Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Prudent Corporate Advisory Services Ltd (BOM:543527, Financial) achieved a significant milestone by crossing INR1 lakh crores in AUM, 1.5 years ahead of guidance.
- Revenue and profit grew by 50% and 57% respectively, indicating strong financial performance.
- The company's SIP book reached INR7.8 billion, with a target to reach INR1,000 crores by March 2025.
- The insurance revenue grew by 60% year-on-year to INR26 crores, showing robust growth in the insurance segment.
- The company has a strong focus on technology and physical on-ground support, which has been a key driver of growth.
Negative Points
- Employee costs increased by 16.2% sequentially due to salary revisions and branch expansions, impacting overall expenses.
- The payout ratio increased sequentially by 0.6% to 62.2%, mainly due to changes in the indirect mix of total AUM.
- There is uncertainty regarding the impact of potential commission cuts from AMCs on historical trails, which could affect future revenues.
- The company faces challenges in maintaining the net yield margin due to potential commission cuts and changes in the AUM mix.
- The insurance business, particularly life insurance, has seen flat growth due to a focus on non-ULIP products, which may limit future growth potential.
Q & A Highlights
Highlights of Prudent Corporate Advisory Services Ltd (BOM:543527) Q1 FY25 Earnings Call
Q: Congrats on good set of numbers. How should we think about the realization increase going forward, given the improving share of equity assets?
A: We are confident that the top-line revenue will be in the range of 89-89.5 basis points for the full year. Our equity AUM is strong, and debt AUM is minimal, so changes in debt won't significantly impact us.
Q: Can you explain the lump sum versus SIP flows in your net sales?
A: Our lump sum flows have been strong, with 62% of gross flows being lump sum in the first quarter. NFOs also supported this. We focus on both SIP and lump sum, and our net sales are robust.
Q: What is the strategy for the life insurance business, and have you received any communication on commission payouts?
A: We focus on traditional and annuity products, not ULIPs. We expect some changes in commission payouts from October, but clarity is still emerging. We are also starting to look at ULIPs.
Q: Are there any discussions about commission cuts from AMCs due to yield pressure?
A: Yes, some AMCs have cut commissions on historical assets due to yield pressure. We pass on these cuts to our MFDs, so the impact on us is minimal.
Q: How do you see the impact of the new regulation allowing ARN code changes after a six-month cooling period?
A: We have seen some interest from wealth RMs and banking RMs, but no major movement yet. We believe this trend will strengthen over time.
Q: Can you explain the increase in employee expenses and the decrease in other expenses?
A: Employee expenses increased due to salary revisions and new branches. Other expenses decreased mainly due to lower insurance business in the first quarter.
Q: What are your plans for the broking business post-merger?
A: The merger was for operational convenience. We aim to provide a robust execution platform for our customers and partners, focusing on cash segments rather than F&O.
Q: How do you balance the interests of AMCs and your own during commission negotiations?
A: We maintain a strong relationship with AMCs and pass on commission cuts to our MFDs. Our B2B model helps us manage these changes effectively.
Q: What are your aspirations for the insurance distribution business?
A: We see significant growth potential in insurance, especially in health and life insurance. We plan to launch insurance transactions on our FundzBazar platform soon.
Q: Can you break down your net sales between lump sum and non-lump sum portions?
A: We do not bifurcate net sales between lump sum and SIP. We track SIP additions separately, but net sales are calculated as gross sales minus all redemptions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
