Ladies and gentlemen, good day, and welcome to the Q4 FY '25 Earnings Conference Call of HDFC Asset Management Company Limited. [Operator Instructions] Please note that this conference is being recorded.
From the management team, we have Mr. Navneet Munot, Mr. Naozad Sirwalla, and Mr. Simal Kanuga. I now hand this call over to Simal Kanuga, who will give us a brief, following which we will proceed with the Q&A session.
Thank you, and over to you, Simal.
Yes, thanks. Thanks, Sejal. Good afternoon, good evening, everyone, and thank you for joining us today. Our presentation is available both on exchanges as well as our website. As usual, we'll start with a quick overview of the industry. So the year got concluded FY '25 with AUM reaching INR 65.7 trillion, reflecting a 23% increase over the previous year.
Of the INR 12.3 trillion increase, approximately INR 8.2 trillion was in form of net new flows. The comparable number for the previous financial year was INR 3.5 trillion. This is the 13th consecutive year where industry has witnessed positive net flows.
For FY '25, equity markets witnessed two distinct phases, more or less cut into two equal half. NIFTY 50 rose by 16% in the first half, that was April to September of 2024, and declined by 9% in the second half, October to March, October '24 to March '25.
And in terms of flows into equity-oriented funds, the first half saw net flows of INR 2.81 trillion, and second half witnessed net flows of INR 2.74 trillion. For context, net new flows for financial year ending March '24 were INR 2.62 trillion.
During the current financial year, actively managed equity-oriented NFOs contributed INR 900 billion, that is 18% of the net new actively managed equity-oriented flows. The corresponding number for previous year was INR 546 billion, which made up 23% of the flows of the previous year.
Monthly SIP flows touched a record high of INR 265 billion in December 2024, with March '25 logging in INR 259 billion. Comparable number for March '24 was INR 193 billion. That is industry has added just about INR 67 billion to monthly flows. In FY '25, the industry witnessed inflows into debt and liquid funds, adding up to INR 1.35 trillion. ETF saw inflows of INR 831 billion, while arbitrage funds attracted INR 508 billion.
We now move to us. We crossed INR 7.5 trillion in overall AUM with a market share of 11.5% and 12.7%, if we exclude ETF on QAAUM basis. Equity-oriented assets at INR 5 trillion, 64% of our quarterly average AUM, well above industry average of 56%. For actively managed equity-oriented AUM, our market share is 12.8% while for debt and liquid, it is at 13.1% and 12.5% on QAAUM.
Individual investors contribution to our monthly average AUM remained steady at 70% compared to 60% for the industry. We held a 13.2% share of individual monthly average AUM for March 2025. The industry added 9.7 million new investors over the year. We added 3.5 million.
Flows through systematic transactions for March 2025 were INR 36.5 billion, up 24% as compared to March of '24. We also continue to expand our physical presence, adding 25 new offices in Jan 2025, which means we've added 50 new offices over the past 15 months.
That takes our network to 280 offices with 196 offices in beyond the top 30 cities. We continue to constantly enhance and better our digital experience for our customers. And now 94% of our transactions are processed digitally.
Quick update on financials. Our revenue from operations for FY '25 came in at INR 34,980 million, growth of 35% Y-o-Y. Operating profit for the year added up to INR 27,261 million, growth of 43% Y-o-Y with an operating profit margin of 36 basis points of AUM. PAT for the year was INR 24,609 million, growth of 26% Y-o-Y.
Board earlier today has recommended a dividend of INR 90 per share as against INR 70 per share last year, translating into a dividend payout ratio of 78%. This, of course, is subject to shareholders' approval.
We can now open the call for questions. Navneet and Naozad, both are very much in the same room. So Sejal, we can start queuing up questions, please. Thank you.
[Operator Instructions]
The first question is from the line of Lalit Deo from Equirus Securities.
Congrats on a good set of numbers. Sir, I just have two questions. Firstly on the revenue yield side. So in this particular quarter, we saw that it has declined by about 1 basis points. So just wanted to understand, whether it is a function of mix change? Or is there anything else to read into it?
Further, like if we look at our direct TER disclosures, there we were seeing that in some of the equity schemes, it has increased materially. So wouldn't that would have helped in some of your -- the -- in inching up the revenue yield?
So I mean, the management fees is same in direct as well as the regular flows, so that wouldn't really impact. Yields have broadly been in line with the last quarter. I think we have been saying in the last quarter also that equity is around 58 basis points, debt is 28 basis points and liquid is 12 basis points.
And revenue margins over the last 4 quarters, if I remember correctly, in Q1, was 46.3% with equity asset mix was 64%, in Q2 was 46.4% or something with mix coming in slightly higher, 65.7% or so. Q3 was 47% with again, a similar mix. And this time, the mix was slightly lower at 63.8% and Q4 margins were 47.2%.
Okay. And sir, like second question was on the ESOP scheme. So we have announced a new ESOP plan. So just wanted to understand like how should we budget it from the cost perspective for the overall ESOP plan?
Sure. So firstly, as of now, we are seeking approval from shareholders for stock options/performance stock units, PSU. This is not what we are giving or allotting as of now. This is for future.
This just gives me an opportunity to give you a perspective on what this is about. So at HDFC AMC, we recognize that our people are central to delivering consistent, long-term, sustainable value to our clients and shareholders.
And as part of our efforts to attract, retain and align high-quality talent with business outcome, the NRC, the Nomination and Remuneration Committee of the Board approved these changes, which is that in 2020, we had secured shareholder approval to allocate approximately 32 lakh shares to employees over time.
Since then, out of these 32 lakh shares, NRC has granted around 23 lakh shares. The remaining 8.7 lakh has now been canceled, so no further shares will be allotted under that scheme. The NRC has approved a new scheme that is ESOP and PSU scheme 2025. This will now go for shareholder approval.
So we are seeking approval for 25 lakh shares, including performance stock units, PSUs. It will be NRC's prerogative to allocate these shares over a period of time. Last time, we took approval in 2020 for 32 lakh shares, as I mentioned. And of that, we are canceling 8.7 lakhs. The balance 23 lakh shares were allocated over the last 5 years, including 10.5 lakh shares to over 600 of our people in 2023.
So the previous scheme had vesting spread equally over 3 years. New scheme will have deferred vesting, that is 10% in first year, 20% in second, 30% in third and 40% in fourth. So 10%, 20%, 30%, 40% over a 4-year period. And we are of the opinion that this is better aligned with interest of our shareholders and reinforces long-term performance.
The NRC has also approved the issuance of PSUs within this overall limit of 25 lakh shares. So 25 lakh includes both, the ESOPs as well as the PSUs, which will be granted at face value and will vest 30% in third year and 70% in fourth year, contingent upon meeting clearly defined performance parameters, primarily based on revenue, profitability, et cetera.
Importantly, and I must say this, PSUs will not be granted to me or my direct report, so who are classified as Head of Department. The HDFC Group, I've always said, has consistently championed employee ownership across its companies. And this new framework reinforces that ethos while responding to the evolving expectations of talent and demand of our industry.
So let me reiterate that there is no intention of allotting entire 25 lakh shares at this instance. It will be spread over time, similar to our old scheme, and we'll come back to you after the shareholder approval and the discussion with the NRC on allocation, et cetera.
The next question is from the line of Shreya Shivani from CLSA India Private Limited.
Congratulations on a good set of numbers. My question broadly was around the equity segment and the trend in the retail and HNI -- within that retail and HNI as the breakup we get from AMFI. So what I noticed was on quarter-on-quarter basis, both the segments have contracted similarly in -- between December to March.
So if you can help us understand how has the behavior of customers in these two segments been? Have there been any differences or any qualitative comments you can make about these two categories? Because one would think that during volatile markets, the HNI exits much more and much faster, et cetera. So any comments over here would be useful.
So as we mentioned in the opening remarks that if you look at last year, and you split into the two phases and then someone -- I mean, I can say that a year of two halves. NIFTY was up 16% or so in the first half, and the market was down, I think, 9%, 10% or so in the second half. But if you look at the flows into equity-oriented funds, the first half saw net flows of INR 2.81 trillion and second half was INR 2.74 trillion.
I mean, and as you compare with the last year, last year had net flows of INR 2.62 trillion in the entire year. Also, if you look at the SIP flows, in the last 4 or 5 months, I think it's almost flat, around INR 26,000 crores or so. So I think we are seeing greater resilience among investors.
I think it's a collective effort of the industry, collective efforts of all -- I mean, of the industry association, collective efforts by all the industry players, our distributors, advisers and everyone to give the message to the investors that they need to invest with a long-term orientation. And clearly, I think that seem to be bearing fruit and we are seeing people continuing with their investments.
In fact, if I draw your attention to gross flows and redemption numbers, which will give you some more insight into the investor behavior. So in the -- as I said earlier that this was a year of two halves. And in the first half of FY '25, when market was up, gross inflows stood at INR 5.87 trillion with redemptions at INR 3.06 trillion.
In the second half, when market was down by 9% or so, while gross inflows moderated to INR 5.1 trillion, redemptions also declined to INR 2.38 trillion. So people are also going slow on redeeming, right? I mean, if you've got the point that I'm trying to make.
Yes, yes. But sir, one of the things that we saw also with AMFI reporting the monthly data is in terms of the number of SIP registered and number of SIP closed or redeemed whatever. In that, the number of SIP registered in the past 2 months, that data has -- that number has been on a declining trend.
So is it fair to say that while the ones who are invested are continuing to be in the game, but the choppy market has sort of dissuaded or it has dissuaded the newer customer from entering. Would that be a fair assessment right now?
Thank you for asking that. And there seems to be, I mean, a lot of noise around this point. So I'm happy that you asked me this. AMFI has started publishing an additional data point on their website, you might have seen, that is the number of contributing SIP accounts, which is a true reflection of investor activity.
The contributing accounts in December 2024 were 8.27 crores and the number for March was 8.11 crores. It would be a good idea to keep this number at the core. The more relevant, of course, is the fund flow through SIPs and I mentioned this point several times.
SIP collections reached a record high of INR 26,400-something crores in December '24. And even in March '25, contributions were strong at INR 25,900-odd crores. So it's just a 2% dip or in absolute terms, around INR 500 crores dip on a base of INR 26,000 crore plus.
And it would be pertinent to note that the last working day for March 2025 was 28th as against 31st for December '24. So it's 3 days short. And you know, I mean, every day matters for SIP figure. So some part of this dip can also be attributed to this also.
SIP collections in March '25, I mean, we believe, remain resilient at 98% of their record high. So it's -- and if you compare year-on-year, then it's a robust 35% growth Y-o-Y. And this is despite, I mean, heightened volatility and global uncertainties. So the resilient participation reflects the growing maturity, confidence. And I strongly believe it's the long-term orientation of Indian investors and commitment to the disciplined wealth creation.
So while we appreciate that there may be periodic closures or pauses on a month-on-month basis, which are natural, the overall trend continues to remain strong. And as I see it, there is clearly growing investor interest in systematic investing.
The next question is from the line of Moksha from Millennium Money Finance. Due to no response from the current participant, we will move on to the next participant.
The next question is from the line of Ronak Chheda from Awriga Capital.
Hello. Am I audible?
Yes, sir, you are audible.
Congrats on the result in such a tough quarter. My question is on the cash balances. Previously, when we've spoken to you guys, you had mentioned that we might be looking at using some of this cash to become an anchor investors in our efforts to build the alternative side of the business. Just wanted to know where are we in that journey? Can you elaborate? Is there something in the near offering?
I can answer on the alternate side. But on the cash balance, you want to highlight anything, Naozad?
So again, just to cover the cash balance. We have always made a priority to return value to our stakeholders, right? So this year, our payout ratio is 78%.
And in fact, if you look at our sort of realized operating post-tax profit, given that we have a mark-to-market on other income, we have practically distributed the entire realized post tax profit this year as dividends. That's on the cash flow status.
Our skin in the game, from a SEBI perspective, we continue to have to invest in our own schemes based on the SEBI formula, so that continues. And on the AIF front, we have mentioned in the past, Navneet will add, but we have committed significant capital to seeding our fund of fund, which is our first initiative on the alternate platform. We are going to soon launch the credit fund, and where again, the balance sheet of the AMC will be a significant investor.
Maybe I'll let Navneet add.
Sure. So you've already mentioned, Naozad, that the alternatives platform continues to gain momentum. As we mentioned, we closed our first Cat II AIF fund of funds. The portfolio construction has been progressing very well. As we mentioned earlier, we got over 400 investors, and we believe that over the next couple of quarters, we would have more offerings within the alternative space.
We've got the approval to launch a Category II credit fund. So we are expanding our presence in the alt space with the launch of HDFC AMC Credit Opportunities Fund. The team has been in place for over a year, and we would be approaching investors and our distributors for that product.
On the wholly-owned subsidiary side, HDFC AMC International IFSC Limited, we went live with 3 funds in the third quarter of FY '25 and has since witnessed a good response. It is positioned to enable international investors to tap into India's growth story, and we are also gearing up to empower Indian investors to explore global opportunities as we build out these capabilities.
So we remain committed to seizing any emerging opportunities to drive growth and strengthen our competitive edge. And as you asked that, yes, over a period of time, this will be a good deployment of our capital.
Sir, would there be -- would it be possible for you to quantify the amount of money we are planning to use from our own balance sheet for the next near-term funds, whichever you're going to launch?
I mean so in the fund, I mean, last time in the fund of fund, whatever we got, we put 10% from our balance sheet as skin in the game. In our Credit Opportunities Fund, we will do the same. And over a period of time, as they come with more offerings, we would have an opportunity to deploy capital there.
Just to make one more point on that, while you mentioned about the capital going into alternate or the GIFT City opportunity, but I mentioned it earlier also that with a healthy cash position, we are well placed to take advantage of strategic opportunities. We also remain proactive in evaluating any M&A opportunity that can accelerate growth or strengthen our presence in the relevant segments. So it gives us a lot of strategic advantage.
[Operator Instructions] The next question is from the line of Dipanjan Ghosh from Citigroup.
Just a few questions from my side. First, over the last, let's say, 15 days since the end of the quarter, we have seen a tad revival in markets or bounce back, whatever we want to call that. So in terms of incremental flows, are we seeing any sort of revival? Still early days, but if you can give some color on that?
The second question is, if I look at your ticket size of SIPs, it seems on a March exit basis, it's down around 12%. Probably a little bit higher than what we [Technical Difficulty].
Hello? Sejal?
Yes, sir. It was from the current participant.
Got it. So is he available back online? Or should we move to the next question?
Disconnected.
I think if I understood it, it's about the trend in last few days.
And I think, Navneet, he was also asking about SIP average something. So that is mainly because of the SIP [indiscernible]. He might have just divided the systematic number for us. So maybe we can just wait for Dipanjan to come back again. Sejal, we can take the next question.
The next question is from the line of Bhavin Pande from Athena Investments.
First question. On the distribution side, we can see that on the equity AUM distribution mix, direct specifically has seen an uptick. So in your opinion, how do we look at it from a long-term horizon?
Your question is the direct channel as a percentage of total AUM is increasing, right?
Yes, sir.
One that, because of the lower TER, automatically, you would assume that direct as a percentage would keep increasing because, I mean, you have a lower TER, as simple as that.
But overall -- I mean, the distribution pie data provided should not be viewed as a direct representation of market share within a specific channel in the last like 1 year or so or maybe a little lower that the direct channel has seen a notable increase. It's grown from 25% to 27.8%. This is driven by fintech platforms, plus RIAs and, of course, large family offices and high net worth individuals who invest with AMC's directly.
And additionally, we have to keep in mind that with everything else being same, the share of direct plan will keep on increasing by default that I mentioned earlier due to differential TER between the direct and regular plan.
Okay. And on the -- secondly, on the market share side, does our flow market share continue to be higher than the stock market share, both in lump sum as well as SIP?
Yes.
And for fund performance, how do we sort of look at it?
No, I think it's very encouraging. And I think we have navigated the market cycle very well. We have seen significant volatility over the last couple of months, and I think portfolios were positioned rightly.
Some of the funds, which went quite cautious, I can take the names of, let's say, our mid-cap fund or a small-cap fund where we clearly noticed froth in pockets of market, I think the fund managers took the right call.
And in the last couple of months, we have seen significant uptick in our performance in those funds. And across the board, I think we feel very proud of the performance that our investment team has delivered.
Okay. And indicatively, so far, SIP trends continue to be at par with what we saw over the last 3 or 4 months? Or they are a tad higher given the recovery in markets?
You're saying the overall SIP?
If you're talking about April, I think we would want to pass that. As of now, we don't want to comment on any data to do with April.
The next follow-up question is from the line of Dipanjan Ghosh from Citigroup.
I hope I'm audible now and apologies for the confusion earlier. So first question on the SIP number. And if I see your SIP ticket size on a March exit basis, it seems that it has gone down by around 10%, 12% on a Y-o-Y basis.
While I understand that the industry numbers have also kind of been a little soft on the SIP ticket size, but it seems that for you, the decline has been a little bit more, and also your SIP market share also over the last 2 quarters has been a little soft.
So just wanted to get some idea of why is this differential in ticket size trajectory between you and the industry? That would be my first question.
My second question is a follow-up on one of the previous participant's question in terms of the yield number. Normally seasonally always in the fourth quarter, historically, we have also seen some adjustments that happen. So first is, has there been any adjustment in this quarter or the entire 0.9 bps of decline can be entirely attributed to the mix change out there?
And the last question is on the OpEx part. I mean, do you -- ex of ESOP or even including ESOPs for that matter, the expense guidance of 10% to 15%, does that hold true going ahead?
Sure. Dipanjan, so first on the systematic number, and I must clarify, as you are aware, systematic numbers that we report includes both SIP and STP, systematic investment plan and systematic transfer plan. The decline that you have seen in our systematic transactions can largely be attributed to STP. And you would know that STPs are higher in value terms, and hence, you are seeing that effect.
On the yields, where are you seeing the decline, Dipanjan? I mean the yields?
I'm just taking your operational revenue, which is like, let's say, INR 9 billion almost for the quarter.
You're talking of only revenue?
Operating revenue.
Operating revenue. Yes, that's...
Only operating revenue. Only the operational yields, not the operating margins.
Dipanjan, it was 47.1 to 47.2 basis...
He's asking revenue rupees...
So basically, if you look at yield, it was 47.1 in the last quarter, 47.2 in this quarter.
It's a 3-day -- it's a number of days issue, Dipanjan. Q3 had 92 days, Q4 has 90 days, that itself is an impact plus AUM has been overall lower than last quarter.
In absolute number revenue -- okay. No, I get that. The revenue decline, I understand is a function of 3 less number of days. But average AUM is, let's say, whatever, you have reported somewhere around INR 70,740 billion (sic) [ INR 7,740 billion ] and your revenues are around INR 9 billion. So if you kind of do a simple math on that and annualize it, I think the number comes out to be around 46.3 but anyway, I'll maybe take it offline if that's fine.
Yes, 46, 47 basis. I don't know what's the -- but we can discuss it offline if required.
Sure. And maybe on the expense part, if you can give some guidance.
You are saying of...
Operating expense as an overall expenses, the guidance of 10% to 15%, does that still hold with the new ESOP plans being rolled out? Or kind of going for shareholder approval.
So part of the ESOP, ESOP bid currently it's too premature to comment on the cost aspect because the specific quantum of allocation of ESOP, PSUs, timing of issuance will all be determined by NRC in due course.
First thing is that we'd like to highlight that this will be a onetime noncash cost, right? The way it works in accounting is based on the actual valuation, you amortize that cost for the vesting period, and it does not impact the company's cash flow. That's on the ESOP.
But ex of ESOPs, what should -- how should one think of the growth in expense if let's say the next year continues to be a little bit soft on incremental volumes?
So we don't give specific forward-looking guidance, but you've known us to be always prudent when it comes to spending, right? And it's ingrained in our -- the way we think about cost. Having said that, we are very keen and want to capitalize on all opportunities that strengthen our position, right, and broaden our capabilities.
So our focus will remain on building a leading future-ready asset management company. And in that regard, if you have to continue to invest for the future, we will. The past trend of growth in expenses of employee costs as well as other expenses is well available with you. The CAGR over 3 years, 5 years, you can -- you have the numbers. They are fairly very, very much in control.
Our total expense as a basis point of AUM has -- is about 10 basis points for FY '25. This is aided by obviously the rapid rise in AUM. And despite increase in number of people and 50 branches opened in the last 15 months and investments in technology, et cetera, we have managed to keep the cost at 10 basis points.
I would just like to add a note of caution here that the 10 basis point is not what one would like to build future estimates on because if and when during a period when, if AUM growth moderates, this number might look different.
Just one thing, Dipanjan. The ESOP that you are referring to, as of now, it is just taking an approval, right? It is after the NRC will decide, then allocations will happen and after that, that will come. So of course, at that point in time, we'll give all the details.
The next question is from the line of Melwin Mehta from Sterling Investments.
Am I clear?
Yes, please.
Yes, sir.
A quick question on this kind of having the asset management company having investment in the funds. Just to clarify, is it only at the start of that fund formation? Or is that continuing as the fund grows larger and bigger?
No, it is -- so actually in our funds, it is regulatory. So basically, there is a skin in the game circular, whereby depending on the risk of the particular asset class, there is a certain basis points of AUM that we need to keep investing. So more capital that kind of we are able to raise, our investment in that fund keeps going up.
And can that be kind of shared with an external agency or it's absolutely necessary for us to fund that?
No, it is skin in the game. So we have to put in our own money.
We use our own balance sheet capital.
It has to be from the balance sheet?
It has to be. It is SEBI's regulation, yes.
And is it 10% for all funds? Is it 5% -- I'm sorry, I'm a bit ignorant here.
10% was for alternative investment fund of fund that we launched and the private credit fund that we are about to launch. This is a different thing. This is in our mutual fund business where there is a SEBI circular on skin in the game. Depending on the profile of an asset class, there's a certain basis point of AUM that we have to invest from the AMC's balance sheet.
Got you. And is this a recent announcement?
The SEBI skin in the game has been around for almost...
Some time back. Just to clarify, the investments in the AIF are voluntary from our balance sheet. There is a minimum criteria that is decided. We are, of course, investing way about that criteria.
Sure. And given the kind of strong HDFC brand, which needs no introduction at least in the Indian context, is raising more foreign money to invest in India a priority? Or clearly, the management is focusing on the domestic market?
You are asking investing globally by domestic investors.
But that was my second question -- connected question. So I'm asking two questions here. One is HDFC's brand basically, given the domestic market, but also raising money from abroad to invest in the domestic market. And part B was obviously, given the HDFC's brand in the domestic market to basically launch global funds, which will be obviously where the investors will be the domestic Indian investors.
No, you're absolutely right. So with that intent, we set up a wholly-owned subsidiary, HDFC AMC International IFSC Limited. I mentioned earlier that we have gone live with 3 funds in the third quarter of FY '25. We would be coming with more number of funds in months to come.
And it is positioned for both. One, to enable global investors to tap into Indian market. And second, over a period of time, also to empower Indian investors to invest globally. And then we are building out capabilities to enable both.
The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services Limited.
Firstly, on the SIP closures, while you alluded to the fact that it's not an alarming sign yet, but any behavioral difference between online platforms and the advice or the mutual fund distributor route? What we are hearing is the closures are more on the direct side rather than the advice side. Could you give some color there as to what's the trend there?
Y-o-Y, if you look at, there has been a significant increase in the monthly SIPs from around INR [ 8 ],000 crores to INR 26,000 crores. And in terms of accounts, I gave you the number earlier. I mean, over the last couple of months, as of now, I mean, the -- looking at the investor behavior, gives us confidence that investors are a lot more resilient, they are showing more maturity, more confidence in the long-term potential of market.
And industry continues to put huge efforts to ensure that investors invest in a disciplined manner. Are there big differences among different channels? Not that I can honestly comment more on that.
Okay. Okay. And any -- is there any...
Large number of investors have come in last couple of years. And this is like a good test, the volatility of the last few months, and we are encouraged to see the response of the -- the way investors have behaved in the last few months.
Any trends that you can see on the debt side, where with the interest rate cuts, the duration, the longer duration or pickup in any of that category?
So I mean, this is the first year where we have seen positive flows, both in debt fund as well as liquid fund net flows turning positive. Debt mutual funds in general haven't -- I mean, despite that, I would say that debt mutual funds haven't quite caught on with retail investors.
The industry is still working very hard to change that. In AMFI, we started a campaign Debt Funds Sahi Hai around a year back or so. That was a good step aiming to raise more awareness, especially around how debt products can support long-term goals like retirement planning. We believe that debts serve as a strategic tool in managing market volatility, helps investors optimize for stability in overall returns while balancing risk.
We have seen encouraging trend. Those who have stayed invested over the long term have benefited, and corporates continue to use the short-term debt products for liquidity management, and we have seen flows in this year.
So I remain optimistic and hopeful for favorable change in the debt fund taxation. I mentioned it earlier also that along with sustained awareness efforts will help unlock the full potential of India's debt market.
Is the institutional money kind of coming to the longer duration? Is there some initial trends where people have started looking at debt mutual funds or hybrid with a higher proportion of debt? Any of those trends are visible right now?
In India, when we say institution, that's largely corporate treasuries. I think their investments would more be at the shorter end of the curve. Individual investors have shown interest in long-term bond product, like our long-term bond fund has seen healthy flows in last year or 2. We have seen that trend from individual investors. But otherwise, corporate treasuries are largely at the short end.
Okay. Last question on other income, we've seen a sequential improvement there. I believe the markets were flattish, equity markets were flattish on a NIFTY basis and small-cap, mid-cap were down. What kind of explains this increase in other income sequentially?
So it is a function of our balance sheet. A lot of the investments are also in debt mutual funds of our own, right? And there were a couple of rate cuts. So we had some benefit of that on duration of the mutuals.
The next question is from the line of Krishna Manotra from NJ India Investments.
Congratulations on a good set of numbers. Most of my questions are...
Sorry to interrupt, sir. I would request you to please use your handset.
Am I audible?
Yes, sir. I would request you to be -- please be a little loud.
Okay. I just had one question. There is currently buzz going around in the market regarding thematic and sectoral funds space. So like most of them have not performed in the past 6 months and so -- and as per the data I have, we have a higher yields in the thematic and sectoral funds compared to the mid-cap and small-cap funds. So going forward, should we consider that lower inflows in the thematic and sectoral funds? So can we consider the equity yields slowing down further from here?
No, overall, that's still a very small part of our overall product portfolio. But to open our product portfolio and also in line with the views of our investment team and the product team, we have launched a couple of products in last few years, but that's still not a meaningful part of our overall equity portfolio.
[Operator Instructions] The next question is from the line of Madhukar Ladha from Nuvama Wealth.
Just coming back on the SIP discontinuances. I know that the overall flow number has been very resilient and it seems to suggest obviously something has structurally changed or at least looks like.
But there is a little bit of worry in the sense that we continue to see higher SIP stoppages versus the new creation. And if this sustains, then should we be actually worried that at some point of time, this will flow through in the SIP flow number? Is that the correct way to think about it? Or are we missing anything over here?
Because also, secondly, I think there was also this narrative around AMFI cleaning up this number because some of the direct platforms, online platforms continue to show SIPs which was not getting triggered or which were not getting paid also in that number. So has that played out? Some sense on these two things would be helpful.
So Madhukar, the SIP ceased counts have grown over the earlier baseline in the 4-month period from December '24 to March '25. But I mentioned earlier, the one number that everybody should track is that the peak collections -- I mean, over the peak collections in December, gross SIP collections are down just above 2% from December '24. And December '24 was the peak, and it's down 2% in March '25. A large number of these ceased SIP or the SIP closed are part of a superset, which had missed more than three installments.
Now the real paying SIPs, that number, that column that has got added, and I think you are referring to that number then on the AMFI website, the real paying SIPs have not suffered too much because of any negative investor sentiment. And again, I would repeat that despite the sharp fall in the market, monthly SIP collections holding to within 98% of the peak number is a strong testimony to the investor sentiment and collective effort that the industry has made.
And honestly, I mean, 2 years back, had you asked me to project the SIP number, nobody would have projected the number where we are today. And a year back, when we were at INR 19,000 crores, I mean few people would have projected that we would be at INR 26,000 crores, given what has happened in the market in the last 6 months. So we feel very encouraged.
Yes, that is bang on, sir, that is completely true, and I agree with you completely, sir. So just one follow-up. So is this cleanup sort of done? You said more than 3 months since people have not paid, that number has actually -- they've removed that, it seems. So are we largely done with that? Or this can have like maybe a couple of more months of time?
Because there's been so much noise around it, the way you should see is, one, that the amount that has been collected is what reflects in that INR 26,000-odd crores of the gross flow. That's an important number. And the second important number is the people who have credited that amount in the month. So both these numbers are very relevant and gives you a true reflection of what's happening on the SIP front.
And sorry, Madhukar, I would just add, there is a number published of contributing SIPs on AMFI website. So you don't need to mention that -- so you can just go ahead and...
So just look at that number who have contributed in this month, yes.
Yes, yes. No, that is also quite -- very robust. So there is no problem with that. Got it. So -- and we had done the distributor payout rationalization. I think I just did some back of the envelope calculation. And if we were to account for the 90 and 92 days in the quarter, then it seems that the equity yields are holding up or are slightly better on a Q-o-Q basis. Would that be a fair assessment?
Yes, more or less in the same ZIP code on the equities and little bit on the third basis point may be. But yes, we mentioned around 58 basis points.
The next question is from the line of Ankit Bihani from Nomura.
Am I audible?
Yes.
Yes, sir.
So we have seen flows from NFOs into equity schemes for the industry declined sharply over the past 2, 3 months, though NFO flows have been quite strong in FY '25 accounting for around about 15% to 20% of the overall equity flows. So what is your take on NFO flows going forward and its impact on overall flows into the equity schemes? Should we see some slowdown there?
We have seen some cycles. I think we see some quarters where NFOs contribute a larger part to the overall flows. There are quarters when they are low. At our end, I think we believe our product suite is very comprehensive, and we cover a wide spectrum of investor needs across all categories.
But for the industry overall, I think fund houses who don't have a product in certain categories, they would continue to launch. But yes, I mean, as I mentioned, those flows are little, if I can use the word, yes, volatile on account of NFOs what you get.
The next question is from the line of Abhijeet Sakhare from Kotak Securities.
My question was on the SIP or the STP plus SIP number that you disclosed. So the industry number, as you were saying, is almost flat on a quarter-to-quarter basis versus the decline that we've seen. But adjusting for the STP issue, would it be fair to say that it's kind of mirroring the broader industry trend itself?
Yes. So I told you that the industry's SIP number for December was INR 26,500 crores or something and March was INR 25,900 crores. So this was a decline of 2%. Our decline during the same period was less than 2%. But the fall that you are seeing in our systematic number is on account of impact on STP, the systematic transfer plan, yes.
The next question is from the line of Gaurav Sharma from HSBC.
Am I audible?
Yes.
Yes, sir.
Sir, again, harping on this SIP. So while we understand that the gross inflows have been steady for you as well as the industry, just wanted to understand whether segmentally, is there any change, like flows have been moving towards the flexi-cap and large-cap more from the mid-cap and small-cap in the last 6 months? If you can provide some color on that.
And second one is related to this specialized investment funds. So any time lines or any further communication you have received from the regulator when we can expect the launch of these funds? These are my two questions.
So first, on the SIP flows, I mean, in a very short period of time, investors may not switch from one category of fund to another fund. Incremental flows have a tendency to see a trend, depending on how the markets have been and how the investors' views have been. And as I mentioned earlier, again, at our end, the systematic numbers that we report are both SIP and STP and there's some bit of fall on the STP side.
SIPs are like higher in value. So you see that effect depending on the market. On the SIF side, see, the purpose of introducing SIF was to offer investors who were leaning towards unregulated or unregistered products a regulated alternative with mutual funds, who are very well governed and our transparency levels, our risk management, our overall governance is very different.
So to provide a very secure framework under a regulatory umbrella. That was the genesis behind coming out with the whole SIF regulation as SEBI Chair had mentioned earlier. With a regulatory framework now in place, we are actively evaluating potential opportunities in this space. So team is working on creating right set of products that leverage our investment capability, our risk management and product capability on one side and the evolving investor needs on the other side.
So I mean, just like any other thing, whether be it active funds, be it passive funds, be it alternatives, PMS, they all revolve around like we want to be a one-stop shop offering a wide range of savings and investment products. And the strength comes from a combination of factors, large and well-diversified investor base on one side and the deep investment risk management and product capability on the other side.
The next question is from the line of Mohit Mangal from Centrum Broking Limited.
Congratulations on a good set of numbers. My first question is on the tax rate. So I think this quarter, we are around 23.5%. I mean if I look at the full year, it's good 25% and for the entire -- I mean, so maybe 2, 3 years, should we assume the tax rate to be 25%? And the reason why I'm asking is that because in financial year '24, you just had around 21.5% tax rate. So how should we do that -- see that going forward?
So this year, the tax rate is higher than last year simply because the capital gains tax was -- it was increased in the budget. So we obviously create deferred tax liabilities on our mark-to-market gain. So that's the reason for the tax rate. So now our tax is very close to corporate tax rate, effective tax rate.
Right. So going forward also, I think we should assume that this would be kind of maintained?
We typically don't give guidance going forward but if there's a change in tax laws, then obviously tax rate will change.
Understood. Next is in terms of the number of branches. I think we opened around 26 branches this year. So going forward, do you think you'll increase number of branches or you'll keep it constant? Any kind of color on that?
On the branch expansion side, you rightly noticed, I mean, we have opened around 50-odd branches in last 15 months or so. We keep evaluating our physical presence across the country. We also keep investing in our digital capability and keep taking a view. This is also driven by looking at the different geographical spread where our presence is and where the potential for the business is.
But I must add, I might have mentioned earlier, in earlier calls that we approach branch openings very thoughtfully. So when, I mean, focusing on the building business in a city or a town through branches in neighboring areas, and a decision to open a new branch is made only after achieving a desired AUM. And they generally breakeven in a...
The next follow-up question is from the line of Melwin Mehta from Sterling Investments.
Am I clear, operator?
Yes, sir.
Probably this is for Navneet as half the question is actually an AMFI question and half as you as a leader of HDFC. In terms of these direct plans, you rightly said kind of having a take-up, how do you see the MFD market kind of evolving in, let's say, in the year or 2 period and a little bit of a longer-term period?
Do you think the automatic route would then -- the natural expectation is to either the RIAs will take up? Or you think India is a market where MFDs would be basically around for a longer time?
No, India is a market where I think all of these channels will flourish. And I think whether it's MFDs who have worked very hard over the last several decades, industry used to be substantially smaller than the size we are seeing now. And I think we are thankful to all of those hundreds of thousands of distributors who worked very hard in bringing the industry to where it is currently across the length and breadth of the country.
There are national distributors, the platforms who have a large base of sub-brokers or distributors, who work very hard, banks who sell through their branches and relationship managers across the country, the fintech channel, which has done wonderfully well over the last couple of years in terms of bringing new investors, particularly through the SIP route in the last couple of years.
And then of course, the registered investment advisers, while their numbers haven't grown, but as an industry, they also continue to work with the regulator and all of us to have increase in their reach over a period of time. And there is room for all of them to grow. And I'm pretty sure that over the next several years, as penetration increases in India, all of these channels have a role to play.
And are you expecting the RIAs which are more regulated at the moment than MFDs, which are very, very light regulated, are you expecting the MFDs to be regulated slightly more than where they are currently and RIAs to slightly be reduced in terms of their compliance requirements?
That's not the right way to put it. I think MFDs are also, I would say, well regulated in terms of like adhering to the code of conduct and all the other business practices, which are guided by AMFI. And of course, asset managers who deal with the mutual fund distributors, all of us are deeply focused that we have right set of practices in the industry.
And RIAs, as I mentioned earlier, that are smaller in numbers currently, but given the needs of investors over a period of time and with some of the recent changes in the regulation, I see tremendous scope for them to grow as well.
Yes. Because only recently in my India trip, Navneet, I was -- I got a call from two insurance agents. I just feel that the insurance agents are very, very lightly regulated compared to our industry.
I mean it won't be fair on my part to comment on some other industry.
No, but in terms of -- given that most people in this world are not kind of natural investors, and there is an element of sales required, which I think the Indian -- the insurance industry does very well, and dare I say, even sell strong ULIP products whereas our industry seems to be regulated in very harsh terms.
No. I mean we have always mentioned as an industry that greater level of transparency, better disclosures, better risk management, better customer centricity is always good. Ultimately, we are managing somebody else's money and trust is central to everything that we do, and that applies to the entire ecosystem, whether it's asset managers or our distributors or our advisers or everybody else in the ecosystem, for us, I mean, trust is central to the way we see growing this industry.
That was the last question. I would now like to hand this call over to Mr. Navneet Munot for closing comments.
Thank you so much.
Sejal, you can close the call. Thank you.
On behalf of HDFC Asset Management Company Limited, that concludes this conference. Thanks for joining us and you may now disconnect your lines.
