HDFCAMCNSEOctober 18, 2023

HDFC Asset Management Company Limited

8,978words

111turns

14analyst exchanges

3executives

Download PDF ↗HDFCAMC stock page →

Management on call

Navneet Munot

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Naozad Sirwalla

CHIEF FINANCIAL OFFICER

Simal Kanuga

CHIEF INVESTOR RELATIONS OFFICER

Key numbers — 40 extracted

INR47

tion. The quarterly average assets under management continued its impressive growth, reaching INR47 trillion, marking a 20% Y-o-Y increase. Actively managed equity-oriented funds are getting neare

20%

age assets under management continued its impressive growth, reaching INR47 trillion, marking a 20% Y-o-Y increase. Actively managed equity-oriented funds are getting nearer to the 50% mark of

50%

marking a 20% Y-o-Y increase. Actively managed equity-oriented funds are getting nearer to the 50% mark of the total AUM with QAAUM of INR23.1 trillion, a notable uptick of INR18.4 trillion reco

INR23.1

y managed equity-oriented funds are getting nearer to the 50% mark of the total AUM with QAAUM of INR23.1 trillion, a notable uptick of INR18.4 trillion recorded a year ago, signifying 26% Y-o-Y

INR18.4

ing nearer to the 50% mark of the total AUM with QAAUM of INR23.1 trillion, a notable uptick of INR18.4 trillion recorded a year ago, signifying 26% Y-o-Y growth. During the same period,

26%

h QAAUM of INR23.1 trillion, a notable uptick of INR18.4 trillion recorded a year ago, signifying 26% Y-o-Y growth. During the same period, the NIFTY 50 price return was 15% and the

15%

ignifying 26% Y-o-Y growth. During the same period, the NIFTY 50 price return was 15% and the NIFTY 500 price return was 17%. This indicates that the industry growth outpaced the

17%

wth. During the same period, the NIFTY 50 price return was 15% and the NIFTY 500 price return was 17%. This indicates that the industry growth outpaced the benchmark indices and attracted signi

INR10.3

racted significant inflows. Debt funds displayed healthy interest with QAAUM surging to INR10.3 trillion in the quarter ending September '23, up from INR8.8 trillion in quarter ending March '23.

INR8.8

interest with QAAUM surging to INR10.3 trillion in the quarter ending September '23, up from INR8.8 trillion in quarter ending March '23. B30 MAAUM category continues to exhibit a healthy growth rat

27%

B30 markets. The share of B30 in the overall MAAUM and equity MAAUM remained steady at 17% and 27% respectively. Systematic investment plan continued their upward trend, recording close of I

INR160 billion

% respectively. Systematic investment plan continued their upward trend, recording close of INR160 billion in September 2023, a notable increase compared to INR130 billion in corresponding month of the pr

Advertisement

Guidance — 16 items

Simal Kanuga

opening

“We'll refresh our presentation in the forthcoming days once necessary data for the month of September is released and the same will be made available on stock exchanges as well as our website.”

Navneet Munot

“Sandeep Agarwal And sir, my next question is, what percentage of growth you expect in next two years in SIP flow?”

Kunal Thanvi

“And Simal, on the incremental flows that you're getting, like it will be lower than this?”

Navneet Munot

“I think from the pre-COVID period -- I think that this point was made in the last quarter that from quarter ended September '19, the CAGR on this front is 9%.”

Prayesh Jain

“Could you give some understanding at the industry level as to what is the -- I understand a large portion or majority will be equity, but some specific as to what is the direct equity or hybrid at the industry level and for HDFC AMC?”

Simal Kanuga

“It will be mix of both, equity as well as hybrid.”

Lalit Deo

“And the second question will be, so now with the change of control to HDFC Bank now.”

Naozad Sirwalla

“An annual increase of like high-single-digit, low-double-digit type you should expect.”

Sahej Mittal

“And some guidance on ESOP bit for the second half and for the next two years?”

Naozad Sirwalla

“So, to your point, next year, for example, the non- cash comp would come down because 60% of the costs would have been taken in the first year of the issue.”

Risks & concerns — 3 flagged

But of course, as the size increases by multiple of INR50 billion, you'll see a little pressure on margins.

— Navneet Munot

If you look at all our equity products, I remember two years, three years back, a lot of people used to say when there was a period of one years or two years where active funds were finding it difficult to generate alpha.

— Navneet Munot

So, has the entire impact of changing slab, reduction in gross TER captured in this net realization number or the exit run rate, let's say, in September or October will be somewhat different from 67.5 bps, assuming mix has not changed?

— Dipanjan Ghosh

Advertisement

Q&A — 14 exchanges

So overall, I think it's been helped by a variety of reasons, including the improvement in performance, products getting approved across all wealth managers, our focus on each and every channel, be it the mutual fund distributors, RIA, fintechs, banks, and of course, HDFC Bank. I think it's been quite helped by a variety of other initiatives, be it on the marketing side, on digital side, product communications side, etcetera. And this continues to remain a very high focus area for us. And we remain quite focused as a team to build our systematic transaction book. Sandeep Agarwal And sir, my ne

Navneet Munot

Over the last several years, you have been seeing continuing improvement in the overall SIP flows in the industry. I think a combination of factors, a great track record of the industry over a long period of time, which is acknowledged by a lot of investors. I think it's focus on transparency, increased transparency of the product relative to any other investment vehicles for people, that's giving more confidence. I think technology is making it easier for people to invest, easier to get more information. And of course, the tremendous focus of the industry and all of us, the players in the ind

Hi, thanks for the opportunity. So, I had two questions. One was on the debt side of the business. When we look at Y-o-Y growth for the industry in HDFC AMC, we have grown at a slower rate compared to the industry. Can you talk about what's happening on the debt side for the industry and for us? What is the mix of growth in active versus passive also on the shorter duration versus longer duration? So that's on the debt. And the second was on the yield. So, when we look at our yield improvement, we have seen like there has been a sequential improvement in the yield. Can you break this up for us

Navneet Munot

Sure. So, on the debt side, your first question, the debt market share has increased on a Q-o-Q basis. The loss that you see on the Y-o-Y basis is mainly due to our lower participation in debt index fund. We have mentioned it earlier that our market share is lower there. Some of the funds that got launched earlier have been able to raise much more money than what we have been able to raise. But I wouldn't read too much into this. Our market share in debt, excluding index fund on quarterly average AUM basis for quarter ending September '23 stood at 14.5% and was flat year-on-year. In actively m

Actually, Swarnabh, that includes index fund. See, index fund is a very small part of the overall pie, right? It is like INR15,000 crores, INR16,000 crores on INR3 lakh crores kind of a number. The index funds, like if you look at the larger index funds, the NIFTY 50 and the Sensex 30, they would be around at whatever 12, 13 basis points kind of a yield. And the equal rates and etcetera would be at around 25 basis points kind of a yield. But that would not really move the needle. It's a small part of the overall equity book. Swarnabh Mukherjee:Right, sir. And also, just wanted to confirm that

Simal Kanuga

So, I'll just answer your question on balance advantage and then Navneet can give the bigger picture. So, on the number that I mentioned of 50 to 60 basis points, that's on fresh flows. So, what we do is, when the expense ratio drops because of the change in AUM, for future sales, we also reduce the commissions that we pay. So, our yield thereby would be in that broad band that I mentioned of 50 to 60 basis points. So that was on your specific question. On overall yield, I think Navneet can throw a better light. Right. So, we have always mentioned that book margin is higher than the flow margi

Just a couple of questions. Firstly, on the SIP book. Could you give some understanding at the industry level as to what is the -- I understand a large portion or majority will be equity, but some specific as to what is the direct equity or hybrid at the industry level and for HDFC AMC?

Simal Kanuga

It is well into 90%. Okay. In pure equity or hybrid will be... It will be mix of both, equity as well as hybrid. Okay. Got that. And just extending the point of what previous guy was asking about the employee cost. See, sequentially, we have seen an increase of 10% in employee cost. But you mentioned that there is some additional ESOP cost which was I think closer to INR2 crores, INR2.5-odd crores. Apart from that, headcount increase which caused 8% kind of an increase. So, what was the total headcount that went up during this quarter? I'm just trying to -- the reason why I'm asking this quest

So, just wanted to understand, sir like, if we see the equity AUM channel mix, so we see that the share of direct plan originated equity AUM has increased. So just wanted to know your thoughts on the channel-wise market share on the flow side, like where we are seeing the most improvement in our market share across which channels? That would be my first question. And the second question will be, so now with the change of control to HDFC Bank now. So, what are the changes which we have done at the ground level to improve the mix to move the contribution from HDFC Bank to HDFC AMC?

Simal Kanuga

So, I think I'll just take the first part of your direct plan. So, I think we have always maintained. The direct plan book share is around whatever, 22%, 23%. But as against that, the flow share is in late-20s. So, one reason for tilt towards more direct plan is because of that. Secondly, even if you assume flat markets, no flows, the direct plan does have a lower expense ratio. And thereby, you will see a 20 to 30 basis point positive impact on the share there on an annual basis. So that is one part. And Navneet would address the whole HDFC Bank part. So, we are seeing the material improvemen

First of all, congratulations on a good set and commendable performance. So, if I look at your September -- so I mean, for the first five odd months, you have been clearly sweeping the table in terms of net equity flows, right? But if I look at September numbers -- September flows, net equity flows, there seems to be some sharp drop in HDFC AMC's market share. So, is there any particular reason for that?

Navneet Munot

I think, see, month-on-month, there could always be volatility. It depends on some of the NFOs that get allocated -- allotted in that particular month or some other factors. So, I wouldn't read too much into it. But overall, the trend has been upwards for us. And as I mentioned, it's across channels and across products. And we have been very pleased by the trend that we have been seeing. In a particular month, there could be like always one or two NFOs of competition that can impact the market share. NFOs, as you know, in September were lower than the NFOs in August. And within that, if there

Yes, it is there in the presentation, Madhukar. So, we have gone to active equity September QAAUM at 12.4%. A year back, this number was 11.5%. Madhukar Ladha: That is -- isn't that the total -- on a total AUM basis?

Simal Kanuga

No, that is actively managed. If you go to Slide number 11 on the presentation, it has this detail. Madhukar Ladha: Okay. Second, if -- you mentioned 67 basis points is Q2 yield on equity that also includes the index fund yield. Can we get the number for the last quarter? What has happened quarter-over-quarter? I think, it is same. It is -- 67, 68 is... And we have mentioned the reasons also. There are two main reasons. One is that the book margin is higher than the flow margin. And second, also the sliding scale structure. So, if market has gone up and some of the funds have crossed that INR5

Good evening. So, I would like to ask, what is the approach for ETFs? So HDFC is playing a bit defensive on ETFs and index fund. So, what is your view of increasing the share of ETFs in our portfolio or what is the structure, like say, five years down the line, how do you see ETFs as a part of the overall book? If you can throw some light on it.

Navneet Munot

See, we have always mentioned that active and passive investment strategies will co-exist harmoniously rather than competing at each other's expense. India is substantially underpenetrated. So Indian markets will chart their own course. And we don't need to move assets from active to passive the way it may have happened in some of the markets, where institutions would have moved their assets. Our stance on active is very well established. We hold a very strong belief in its potential. We see substantial alpha opportunities are still available in India. If you look at all our equity products, I

So first of all, aspirations are always doing more than what we have done, doing better than what we have been doing. And the brands we represent, the distribution network, given our top-of-the-line digital infrastructure, given the efforts we are making on the marketing side, product content, every single thing, we continue to aspire for higher market share. And on both sides, getting greater share of lump-sum flows as well as bigger focus has also been on growing our systematic transaction volume. I'm sure you would have noticed that in September '23 our inflows from systematic transactions,

Navneet Munot

So, I can't comment for people who have come in last one year, how will they behave. But the trend is very encouraging. Over the last couple of years, the way -- the concept of SIP, the way it has become a household name and the level of interest among investors from all strata of society is very, very encouraging. And across all channels, we are seeing everyone focusing on building their systematic transaction book. And I mentioned earlier that, we have always been highly focused on that segment of the market. We have always promoted the concept of the power of compounding, long-term investme

Sir, you mentioned that your net yields on the equity funds is around 67.5 bps. Now I would assume that this is average for the quarter. But because over the last three months, which is July, August, September, most of the equity schemes have changed slab. So, has the entire impact of changing slab, reduction in gross TER captured in this net realization number or the exit run rate, let's say, in September or October will be somewhat different from 67.5 bps, assuming mix has not changed?

Simal Kanuga

So Dipanjan, if the AUM remains constant where it is for the next 90 days, it would be 67, assuming there are no inflows, no outflows. Got it. Second question on the distribution part. On the equity mix, we have seen increase in national distributors and decrease in MFDs, considerably over the last 12 months. I would assume that the flow movement would be even higher or more skewed toward NDs. So just wanted to get some -- and in this context, on your equity-oriented market share gains, if I split it between retail and HNI based on AMFI classification, it seems a lot of it is driven by HNI seg

So basically, on Page 17 of the presentation, so you guys have added almost 40% of the incremental unique investors in the industry. Can you talk about like what's driving that? Is it just performance or is there something else? Second is based on this HDFC Bank point, how much is bank -- I mean, how much are you as a percentage of bank distribution of mutual funds? And the third is, any thoughts on the revised consultation paper side? Thank you.

Navneet Munot

So, on the unique customers, I think, yes, you noted it rightly that I think we've been able to capture a very high market share among the new -- I mean, the unique investors that have got added to the industry. And the reasons are, I think a mix of several things. Of course, our performance in most categories is top-notch. That's clearly helping us with all the other efforts that we are making, whether on better engagement with distribution, a top of line digital infrastructure with all the marketing efforts, so on and so forth. And it's across channels -- whether it's national distributors,

First of all, congratulations on hitting INR5 trillion mark. My first question is, what will be your guidance for the upcoming financial year?

Simal Kanuga

Tejas, we don't make any guesses. You appreciate right, our business does kind of depend a lot on how the equity markets move. So, we don't want to even hazard a guess there. Okay. So, my second question would be what would be the important factors that would be the biggest reasons in making you hit the 5 trillion mark as well as gaining such a huge market share? Variety of things. I mean, I've mentioned maybe in different context, I think the brand that we represent, the presence that we have, the partnerships that we have built over the years, I think our product range, the performance track

Yes, thanks for the opportunity and congratulations on a good set of numbers. Just one question. In terms of unique customers, now we have got good 20%, so just wanted to understand their behavior in terms of how sticky they are? And if you could throw some light in terms of who are these customers in terms of age group, profession, that is salaried or self-employed, that would be helpful?

Simal Kanuga

We don't have that data readily available, Mohit. Maybe we'll reach out to you and try and share that information. In terms of staying on equity side, if you look at it, the average holding period, now there is no real science behind it. One way to do that would be based on existing book that does rest with us. But that would kind of get skewed because of large amount of new additions in the last 12 months, 24 months, 36 months. The other way to look at it is, look at people who are exiting out of us, but that would kind of ignore people who continue to stay with us. So, there is no real scien

Congratulations. And there's one particular operational number I'd like to get some further input on. So, a follow-up to the individual investor -- to the individual customer question, if you look even at our individual folios, this has now really accelerated in the last few quarters, and of course, this quarter has been fantastic. Our average AUM seems to be more or less holding steady at AUM per folio. So, we are getting more than just what customers are getting multiple folios from them. And this now number looks similar to what we were maybe in March '21. Is this -- is it fair to interpret

Simal Kanuga

We didn't exactly understand your question. So, you are saying AUM per customer is good. That's what you are suggesting? Yes. So, the number of folios is increasing very fast. So, our share of folios today is now at a level which was similar to what it was in March '21. And in March -- and you could say folio can go up, but the average AUM portfolio can go down, but that's not happening. So, our folio -- also average AUM per folio is staying more or less constant. So, it's not just people being added for the sake of it. So, if that's the starting basis, which means it's a strong foundation, as

Speaking time

Navneet Munot

Simal Kanuga

Moderator

Amrish

Prayesh Jain

Dipanjan Ghosh

Kunal Thanvi

Naozad Sirwalla

Sahej Mittal

Sagar Doshi

Advertisement

Opening remarks

Simal Kanuga

Thank you. Good evening, and thank you for joining us today. Before we dive into specifics, we would like to highlight a change in reference to some of the data points in our presentation. As against our usual schedule, our results have been advanced by a week or two. The change was made to ensure synchronization with the quarterly results reporting of HDFC Bank. It is important to note that as of now, not all the necessary industry data for September is made available. In instances where September data is still pending, we have substituted it with August data. We have done this to present the most accurate and timely information possible. We'll refresh our presentation in the forthcoming days once necessary data for the month of September is released and the same will be made available on stock exchanges as well as our website. Let us start with some industry level information. The quarterly average assets under management continued its impressive growth, reaching INR47 trillion, mark

Advertisement

← All transcripts HDFCAMC stock page →

HDFC Asset Management Company Limited

Market Movers