Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- 360 One Wam Ltd (BOM:542772, Financial) reported a significant year-on-year increase in total AUM, reaching INR2,42,619 crore, up 41%.
- The company achieved strong net flows of INR9,786 crore in Q2, contributing to a total of INR15,335 crore for H1 FY25.
- Wealth ARR increased by 45% year-on-year to INR1,56,849 crore, while AMC ARR rose by 33% to INR85,770 crore.
- The company reported its highest ever quarterly PAT in Q2, with a 33.4% increase to INR247 crore.
- 360 One Wam Ltd successfully onboarded over 160 families with over INR10 crore AUM and over 70 families with INR50 crore-plus AUM in the last quarter.
Negative Points
- The company experienced overall outflows of INR3,600 crore during the quarter, despite strong inflows.
- Variable employment costs were high during the quarter due to sales incentivization and bonuses related to senior hires.
- The cost-to-income ratio increased to 48.4% for Q2, indicating higher operational expenses.
- Retention rates saw a slight decline due to a few advisory accounts with lower retentions and a basis point reduction in mutual fund assets.
- The company anticipates a more conservative dividend policy, reducing payouts to 25% to 40% of profits, compared to previous higher levels.
Q & A Highlights
Q: Considering the strong performance this quarter, do you foresee revising the guidance of $250 billion to $300 billion upwards? Also, how are net flows from existing versus new clients?
A: The INR25,000 crore to INR30,000 crore flow number for the year is reasonable. Given the strong flows in the second quarter, there might be a potential increase by INR5,000 crore for the entire year, but we should wait to see how the markets hold up. Existing clients contribute around 25% to 40% of net flows, while new clients contribute 55% to 65%. Of the new clients, 60% are from new liquidity events, and 40% are transfers from other institutions.
Q: With Anil Ta Ta, the co-founder, moving out, how much AUM was under his management, and what is the succession plan?
A: Historically, the impact of a relationship manager change over 3 to 5 years is typically 1% to 4% of the book. Anil's departure is part of a structural change, and the business impact is expected to be minimal. North, where he was focused, contributes about 12% to 14% of our wealth management revenue. We have a large team of 140 to 150 senior bankers, ensuring succession is not an issue.
Q: How do you view Opex growth over the next 12 months, especially in relation to TBR?
A: There is no direct correlation between TBR and Opex. This quarter's Opex was slightly higher due to a UK case settlement and related legal costs. Typically, Opex is around INR68 crore to INR75 crore per quarter. TBR impacts the variable bonuses of employees, but not the Opex directly.
Q: How should we think about ARR retention from a medium to long-term perspective?
A: In the next 1 to 2 years, we expect ARR retention to return to the 70 to 72 basis points range. Over 4 to 5 years, it might be closer to 67 to 68 basis points due to changes in business mix, such as a shift towards advisory over distribution and a reduction in listed equity retention.
Q: Can you provide insights into the discretionary versus non-discretionary flows?
A: We aim for a two-thirds to one-third split between discretionary and advisory flows. While non-discretionary has been growing, we expect a transition towards discretionary as clients and relationship managers adapt. Our goal is to have 25% to 35% of incremental flows in discretionary over the next 12 months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
