Anand Rathi Wealth Limited (ANANDRATHI) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q2 H1 FY '27 Earnings Conference Call of Anand Rathi Wealth Limited. [Operator Instructions] I now hand the conference over to Mr. Feroze Azeez, Joint CEO of Anand Rathi Wealth Limited. Thank you, and over to you, sir.

Thank you so much. Good afternoon, and thank you, everyone, for joining the Earnings Conference Call for the Quarter and Half year ended 30th September 2026. Today on this call, we have our CFO, Mr. Rajesh Bhutara; our Head of Relationship Investor Relationships, Mr. Vishal Sangvhi. Jugal Mantri is in Europe for a holiday. so we don't have him on the call today. And this is the first quarter call I'm doing without him. So I missed him on this call. Yes. So I'm very pleased to share that we have delivered another quarter of consistent and fortunately market agnostic performance despite the challenging environment. This is our 20th quarter result since we got listed in December 2021. And in every quarter since listing, with God's grace, the PAT growth Y-o-Y has been greater than 20%. Excluding the impact of nonbusiness-related items, fair value gains and ESOP expenses and related tax effects. After the tax -- after tax for the first half year of FY '27, -- the PAT grew by -- sorry, after tax PAT grew by about 23% year-on-year to INR 238 crores, while revenue increased 17% year-on-year to INR 693 crores. Similar for the Q2 FY '27, we reported a consolidated profit -- net profit of INR 122 crores, registering a year-on-year growth of 22% Total revenue during this period rose by about 16% to INR 357 crores. In the first half year of FY '27, the company has delivered 49% of the full year revenue guidance, which stands at INR 1,415 crores. So 49% penetration on the guidance of revenue and 52% penetration on the PAT guidance, 48% more to go of the INR 460 million guided. Continuing our policy of rewarding shareholders, the Board of Directors have declared an interim dividend of INR 4 per share. And after a bonus so INR 4 per share of the new INR 16-odd crores shares, which are outstanding. In the first 6 months, we have achieved 52% of the PAT guidance of INR 460 million, I think that's already mentioned. We've achieved 3 important milestones in this quarter, which have gone by. The highest net flow ever in the history of Anand Rathi Wealth over the last 20 years, happened in this quarter, which went by, and we collected new fresh monies of INR 4,186 crores, which is up 39% from the last year's number, corresponding number of FY '26 quarter ending September. So INR 486 crores of net mobilization or new monies with our clients' gratefulness and when the clients realize that this portfolio during bad times can hold up, bad times, clients have shared more money with us. Second, we recorded our highest ever quarterly equity mutual fund net flow. Again, in the last 20 years, we have not been able to achieve that. And with your support and client support, we have achieved INR 2,867 crores, up 39%. It's easy to say buy equities low and sell high, and clients pragmatically have bought more equity, which shows up in IRRs over long periods of time. Courage translates into IRRs, but not in the short term in a few years. So I'm very happy to note that our clients, unlike the mutual fund industry has not delivered the best net mobilizations in the first half year is, of course, have been robust. Lump sums have been low in that half year and the last quarter, we have had a 39% increase in equity mutual fund purchase. Third, we recorded our highest ever monthly client acquisition in the month of September, which will not be apparent in the results because I'm speaking about September. With God's grace, and clients when they see their portfolio is doing relatively better, of course, sadly not the best times, they start referring their friends who are [indiscernible] with what has happened in their portfolios with aggressive strategy. In our flagship business of private wealth, during the last 12 months, we have added 1,500 new client families on the net basis, bringing our total client families to 14,309. Client attrition rate in terms of AUM loss remained low, 0.17% for quarter 2 FY '27 and 0.26% for half year FY '27. Of course, these are second decimal numbers. But we would ideally want every client family who trust us with their hard-earned life savings to be satisfied. Regret RM attrition continued to remain low, 2 RMs whom we consider regret mathematically, of which one I might want to not call mathematically, I can't call that person a non-regret. I would say 1 regret attrition we have had in H1 FY '27. Digital wealth business, which is B2B2C business, registered an AUM growth of 15%, 14% year-on-year and reached INR 2,531 crores, and the number of clients increased 15% to [ 7,518]. OFA business, Omni Financial Advisor business, which is a SaaS platform has close to about 6,898 subscribers with the platform assets of about INR 1.66 crores at the end of September 2026. It has to be remembered, these are just platform assets, which we report. Also last quarter, we started operations in London, U.K., and we have received requisite regulatory approvals to commence operations in Gift City, India. That's where I stop and hand over the mic back to the moderator.

[Operator Instructions] First question is from the line of [indiscernible] as from Motilal Oswal Financial Services Limited.

Sir, just a few questions. Firstly, a broader one. If you have to think about your, say, top 100 customers, roughly in your estimate, what would be the wallet share that Anand Rathi Wealth could have for them?

Firstly, yes, my top 100 clients, I don't have to think of them because I think of them -- so I've done a lighter okay? So current back because that's where we have the Platinum segment, okay, more than 1% of our clients fall in the platinum segment. What kind of wallet share is very dispersed. Basically, we have this principle of home grow, the colleagues home grow the clients. So we don't flop on the doors of people who have just had a business of INR 200 crores. So I would say that our platinum clients, I can say confidently that 50%, 60% of the wallet will be with us. And the same clients, if I see the trend, which is what I think is important would be upward trend for 95% of the families. So top 100, I would say, 60%, 70%, and there'll be several with 100% with us.

That's a part of -- when you say that me -- the denominator is the mutual fund network or you are saying of the total net worth?

See, wealth has only one definition. Unfortunately, market defines, however, I'm speaking about wealth. Wealth includes all the assets, physical also, which they don't live in. mutual fund stocks, I count everything as wealth. Wealth is everything one human being has, which he does not consume or aspires to consume.

Got it. The second actually is more financial question, we've seen a very -- including the [indiscernible] we've seen a very sharp increase in employee costs contest was a forte -- now how should we see this and modern sales next year? Do we see an increase in expense, ideally, the ESOP expenses is the highest in the first year, and then it's on a declining trajectory. Should we go in similar manner and I assume that the overall, the restart cost will decline in next year and possibly the overall employee cost will see a much lower growth in next year?

Yes, noncash expenses, which is where ISO falls, mark-to-market and not cash expenses, the dispersion between your profit before tax, which is INR 122 crores and this INR 90 crores will reduce. Yes. So to answer your question, will the to cost reduce, yes, dramatically, yes.

And sir, just one final question is on the M&D part where anything that worries you on this business, which kind of, say, runs at the top of your mind, that business has been growing well for us. no doubt on that trend. But does that -- any part of that business worries you in instance?

Prayesh, whatever worries us, we start working on it, okay, long before it becomes an actual bull knocking on our door. So if you ask me, I said the same thing 4 years back, it doesn't worry me because all the variables which were my risks were identified much before. So does it worry me? No. Does it require professional management to be able to make sure it is not? The answer is yes. So scalable, the answer will be yes. Of course, people will take it to the pitch because they don't the professionals generally people, I don't know why. But yes, I would do a straight thumb. So no, that doesn't worry me. But yes, I know most people wouldn't believe that statement. They didn't 4 years back. They don't today.

So even in this solid market, you would have given very healthy IRR on these products?

Yes, we would have given. Some of them didn't give the maximum IRR in the last quarter. Otherwise, we had 1,190 consecutive products, consecutive products from December 2020 till as much as May, June this year, which is the longest streak of wins any product in the history of Anand Rathi -- in the history of India would have given expected return, all of them, but that streak broke in this year and some products still deliver the full 14%, 15%, but delivered 6%, 7%. None of them in the history of Anand Rathi's issuance from 2012 December have ever lost money at mature.

Do you think the slowdown in the growth now will be a challenge for this MLD business? Question is from the near-term perspective, do you see that as a risk for your future flows?

I can answer it in 2 ways. One is, if I don't see a growth of 20%, 25% is 2 quarters, for example, if that's near term, I would have revised my guidance downwards. Okay, one thing you can expect from us as professionals is courage. Mistakes we do. But we generally have been taught by both my bosses, Mr. Rawal, Rakesh Rawal and [indiscernible] He's a do a straight talk and tell them. So near term, am I worried about the summation of 20%, 25% PAT growth, the answer is no. If that was the case with the slightest of the probabilities, I would have revised my PAT guidance down from 460. And you can expect this from us in the future as well. Now coming to the structure product long term, do such small cycles or longer larger cycles also impact structure product business? The answer is no. Why? Because unlike another wealth management product, the agility of a structured products is very high. Tomorrow, today, now let's assume, I was just speaking to a journalist a few days back a couple of days back, and I said Nifty has stopped representing the Indian broader market. Because there's a lot of short buildup of FIs in the Nifty stocks because we have opened up some degree of short possibilities there by some regulatory changes. So if tomorrow, Nifty is not a great barometer for me to issue a structured product, can I do it on Nifty, brought Nifty 500, if there was future listed. So there's a lot of agility in the May. Is 30% target for 5 years is 2 months to ask for the situation, then I make a product with Nifty? So coming back, long term, the agility of a structured product, which can embed any long-term derivative becomes so flexible that if the interest rates are very high, I will start buying or where will start buying, I will start selling call instead of buying puts or. So basically, if your volatility is low, the design changes. If the volatility is high, you will make a low vega product. If your rows are high, then you will make a low data -- so of course, this might seem sound like [indiscernible] and which literally is the area of it. But yes, but that's the agility the structure product has to become contemporary. Unlike a long-only mutual fund, has to be long only, right? So the extent of long is also not [indiscernible] in the category of equity mutual funds, for example, PMS, of course. But structure product a bullish has commented my new target from the long-term indication, short term, do I worry about the demand, no, I worry about when do I get my place to 50% give guidance.

The next question is from the line of Shrenik [indiscernible] from Indus.

I just wanted to -- so congratulations for the great set of numbers, very consistent. You have these HNI clients, which are INR 50 crores and above. These are big chunk of your overall revenue? I just wanted to understand, I mean that you get are similar for this segment versus, say, the crores to INR 50 crore segment that you [indiscernible]

Absolutely. I get, if not the same, marginally better. Maybe I'm not checked, but we don't give any discount on economies of scale, only increases value-added services, but does not reduce fee. So I can proudly say -- we may be one of the few wealth management outlets, which has never taken a check in direct from a client, irrespective the person offered us thousands of crores. So the answer is no. As you go up the pyramid in terms of my plans, that's why we home-grow them. So most of my largest clients have been with us for 15 years, they would have started with INR 2 crores.

The next question is from the line of Sukrit Diatomite intra Private Limited.

I have 2 questions. My first question is just on under forward guidance. Beyond the regular outlook, what are the top 2 to 3 education priorities you're focusing on in the next few quarters to drive client acquisition, wallet share expansion and AUM growth? And along side that, what do you see as the key risk from market volatility, changing the constant changing in investors' sentiment or increasing competition. And how are you preparing to manage them while tendering the company's overall market share? That's my first question. I'll ask my second after this.

This is a question that I can go on and on because you ask me everything practically, I do. So but yes, coming to the -- on the lighter note, I was saying that. But on a serious note, when you look at our principal [indiscernible] which we build our business is not do new things every quarter or every year, do the same old thing in a better fashion again and again. What do I do for client acquisition? I do events of my clients, colleagues, societies, very low-cost events, I go to their places and select 15 people. So I have done 130 events. Okay. I don't know. The -- so I have an events department, which don't do those fancy or rent. They do, of course, but those are not the premise of my acquisition. So if my client loves me, I will say, sir, -- any society make -- given radoso then he will speak. [indiscernible] or they actually refer us clients there. If they think I have added enough value in life. And if I have 14,000 families my 7,000 families have finished 3, 3.5 years. There are 2,500 families who finished 10 years maybe, right, 2,000-odd. Don't hold me to that number. So those are the guys who actually give me events. That's one way. So acquisition, we acquire on the basis of now today, website leads have become a reasonable source. Now where people reach out to us, thanks to some degree of awareness of our services. They reach out to us. So over the next 3, 4 years, I would see cold calling is something which we don't like we're doing. Because we don't like as human beings receiving phone calls on a Sunday afternoon, random people. So we want to avoid that in the future. But we are building references. I've always been 50%, 70% of our clientele. We want that plus websites; list people either have to walk up to us or they have to be referred. That's the destination model in 3 years, event we did in this financial year. So we have done -- Vishal Saras figured out in the meantime. 165 events we have done not [indiscernible] where you're trying to brand yourself as bigger and spend crores. That's not the -- so that's on the acquisition, right? Wallet penetration is delivered Jensen's alpha. Most people don't deliver [indiscernible] . If you deliver somebody, Jensen's alpha in India, Jensen's Alpha is mistaken to be alpha. -- enters a for deliver growth, that will give you the wallet. And we go with the assumption that my client is smart. Of course, that's why actually is 1% or a little lesser than 1% of India. So do I have to convince him to give me money or have to deliver to give them money. Actually, if you think logically, I don't have to convince them. I just have to deliver, deliver not absolute return because absolute is not in my control. [indiscernible] right? So relative -- relative is in my influence, not even in control. So that's where like you do a mutual fund selection out of you try and make sure that you beat the NIT or SE500 by 2% to 3% after earning by 1%. Then the client knows, okay, he's accumulating small, small buffers like our model portfolio on the equity mutual fund side, from first of June 2013 audited okay, across 13 years, has delivered 198% Alpha on [indiscernible] and about 100% Alpha right? So even if the market fell by 50%, the guide has still read lift in 30 years.

So that is in terms of how you penetrate a user, some operations and tangential other your in on core structure, technology and regulatory plan all business scalability -- and what measures have been taken to ensure the cash [indiscernible] and the margins are maintained like sale.

[indiscernible] this all will happen because [indiscernible] finished 25 years in this company. Largest of information firm depot.

Yes, sir. Good afternoon, everyone [indiscernible]

Margin maintained over Pujara. really, we have maintained all the margin or visits in our case. I think can [indiscernible] Yes, that is Technology side we have a strong technology team as well as a strong system. So technology side did not have any issues for [indiscernible] Thank you, Rajesh. So to add to Rajesh, sir, 1 is how we look at costs, we look at it, like we don't want operational efficiencies, what you call that operating leverage. We want to reinvest in our business, 40% is my target. I have to have my PBT above 40%. I have to have my PAT above 30%. This is what has been told by my boss. So it's Pasteriwe try and do that. How do we look at cost? We don't become flamboyant sometimes when things are good, so on and so forth. So one is our technology going to become more efficient. Our costs are going to go up. I don't think it will go up. Second, are we building our technology very on a different tangent than the industry? The answer is, yes. for example, we hired 4 IDMs who are designing algos for me to research, okay? One of the kind of stuff which happens in our treasury more so. So technology, we will spend some money. But any time our PAT PBT increases beyond a certain level, we would want to reinvest in strengthening a lot of okay, which is what Rakesh says, if you have to in good times when your PBT is going to go up more than you expected, 43, 44, 45 is okay, it's an order of magnitude of [indiscernible] now I don't want to impress the shareholders saying that I have operational efficiencies. I would bring it back down by investing in things which I think, which will keep my business up and running and consistently running 20 years from now.

The next question is from the line of Mona Jan from Pala Capital Partners. I'm sorry we are unable to hear you. We would request to please take care of your connection and join back in the queue. And meanwhile, we'll move to the next question which is from the line of Milan Kulkarni from MLDL.

Yes. Good afternoon. How much has the noncash charges in the quarter?

So noncash charges and mark-to-market, right? -- non-GAAP charge I think INR 40 crores.

Noncash sales INR 46 crores.

What was the corresponding quarter of the last year?

Last year in [indiscernible] , same quarter last year.

The next question is from the line of Nikhil Agarwal from Choice International.

Hi, everyone. So my question the company. In July 2020, new subsidiary, Anand Rathi went if you see insensible approval. So could you throw some light about the revenue opportunity you are targeting to [indiscernible]

Okay. If I understand it right, Gift City, we've got an approval, what kind of revenues would you expect or what kind of revenue opportunities you expect?

Yes. correct.

So we are a very India-centric organization. So we will use that license as, of course, expected and the license in nature as well to bring money to India. And when you bring money to India, we will try and deliver the Indian resident proposition to an NRI. Today, in the Indian resident proposition, we have mutual funds, which we choose mathematically and then we design structure product. So we will try and deliver the same proposition in a more tax-efficient fashion to an NRI. That's the expectation. So what kind of revenues are possible. I don't want to count my ex today. But do I see very exciting times for me if I can get global capital into an already validated proposition, answers. Will I do anything different? No. Will I do what I have done in a different platform for a larger universe and larger cancers, that is yet. So if, for example, if there is a London guy who wants to invest in India, I would use the platform to be able to offer my India proposition, which has a credibility of 14, 13, 14 years, the [indiscernible]

So any scheme -- sorry to under -- any scheme planned for this year?.

Yes. See, yes. So there are a lot of advantages there. Should I plan us any revenue you should go with for my first 20%, 25% PAT growth or revenue guidance for this year, I'm not provisioned anything. We've not promising anything. We like to see the proof of concept, what our client objectives initially. Then we meant that -- we do a lot of trial in RA before we become very confident to put them into our revenue.

Next question is from the line of Sunil Shah from SRE PMS.

Yes. Hello, is and everybody in the team always, it's wonderful to have it talk here. So my point was about the Gifted City, and I think we got some clarity there. So it's going to be inward remittances or inward investments. Are we looking at doing something out of India, replicate our model, take money out of India through the Gifted City as well? Or is it just going to be invited at least to start with. That's my first point there.

Okay, you want me to answer the first one first?