Anand Rathi Wealth Limited (ANANDRATHI) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Quarter 1 of Financial Year 2027 Earnings Call hosted by 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, Mr. Azeez.

Thank you so much, Michelle Ma'am. Good afternoon, and thank you, everyone, for joining the earnings conference call for quarter ended 30th June 2020. We have today without the Group CFO, Mr. Jugal Mantri; the CFO of ARWL, Mr. Rajesh Bhutara; and our Head, Investor Relations ships, Mr. Vishal Sanghvi. . As we have always shared with you, we remain committed to delivering consistent profit growth. I am pleased to report that we have delivered another quarter of consistent performance, which is our 19th quarterly result. I would like to sincerely thank our clients, employees and all our stakeholders for their continued trust and support. Despite the volatility which you all are aware of, in the quarter 1 FY '27, our uncomplicated business model and unwavering focus on client outcomes helped us deliver consistent market-agnostic growth. This once again demonstrates the strength and resilience and the scalability of our business. The mean Y-o-Y growth of our last 17 quarters, keeping the first 2 because there was a COVID base. Profit has been growing -- has grown at a median of 31.7% Y-o-Y and a mean of -- sorry, mean was 31.7% and median was 33.1%. Seldom do listed companies measure the consistency of the earnings and the standard deviation of these 17 numbers, which are Y-o-Y PAT growth declared for the last 17 quarters, the standard deviation was 4.8%, reflecting the consistency of our performance mathematically rather than in English. Total AUM grew by 21% Y-o-Y to INR 1,06,300 crores as on June 30, 2026, supported by the net flows of INR 2,743 crores for the quarter despite high volatility equity capital market reflects our clients' continued confidence in our business model. So this quarter, we had INR 1,900 crores of net sales in equity mutual fund alone. In our flagship business, in the last 12 months, we have added 1,600 plus new client families on a net basis, bringing our total number to close to 14,000 to be precise, INR 13,041. Client attrition rate in terms of AU loss for Q1 FY '21 was 0.09%. We'd love to see this number second decimal. But yes, we would love to see it in fact. Underscoring the strength of our client-centric uncomplicated approach. Zero regret attrition for the quarter is another highlight. Now I hand over the conference to our Group CFO, Mr. Jugal Mantri, to give you all the updates of the subsidiary companies and the consolidated financial performance of the company. Jugal sir, then I hand this over to you.

Thanks, Feroze bhai. Thanks, Michelle. Good afternoon, everyone. Let me first talk about our other businesses in subsidiaries. Digital wealth business, which is B2B2C business registered AUM growth of 23% year-on-year to INR 2,536 crores, and number of clients increased by 16% to 7,320. [indiscernible] business, which is SaaS platform has 6,890 subscribers with platform assets of INR 1.66 lakh crores for the full ended 30th June 2026. We have also started operations in U.K. and very soon, you all can see this business flowing from there and start contributing. Now let me give you a brief of our Q1 FY '27 consolidated financial performance. Excluding fair value gains on investments, ease of expenses and related tax effects or consolidated total revenue for the Q1 FY 2017 stood at INR 36 crores compared to INR 284 crores for Q1 FY '26, registering are 13% Y-o-Y growth. Profit after tax stood at INR 16 crores showing a 24% Y-o-Y growth compared to INR 94 crores in Q1 FY '26. Profit after tax margin is higher at 34.4% for Q1 FY '20 compared to 33% in Q1 FY '26. During the first quarter of we have achieved 24% of full year revenue guidance of INR 1,415 crores and 25% of its full year PAT guidance of INR 460 crores. Given the strong business we have built and the opportunities ahead, we remain confident of achieving our guidance. Reported numbers, including fair value gains on investments, ESOP expenses and the related combined tax effects, total revenue for Q1 FY '27 stood at INR 430 crores in and paid at INR 163 crores. That's all on the financial numbers. Now we can start question-and-answer session. Over to you, Ms. Michelle.

[Operator Instructions] The first question is from the line of Shubhi Gupta from [indiscernible] Managers.

So my first question is that we are expecting platinum families to grow from to about 450 to 500 over 2 years. So I wanted to ask what is the quarter 1 update on that number? And how much is the contribution from them? My second question is that clients from less than 5 crore bracket upgrades themselves to INR 50 crore bracket. So I wanted to understand at what rate does that happen? Is your how much of the first bucket upgrades the second market.

I didn't get your second question, Shubhi, if you can repeat that for me.

Yes, sir. So basically clients from less than INR 5 crores bracket, upgrades them to INR 50 crores bucket, which is a target market. So wanted to understand that at what rate does that happen? Like how much of that first bucket get answered to the -- or upgrade themselves to the second bucket?

The first -- so first question is what's the update on the platinum clients. I think platinum clients would be about 230 now approximately from 211. And this is a segment which we have launched just about 2.5 years back, when we actually launched this segment, we had about 40, 45 clients only. So if you ask me whether we will get to that 400, 500 number sooner than later. Of course. The second question automatically is the next question of the first question or the subset to the first question, how many people upgrade? 550 is a large segment. So we are actually now also trying to segment our clients into gold and platinum. These will be the only 2 segments we currently to have. So I think the upgrade rates would be something like a few quarters, 2010, '15, '20, a quarter. That would be my guess. Because we generally believe and not going to people, quite a few rent management outfit, figure out who's gone into money by a transaction, large real estate transactions or large private equity transactions, if people come into money a few hundred crores. most wealth management output sites there and try and get a share out of that. We believe in growing our clients internally. So I think there will be a hockey stick kind of count increase. Like in the last 2 years, it went up from 450 to 230. So I wouldn't be surprised that you would see it in 4 digits in a few years.

Okay. Sir, just one more question. Sir, AUM per RM leasing, I think it's INR 230 crores per RM and now it's been increasing. So is there a cap on that? Or how do we see that progress?

There's no gap in terms of the amount of money. Of course, there are relationship managers who spent about 15, 18 years with our company. Most of them could be at INR 50,000, INR 800,000 crores also. If somebody has created a business for about a couple of decades, this business is about mass and time, not about speed. That's what we've been saying. So good rolling stone grades, no mass in this business. Anybody who changes companies in this business has -- if you look at data, anybody who changes more than 3 companies. The guy leaves the wealth management industry before he retires. So coming back, is there a cap on the AUM, the answer is no. Should that number go up? The answer is yes. when we got listed, if I'm not wrong, that's when we have got INR 100 crores per relationship manager. Now we have had more relationship managers, and we have more AUM for RM. And since this business the key crux is what's your client attrition, what's your attrition. If your client iteration is 0.09, it is but obvious that this number will keep going up. So piece companies AUM per RM can come down, then you would automatically -- it will -- and it's a case in effect. So you'll automatically should work backwards to check what is the client attrition you will see in a few percentage, 4%, 5%, 7%, 10% also in so many wealth management outfits. So will this number growth? The answer is yes. If this number -- will it plateau on there I guess, no. Because this is a self-fulfilling process because if a client -- like, for example, I have a relationship manager. In fact, most of our leaders, we have about 86 liters and 19 unit ads. All of them are relationship managers. But Pakistan also manages client by managed clients. I think yes, INR 2,000 crores could be an easy number per PM, and we achieved that in a few cases, depending on how long a person is spent in the company.

We'll take the next question from the line of Jignesh, an Individual Investor.

Yes. So I had 2 questions. Firstly, in such a bad market like we had from April to June, how do we actively manage our asset allocation during such a high volatile market. Second is why I think you as a house are having call that we will not invest in board. But sir, wouldn't it be fair that many of the people have invested in multi-asset funds and maybe sold out in the last quarter and entered small cat. So this -- so I wanted to understand this, how is this actively managed?

Jignesh, see, of course, asset allocation, if your overall risk is high in the portfolio, like we measure it in the form of beta, of course, most of people on the call would know develop there from financial services industry because we have a lot of analysts beta is a risk measure basically trying to risk evaluate the related to a certain index. If my beta is very high, then I need to do active management. Let's assume if her treasury is there. He's got some portion of his money with 2 beta, then he needs to go in and come out of the market. We operate highest beta portfolio is 0.6, 0.65. That means you're taking lower risk than it mathematically not even perception. In mathematics, you are taking lower risk than left, so you don't need too much dynamism. So that's point one. Point two, you're not buying the riskiest asset in equity. I buy mutual funds currently because that's the most tax-efficient platform. And mathematically, somewhat were to without bias, if we try to create a diversified portfolio, mutual fund becomes the best platform for a diversified portfolio. So I already have vehicle, which is the lowest if I was recommending stocks, for example, those are high beta in the equity portion. So low beta overall portfolio and conservative equity allocation and structured products makes my overall portfolio, a low beta portfolio, hence, active management on actual location becomes lower of the need. Then coming to gold if we have this principle, very important principle, and that's the foundation stone on which our cultural or professional fabric is at least laid out is, we buy -- we sell what we buy rather than sell what sells. So gold already is 28% of India's household savings. Out of the INR 1,600 crores approximately, 28%, which is 4 trillion or INR 4 crore crores is already there in gold in the almost 50,000 tonnes. If already we have so much gold, if wealth management also start selling gold then an equity mutual fund is 1.8% and I'm supposed to be selling equity wine-selling gold, which is already 28% of Indian household savings, especially after the gold has gone up 3 times. That's the reason why we don't recommend gold because India has enough of it and it has doubled after 20 -- almost 15 years later, gold has got this rally above 2,000 going to 5,600 and people are still recommend gold in January when the gold are touched by [indiscernible]. So that's why we don't recommend gold because India has enough of real estate and gold.

Right. So out of your total portfolio allocations in mutual fund, all are purely into equity as of now. .

No it's not purely to equity. If I remember right, we have [indiscernible] in equity, INR 4,500 crores in debt and some structured products and some raw material, which gets aligned to the model portfolio over periods of time. So it's a combination of all, but largely mutual funds and structure funds.

The next question is from the line of Rohan M from Equirus Securities.

Congrats on good set of numbers. Sir one question on this other income INR 110 crores that you have, what is sitting in there.

So INR 110 crores of other income is basically mark-to-market gains of our holding. Jugal sir, you want to take that one?

Yes, Feroze bhai. Out of INR 110 crores is INR 96 crores guided mark-to-market gain in the holding of Anand Rathi Global Finance Limited. And that is the normal other income, which is interest income on the surplus which we carry.

Sure, sir. And just on the NBFC revaluation that we have done, like what is the thought process behind that? Like how did we revalue it?

No, we don't believe you. We get it revalued from the third party. So investment banker, he does the evaluation. and this has to be revalued in every 6 months. So this is obligatory on us to get the company revalued every 6 months, and we should incorporate that revaluation either the increase or decrease in valuation whatever comes. We have to incorporate the same in our P&L account.

Sure, sir. Sure. And sir, what will be the primary and secondary issuances of M&A this quarter?

The primary issuances at the gross level in Q1 was about 8% higher compared to last year. So it was to the group one. So it was INR 1,825 crores. compared to INR 1,704 crores to the group companies and INR 312 crores of the primary issuances of the third parties. So total, it was INR 2,187 crores compared to INR 1,704 crores in Q1 of -- and secondary, the number was INR 968 crores in Q1 FY '27 compared to INR 755 crores in Q1 FY '26.

The next question is from the line of Vikas Agarwal, an Individual Investor.

I have a question for Feroze. I remember Feroze have once told that 3 of -- is RM has gone to competitors. So what is the retention of their assets? Like how do you retain their assets to switch to competitors? .

Mr. Vikas, right? Mr. Vikas, thank you so much for your question. Yes, you remember right. So I think in the last -- or the last to last earnings call or the December quarter ending, I had said that 3 of our colleagues went to a specific company. which -- so I have my colleague, Vishal?

So yes, so we basically believe that when a person goes to a newer platform or another company change, if the company is -- Anand Rathi is a very process-driven company, client retention becomes a very important objective. And that has been achieved in the form of -- if I'm not wrong, generally 70% to 80% of the assets at least get retained. This specific company was wanting to hire people at well seen salary because they've raised some capital. So that's why I might have mentioned that 3 people went there and that data we have how you precise numbers I think it will be in the range of 80% retention. Now when you look at retention, we don't add mark-to-market. We take the precise net flow of those specific clients who were mapped to that person on the data resignation.

Okay. I have another question.

Yes. In the meantime, you split [indiscernible].

Yes. How do you plan to derisk your structured product business?

Derisk structured products business. So basically, when you look at our recommendation to our clients, it's mutual funded structure. There are 20 different product lines are possible. We believe opportunity is overrated, focus is undertreated. This is what Rakesh sir has thaught us, who is don't have to give everything to the client. So structure product, it still is a market risk reduction mechanism bras. In that structure product, we sell Anand Rathi Global Finance structure products and third-party products. The proportion of Anand Rathi is greater and third party is low because we believe that lending money to somebody else, you have to be very, very careful of a credit risk, not [indiscernible]. So Anand Rathi Global Brand is a group company, and that's why our comfort remains there. What you would see as a risk of concentration. For me, it is a derisking in it because we have already seen such a product, popular issuers in India almost went [indiscernible], and 1 of them actually went [indiscernible]. So having -- of course, when they went belly up, there were a lot of [indiscernible] conventional bonds, which were there in the mutual funds portfolios of that specific AAA-rated so-called company. So coming back, structured product helps you derisk the market and brings down the beta of one's portfolio. That's one. Second, when you're speaking about concentration risk, concentration risk on ARGFL is because we believe that lending to sudden corporate have to be very, very careful because there is this concept what you see as risk is my derisk. Also Vikas, [indiscernible]. So we -- so the day when these 3 gentlemen design initially all these 3 work from women. So INR 75 crores is what they had, net flow was INR 73 crores in July. So now we have INR 685 crores of the INR 758 crores with us currently. 58.5. This is as of June unit. So one person was we could take away a little more. The other could take away less. So basically, 90% of it is retained a profitably without the market move, of course. Does that answer Vikas [indiscernible]?

Yes. This was a pretty good explanation for sure. .

The next question is from the line of Anita Singhania, an individual investor.

I would like to ask 2 questions. My first question...

I'm sorry to interrupt you, there is a follow-up on the line. Can you mute all the other lines, which are connected from the same room?

Yes. is it better now?

Yes. Please go ahead.

Yes. I have 2 questions. My first question is, as you already applied for mutual fund license, is there any plan to expand in other capital market businesses such as investment banking or others? And my second question is, can you explain your plan and views on the [indiscernible]?

Okay. So yes, we have just a lot of board consent appeal to apply for an AMC license. We believe that arming of sets is very critical because we have some aspirations, long-term aspirations for this business. So arming ourselves with all the ability is something which we see as our duty towards our shareholders. So yes, that Board content to go and apply for the AMC license one. Second, will we get into investment banking. Of course, the Anand Rathi Group already has an investment banking win I guess you're asking me this question because quite a few wealth management outlets, try to get their assets from investment banking [indiscernible], like I just alluded to in the previous answer. Sometimes, people go after [Foreign Language] But those are -- we believe that, that is capital management, not wealth management. By design wealth management is in generational in our belief. So we are trying to get that portion of the assets, like INR 6,300 crores has been filtered to see a large portion of that is intergenerational there. So investment banking for the world has a very large synergy with wet management, but we believe that getting intergenerational wealth doesn't come from investment banking transaction. That's why. But for example, I must tell you, Ms. Singhania, one of my friend works with a real estate firm, and he says that the promoter has got a few hundred crores or a little over INR 1,000 crores for the next 5, 6 years, we can in I'd say Anand Rathi Wealth Limited is not interested in 5-, 6-year money. So that's why no investment banking. And of course, quite a few people have had a strategy to build it there. And there is nothing wrong with it or right with our strategy. But yes, [indiscernible], we want to not focus on capital management, but in business management. Wealth management business is more longer term and international wealth is what interests or appeals to us. So only AMC, no collateral other businesses like investment banking. [indiscernible] yes, results on reacting me, but I keep the LRS.. Again, LRS, actual, let me again say what I just said, focus is underrated and opportunity is overheated. Everybody these there's so much opportunity of the LRS money. Clients also will need it, maybe clients need it. But if 182 product people are trying to understand India, and we are still somewhere we are cracking the surface. If I have to give global recommendation across so many markets, I will at least have to have 200 product people sitting somewhere in Singapore and Dubai. Making tie-ups is very easy. Wealth management like ourselves can go to another private bank and tie up and refer our clients, but we have been told by our boss, Mr. Rathis and Rakesh sir, that only speak in places where you understand second decimal. Otherwise miss the opportunity, you are better off doing that. You can't be everything to everyone for all portions of their money. So LRS is something which is currently part is. Of course, it's a huge opportunity, but we are okay to miss it.

The next question is from the line of Lalit [indiscernible] Deo from Equirus Securities.

Just question on the gains. [indiscernible] We have been hearing a lot of land that can in the exenteration, going out in polite impact, we have been passing on the distributor to [indiscernible]. And then secondly, with respect to the deal on the plan guarantees that the there is an expectation that volumes on the does it impact -- does it have any pioneer on the vehicle business represent [indiscernible].

Right. So your voice was muffled. I tried attempting to hear you. Correct me if I'm not understood your question correctly. First one is AMCs are believed to transmit all the TR pressures to distributors. Is that your first question, sir?

Yes.

Yes. So I think some degree of 2 intro happens. But since we are now seriously large diluter, it becomes difficult for them to also transmit all of it. Whatever is rightfully or 1-2 bps, I think I would have told you last time also, those get passed on. . But in this -- now that you've brought me to subject, I would like to highlight in FY '19, '20 -- was it FY '19, '20? About 6, 7 years back, we -- out of the total net sale in India, Anand Rathi Wealth Limited was 18%. Now for the quarter, is it Vishalji?

[indiscernible].

For FY '26, you would be happy to note if you're already a shareholder. But the 0.18% market share on net flow has gone up to 2.47% as highlighted in the presentation. So since we are a large distributor, we also have some bargaining power is the point I'm making, and we might be the only wealth management, one of the few wealth management outlets, which participate our long positions of our clients only using a metal -- we don't recommend stock. We don't on PMS, we don't recommend long-only AIF currently. If my clients need someday I might. So my other wealth management distributions will generally be having mutual fund as 1 of the products. So it gives me that little extra, but 1, 2, 3 bps of transmission might happen here or there, like I told you last time also. And from the side yield better more because mark-to-market comes because of that, sometimes you keep -- so 2, 3 bps is very little on a base of 1.09, if I remember, right, post GST, which is what [indiscernible]. Does it answer sir, the first question?

Yes.