest into all our debt schemes across the portfolio.
— Prateek Jain
Therefore, there has been some change because of the impact of this composition.
— Prateek Jain
We have pared our realization basis the expected new inflows and the expected new cost, and basis that, you see some decline in our yields on our equity assets.
— Prateek Jain
This downward pressure on yields will continue for some more time because there has been a slew of new players who have come in and, also, while in the last two quarters we did not see many NFOs, but we have seen NFOs coming in the past.
— Prateek Jain
Secondly, as you mentioned, when the asset grows up from here, obviously there would be a decline in the realization.
— Prateek Jain
So, all of these are putting some pressure on the yield and which is likely to continue for some more quarters, before it comes down because of the base effect.
— Prateek Jain
But my point is that for how long this pressure will continue, because when we look at yields on a quarter-on- Nippon Life India Asset Management Limited July 28, 2022 quarter basis, it is very difficult to make out until when will this pressure continue to remain?
— Mital
But, in our case, on both ends, we are seeing pressure on the both sides?
— Kunal Thanvi
Number two, we clearly believe when you talk about market share, one of the most difficult things to execute in this industry has been retail.
— Sundeep Sikka
But what you have to see is that the pace of decline of our equity assets and the net outflows, which we were witnessing, has been arrested.
— Prateek Jain
But if you now see, the one-year and three-year performance has come up and, in the last six-odd months, we have been able to arrest that decline.
— Prateek Jain
Importantly, we had been witnessing decline in the equity assets, which has now got arrested and, in the last six months, we have seen decent amount of positive inflows.
— Prateek Jain
We do not give individual breakup of the yields, but largely, the decline is in line with the industry.
— Sundeep Sikka
However, as we continue to grow from hereon, the share of this asset will keep reducing and, hence, there will be a pressure on the overall yield.
— Prateek Jain
Advertisement
Q&A — 9 exchanges
Q
I had a question regarding your other income loss. You have shown a loss this time of about Rs. 17 Crores. When I look at your breakup of your investments, only Rs. 250 Crores is in equity, about Rs. 2,500 Crores in debt in the mutual fund schemes. So has the debt side also underperformed that badly that the overall returns are showing a negative? I just want to understand, given most of it is in debt, how we reported a loss for this period in the other income?
Sundeep Sikka
I will request my colleague Prateek to take this question please. Actually, as you mentioned, there is Rs. 250 Crores of equity exposure and, broadly the market has fallen about 12% to 15% and, because of the mark-to-market impact, our schemes have declined in the same range of 10% to 12%. So, broadly, the major MTM impact is coming from there. Also, the yields in the 10-year G-sec has gone down by about 50 basis points in this one quarter itself and, that has had an effect on the shorter end of the curve as well. So, on an overall basis, there has been some decline on the fixed income side al
Q
Good evening Sir. If you look at the increase in total folios, majorly, it has been driven by the ETF segment. So I just wanted to understand the new folio additions on the equity side and how has the trend been over the last 12 months?
Sundeep Sikka
They are very high percentage that have come in ETF. We have also seen over 375,000 new SIPs getting added during the quarter. Again, in case of ETF, new investors are coming and, in active, it is a mix of both new investors whereas the existing investors are also going for top-ups. Sure Sir thanks and, with respect to operating expenses, there have been a sharp increase in the other operating expenses sequentially. So what are the reasons for the same and with respect to operating leverage, so apart from the increase in the AUM, what are the other levers for us to have better operating levera
Q
Good afternoon Sir. Thanks for the opportunity. Now the first question was around yield. There is a sharp drop in equity yields in this quarter, whereas when we look at the equity for the other players, we have seen that for them the yields have sort of improved in Q1 after the normalization in the environment. But, for us, even in Q1, there has been a very sharp drop into the yields. So if you could explain, what has been the reason?
Prateek Jain
There has not been a sharp decline. In terms of our overall yield, some of our fixed income or debt assets have seen shrinkage and those money has come in terms of ETF as well as the liquid. So our market share as well as our overall composition is skewed. While we have maintained our equity composition of 42%, debt has declined and has gone into ETF and liquid. Therefore, there has been some change because of the impact of this composition. Also, because of the mark-to-market impact, there has been an impact on the overall yield. Because of mark-to-market, your assets go down but ideally your
Q
Thanks for the opportunity. My question is again on trying to understand where Nippon India stands in terms of profitability, market share because if you look at equity and that in both the categories, we have been not able to gain back the lost market share. The market share is either stable or we continue to lose it, but at the same time, if you look at our yields, we are seeing one of the fastest compression in the revenue yields compared to peers both listed and unlisted. So what is happening out there. Like as we said, we are not participating in giving high commissions. Then also, our re
Sundeep Sikka
Kunal, I will give some initial comments, then hand it over to Prateek. Firstly, you talked about market share. We have seen a rise in market share for five quarters. It has been going up, which asset class, again, I will stay out of that, right now, because it is already in the presentation. We do not want to repeat it. But, for five quarters back-to-back, the market share has been increasing. Number two, we clearly believe when you talk about market share, one of the most difficult things to execute in this industry has been retail. In the retail market share, our retail folio count market s
Q
Good evening. Just one question from my side. If you can give some color on your wallet share across top distributors in the banking category or MFDs or national distributors, more from the equity flows perspective, as we see, in the last one or two quarters?
Saugata Chatterjee
I will just share data from the last two quarters. Broadly, the equity market share, from a flows perspective, when it comes to MFDs, is roughly around 7% to 8% of the industry. From banks and the larger wealth counters, we will be slightly less, maybe around 5% to 6%. From a blended perspective, it will be around 6% to 6.5%. As a company, that is where Nippon Life India Asset Management Limited July 28, 2022 we stand today. We have a very high SIP concentration. In the SIP flows, we will be close to double digit. That has incrementally gone up over the last eight quarters. Hence our net sales
Q
Good evening Sir. So I have two questions. Number one, can you please share some broad range of yields across segments. Specifically on the equity side, maybe if you can give some color on what you are making on the old stock versus what you are making on new?
Prateek Jain
It is in the same range. We earn 75 to 80 basis points on the equity assets. In terms of the old one, again it all depends in which asset class, which category, at what time the investor has come in. But the good news is that we have almost 30% of our assets which are more than four year old now. All the money which could have churned, would have been churned by now because the pace of churn has come down dramatically. So this is the asset which has continued to yield a good yield for us. However, as we continue to grow from hereon, the share of this asset will keep reducing and, hence, there
Q
Thank you Sir. Most of my questions have been answered. Just one question. What are the blended yields in ETF?
Prateek Jain
ETF would be in the range of 11 to 12 basis points. Okay, done. Thank you so much. Nippon Life India Asset Management Limited July 28, 2022
Q
On one of the previous answers that you gave on your share in gross inflows of various distribution channels, if you could also, if you have the data handy, you could also tell us your share on gross direct inflows which is like non-distributed and also your share on redemptions?
Prateek Jain
Mohit apologies but what has been disclosing in our investor presentation is what we can comment on, at this point of time. However, as and when we believe that such data needs to be disclosed, we will definitely take up the lead and start disclosing it. But, at this point of time, we do not disclose the individual shares of gross flows from particular segments in terms of distribution. However, total distributed asset as well as our share of assets from IFAs, bank distributors and national distributors has already been provided in our presentation. Understood Sir, and the second question is w
Q
Good evening. I have one question of the new retained ETF customers that you are seeing for the last one year. Would you have a sense of how many of these are starting their mutual fund investments through the ETF group or these are largely sort of already existing investors and sort of now experimenting with an ETF product as well?
Sundeep Sikka
At this point of time, we may not have that kind of a color, but we clearly see an opportunity going forward where we can cross sell and upsell various products. But it is very difficult, at this point of time, to give this answer. But our strategy will be to cross sell various other products. Sure got it. Thank you so much.
Speaking time
Prateek Jain
21
Moderator
12
Mital
8
Sundeep Sikka
7
Sameer Dalal
5
Akshay Jain
5
Dipanjan Ghosh
4
Mohit Surana
4
Lalit Deo
3
Kunal Thanvi
3
Advertisement
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 - Chief Planning & Business Excellence Officer Nippon Life India Asset Management Limited July 28, 2022
Jignesh Shial
Thank you Michelle. Good evening everyone. On behalf of InCred Equities, I welcome you all for this earnings call of Nippon Life India Asset Management Limited. On behalf of the management, we have Mr. Sundeep Sikka and the entire management team of Nippon Life Asset Management. I will now hand it over to Mr. Sundeep Sikka, CEO of Nippon Life Asset Management. Over to you Sir!
Sundeep Sikka
Thanks. Good evening and welcome to our Q1 FY2023 earnings call. We have with us our Chief Financial Officer Prateek Jain, Co-Business Heads Mr. Saugata Chatterjee and Mr. Aashwin Dugal, Chief Digital Officer Arpanarghya Saha and Fujikake-san - Nominee of Nippon Life Insurance. Our detailed investor presentation and press release have been uploaded on the exchanges as well as on our websites. Before we take your questions, let me share with you some comments on the recent industry trends and our Q1 performance. This quarter has seen significant market volatility owing to the continued geopolitical uncertainty, high crude oil prices, increasing inflation and weakness in currency coupled with FII outflows. In the past too, we have witnessed that global sentiment and local economic indicators had an impact on the Indian asset management industry. The industry assets declined marginally by 2% in this quarter after witnessing a positive momentum for seven quarters. The decrease was mainly d
Advertisement
← All transcriptsNAM-INDIA stock page →