Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aditya Birla Sun Life AMC Ltd (BOM:543374, Financial) achieved its highest ever quarterly profit in Q1 FY25, driven by an improved asset mix and strong cost management.
- The company's total revenue increased by 24% year-on-year to INR489 crores, and profit after tax rose by 26% year-on-year to INR232 crores.
- The mutual fund industry witnessed a 37% year-on-year growth in quarterly average AUM, reaching INR59,60,000 crore as of June 30, 2024.
- The company saw a significant increase in SIP flows, with a 39% year-on-year increase, crossing the INR1,300 crores mark.
- Aditya Birla Sun Life AMC Ltd (BOM:543374) successfully launched the Sun Life Quant Fund, mobilizing assets around INR2,400 crores, making it one of the largest funds in its category.
Negative Points
- Despite the overall positive performance, the company acknowledged that the market share improvement is not as significant as desired, particularly in certain segments.
- The company faces challenges in maintaining a balance between building scale and improving profitability, especially in terms of distribution commissions.
- There is a need for further strengthening the team in specific areas such as mid- and small-cap categories to enhance performance.
- The company anticipates some variable expenses related to branch expansion and recruitment, which could impact overall cost management.
- The impact of tax changes on mutual fund inflows remains uncertain, particularly for fixed income schemes, which did not receive any major incentives in the recent budget.
Q & A Highlights
Q: Could you highlight the channels from where we are receiving the increased interest in SIP flows and provide a breakup between SIP and systematic transactions?
A: The majority of SIP flows are coming from MFD channels and digital channels. While I don't have the exact breakup, a large proportion of the flows are from follow-on SIPs, with less contribution from systematic transactions. We see this as an opportunity to push aggressively to improve overall numbers.
Q: How has the trend been in lump sum flows on the equity side?
A: We received good lump sum flows in our NFO, with around INR20 crores from SIPs and the rest from lump sum investments. Existing funds, particularly in the large cap and thematic categories, have also seen improving lump sum flows, though the majority still comes from SIPs.
Q: What is the guidance on operating expenses (OpEx) and ESOP expenses for FY25 and FY26?
A: We project that employee costs will grow around 10-12%, and administrative OpEx will also grow in the same range. ESOP expenses for the quarter are around INR3 crores, included in the employee benefit cost. The number of employees as of June is 1,520.
Q: Can you provide some color on the net flow movement for your equity assets, excluding sectoral funds?
A: Excluding sectoral funds, the net sales are improving, particularly in large cap and flexi cap categories. However, a significant portion of flows is still coming from thematic funds. The market share improvement is gradual, but various steps like successful NFOs and SIP pushes are expected to help.
Q: How do you see the tax changes in the budget impacting inflows into mutual funds of different categories?
A: The tax changes are not expected to negatively impact equity inflows. Fixed income remains status quo, though we were expecting some steps to promote it. Certain asset classes like REITs and gold now have long-term capital gains tax, which could create opportunities for new products.
Q: What are your thoughts on SEBI's consultation paper on a new category of investment for INR10,00,000 and above?
A: This new category could attract investors who otherwise play directly in the market. It will take time, but it’s an innovative step by SEBI. We will need to build capability in using the derivative market for such products, which could become a customer aggregation tool.
Q: How are the yields on your debt and liquid funds?
A: The yield on debt funds is around 25-26 basis points, and for liquid funds, it is around 12-13 basis points.
Q: Can you elaborate on the improvements in one-year returns across your main equity schemes and the impact on distributor traction?
A: About 65% of our funds are in the Q1, Q2 performance categories. We have made new additions to the team and existing members are passionate about managing funds. This has led to improved performance, which is being well-received by distributors. We are also focusing on increasing productivity and new customer acquisitions.
Q: How do you see the distribution commissions evolving, and what is your approach to rationalizing them?
A: We aim to take a middle path, balancing the need to build scale and improve customer business strategy while maintaining profitability. We will work closely with distribution partners and build our direct and RIA channels. Specific drives may require additional compensation, but we view these as investments for long-term benefits.
Q: Can you provide the SIP AUM as of June end?
A: The SIP AUM as of June end is INR77,700 crores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
