Release Date: January 29, 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) reported a significant increase in AUM, growing from INR 56,200 crores in April 2023 to INR 77,800 crores by December 2023, marking a 38.4% increase.
- The company's SIP book has crossed the INR 600 crores mark, with monthly SIP flows reaching close to INR 650 crores by December 2023, reflecting a 34% growth over the last 12 months.
- Prudent Corporate Advisory Services Ltd (BOM:543527) has added approximately 215,000 new investors in the last 12 months, maintaining a market share of around 4% in the retail segment.
- The company's consolidated revenue grew by 33% year-on-year, with non-mutual fund products contributing significantly to this growth.
- Despite challenges, the company's profit after tax grew by 34% in the first nine months of the fiscal year, driven by higher other income and a growing treasury book.
Negative Points
- Revenue growth has not kept pace with the quarterly average AUM growth due to SEBI's decision to keep B30 incentives in abeyance from March 1, 2023, impacting revenue by approximately INR 11 crores in the quarter.
- Operating expenses have increased due to higher costs associated with the Prudent Loyalty Coin Program and marketing expenses for the insurance vertical.
- The insurance business, particularly the life insurance segment, has seen a decline in fresh premium by 17% in the first nine months of the fiscal year, with expectations of further decline in Q4 due to a high base effect from the previous year.
- The company's yield on mutual fund distribution has been affected by the reduction in B30 incentives, dropping from 8 basis points in FY '23 to 2 basis points in the current quarter.
- There is uncertainty regarding the exact impact of changes in commission structures in the insurance business, which may affect future revenue and profitability.
Q & A Highlights
Q: On the mutual fund yields, there was an impact of B30. But on a Q-on-Q basis, there's still an improvement from 91.3 to 91.9. What are the reasons for this?
A: There is no specific reason for the 0.5 basis point yield improvement. It might be a normal fluctuation. We can assume that the yield will be in the range of 91.3 to 91.5 with B30.
Q: Regarding the insurance business, other OpEx to revenues has shown volatility. What should we expect in FY '25?
A: The non-employee costs in the insurance vertical should gradually be in the range of 60% to 65%.
Q: Is there any productivity difference between new MFD clients with less than INR 10 crore and greater than INR 10 crores?
A: Smaller MFDs initially focus on SIPs and smaller clients. As they grow, they get bigger clients. The productivity of smaller MFDs is generally lower than bigger ones, but this is a normal trend in the industry.
Q: With respect to FY '26, we were expecting INR 1,00,000 crores worth of AUM. Any revision in guidance?
A: We are on track with our expectations. Our SIP book is growing, and we foresee reaching INR 1,00,000 crores by March '26, assuming a 10%-12% growth from SIP sales and mark-to-market.
Q: How do you view the competitive threat from digital platforms like Groww and Angel One?
A: While fintech platforms are growing, they are also creating new market share. We believe that as clients' needs for advisory services grow, they might come back to us. We are maintaining our market share in the regular plan segment.
Q: Can you explain the increase in the take rate for the insurance business this quarter?
A: The increase might be due to some accumulated revenue from previous quarters. We expect clearer visibility on margins from FY '25 onwards.
Q: What is the contribution of POS to the insurance business?
A: The lion's share of our insurance business comes from POS. While we also have an in-house team, POS is the significant contributor.
Q: How does the total distributable TER impact your revenue and payout?
A: The book already collected is not impacted by changes in TER. Incrementally, new business will be at newer rates. Our payout remains a percentage of earnings, so if earnings decrease, payouts adjust accordingly.
Q: What is the average SIP ticket size per client?
A: The average SIP ticket size is around INR 2,800, with new SIPs averaging INR 3,400. Approximately 50% of our clients have SIPs, averaging about 3 SIPs per client.
Q: How has the marketing expenditure for insurance changed this quarter?
A: Marketing expenditure for insurance this quarter is roughly about INR 9.5 crores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
