KFin Technologies Limited (KFINTECH) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Q2 FY '24 Earnings Conference Call of KFin Technologies Limited, hosted by Kotak Securities Limited. [Operator Instructions] Please note that this conference call is being recorded. I now hand the conference over to Mr. Abhijeet Sakhare from Kotak Securities. Thank you, and over to you.

Thanks a lot. Good morning, everyone. Welcome to earnings conference call of KFin Technologies Limited to discuss the 2Q FY '24 performance of the company and share industry and business updates, we have the senior management with us represented by Mr. Sreekanth Nadella, MD and CEO; Mr. Vivek Mathur, CFO; and Mr. Amit Murarka, Head, Investor Relations. I would now like to hand over the call to Sreekanth for his opening comments, after which we will take the Q&A. Sreekanth, over to you.

Thank you so much, Abhijeet. Very good morning, and a warm welcome to everyone who joined this conference. I start the conference with a fair amount of optimism and a lot of confidence as we move into the second half of the year. Clearly, the results of the quarter that had just gone by hopefully has instilled similar amount of confidence in you as well. As always, I will spend about 20-odd minutes explaining a little bit about our results and just as importantly, how we look at the rest of the year and then going forward. I will hand over at which point in time to Mr. Vivek Mathur, who will cover the financials. Specifically talking about the organization and with the strength and its current scale of its operations, we continue to be the largest investor solution provider to the Indian mutual funds from the standpoint of the number of asset management companies we manage. We continue to manage near about 60% of all the operating AMCs, 25 out of 46 to be specific. We're managing now close to INR 15 trillion of assets under management spreading across these asset managers. For the quarter that had just gone by, we again had our overall AUM growing ahead of that of the overall market. Our win rate in the mutual funds business continues to be impressive, even as the overall assets under management coming from the equity component is about 55% of our total AUM, occupying a market share of about 34%. SIP monthly inflows about 40% plus. As always, the SIP monthly flow is a very, very solid and a scientific indicator in terms of where we expect to see the overall equity AUM over a period of time even as the secured retail book continue to persist. From a Folio standpoint, KFintech today manages near about 23 crores of folios in the country across mutual funds and corporate registry, making us not just the largest in India, but one of the largest in the world. When you de-duplicate the number of folios, the number of unique investors that we manage would be a little around 90% of every investor who invest in this country is served by KFintech in one form or shape. The other large business we have in the form of issuer solutions, we have improved our market share substantively to now about 47.5% in the form of the market cap of the companies that we render our RTA services to in India. We have continued to add more and more listed and unlisted companies. Today, we manage about 5,693 corporates. We have added significant IPO book this year, and then we are well positioned in terms of the pipeline of the mandates that we have won, but the companies who are yet to go public, which means that in the coming few quarters, there is more traction to gain. While mutual funds and Issuer Solutions continue to be our larger businesses, as we've been maintaining, it is the other younger businesses, which is largely our international business, fund accounting administration for alternatives, for mutual funds, for pension funds, for insurance clients, so on and so forth. And our pensions truly have been the ones who have been growing much, much faster. We have grown a little over 48% year-on-year in terms of revenue for this younger business as against 16-odd percent for the mutual fund business. So it clearly speaks about a factor of 2 to 3x the growth of the larger businesses. Given the sizable addressable market that exists out there, we hope to maintain this track record, which over a period of time, would continue to reduce the dependency on one large business, providing the resilience that is required in terms of having too much exposure to a single asset class to a single country, so to speak. And not just the country, but even from a business line standpoint, it's not just the transfer agency. We are uniquely positioned to be the only large entity who can manage both the transfer agency and the fund accounting administration side, which is the only asset side of a fund manager. We have assessed ourselves on the ESG to be rated A in the previous year. The rating for this year, the assessment for this year is underway, and then we hope to get the results into early part of November. we hope to maintain and improve our ESG rating, which we are very, very passionate about in terms of driving the business in a very sustainable manner. Also glad to inform you in terms of expansion of our products and portfolios over the past quarter, we have added several cutting-edge products and platforms for the betterment of our end clients, for the investors, for the distributors, India and abroad. One of such platform is called the Guardian, which is the country's first and the only platform, which fully integrates AI with our account aggregator constructs into insider trading platform to be able to provide a very, very compelling solution, one, for every asset manager to be able to report the trades and manage the internal compliance; and two, for the regulator to be able to monitor should they so wish to. Quickly going into the quarterly performance. Financially, we have grown our revenue from operations at a consolidated level at around 16% year-on-year. That translated into 2x out of the EBITDA multiple at 32% with the overall EBITDA margin standing at close to 45%. The PAT grew at 28% year-on-year and the overall PAT margin stood at 29.3%. This marks an impressive areas of growth, both in terms of top line as well as cost optimization. Whilst much of the margin expansion had also happened in terms of the younger and the faster businesses contributing, it is also the more mature businesses contribution, especially in the form of the technological transformation that we've been able to render also helped us to improve our margin profile. Talking about the domestic mutual fund business. Overall AUM at 20.5% year-on-year, we have grown as against the industry average, which was closer to it. So we've grown alongside the AUM. On the equity side, there has been a slight dovetailing that of the industry and not necessarily equating the industry growth, and that is a factor which we hope would change rather soon even as several of KFin's clients have large new fund offerings scheduled to happen into the upcoming quarters. Our monthly SIP inflow stands at 40%, which is a very important factor. SIP itself has grown leaps and bounds to now touch close to INR 17,000 crores per month, not just providing the resilience to the AMCs, but also to the overall capital markets of India at this point in time. We also have 6 of the top 10 asset managers with the fastest percentage of growth in AUM with KFintech. Some of the growth of -- the growth of our younger and the medium-tier AMCs has been truly the hallmark for the growth of KFintech over a period of time. And of course, we will see the cyclicality, the fund performance, what have you. And it is very heartening to note that despite slightly behind growth on the equity side, our overall revenue has grown near about 16% and the income has grown about 18%, so to speak. On Issuer Solutions, 172 corporates have been added in the Q2, taking the total count close to 5,693. Every single day, we add near about 3 to 4 clients. And we believe and firmly believe that as the years grow, all of this would add a significant amount of resilience to the earnings of this company. We've been appointed as the RTA for the State Bank of India, which is a matter of pride for us. And we have also managed the top 3 IPOs in terms of the funds raised this year and 4 out of -- and 6 out of the top 10. Our market share has expanded by 140 basis points from 46% to 47.4% in this particular quarter as compared to that of the previous quarter. This is for the manage -- the companies that we manage, the registered work in the corporate registry side. We have, as I said, a pipeline of several more IPO mandates that have been won and into the coming quarters, as the companies find a suitable time to launch their IPOs, we firmly believe would help us to continue to maintain not just impressive win rate in the Issuer Solutions, but also in the corresponding and commensurate revenue associated with that. On the international Investor Solutions, we continue to add more clients. Our total client base at this point in time stands at 50. Very happy to inform you that our first client in Singapore, we have gone live in the preceding quarter, and we have 2 more clients, one of whom is under the final leg of the contracting and another one in the process of the transitioning. We have also won our maiden contract in Thailand in the form of Bank of Ayudhya Public Company Limited, which happens to be the fourth largest asset management company. KFintech would be providing the fund administration services for this particular client. And the pipeline in Thailand has opened up quite dramatically in just a matter of a few months, even as we have been chosen to be the first such third-party player to be running that solutions in Thailand. We have also won another contract with one of our existing clients to manage the distributor platforming and 2 more LOIs, a Letter of Intent received in Malaysia for FA and RTA solutions. We believe that into the coming quarter, we would close the contract and initiate the transition soon after that. On the alternatives front, we have continued to extend our market leadership. Today, we manage 37.2% of the total number of funds launched in India, totaling to about 434 that we manage. The overall AUM for the alternatives has been steadily on the rise, and it has grown 36% year-on-year. And in terms of beyond the alternatives itself, we also do a significant amount of wealth management platforming and solutions. And on the fund administration side, we won the first general insurance client in India. And also our extremely proud to be chosen by the LIC Pension Fund Manager for us to be transforming their fund administration as a solution even as they continue to be one of the top performing PFMs for national pension system. Outside of this, purely from a technology solution standpoint, we continue to maintain our position of being a market leader in terms of providing digital solutions at scale. Big data and cloud are 2 very, very important topics for us. For a company that sits on near about 6 petabytes of data, it is that obvious that we need to get our strategy correct. Very happy to inform you that much of our data is already cloud provisioned. We are rewriting our application layer into the cloud as well into latter half of November, we would have launched the country's first cloud-enabled and a fully classified alternate investment platform, not just for India but for the world. On the national pension system, our subscriber base grew 24%, even as the overall subscriber base at a country level has grown 11.5%, which means that we've been growing 2x that of the industry national pension system, which helped us to improve our market share from 6.9% to 7.7%. That is 80 basis point increase within the year. And we continue to drive our growth through significant value that we add to the corporate clientele to the points of presences and into the eNPS as a platform. So we continue to be very committed to the cause of driving pensions as a theme even as financialization grows into the country so that individuals are protected from their retirement standpoint by a very concerted and cohesive financial planning, which covers primary and secondary markets, mutual funds, alternatives and pensions. The overall industry performance itself has been nothing short of spectacular. As many of us know, there has been a near 20% rise in the AUM in the Indian mutual fund industry over the past 6 to 7 months. It is extremely welcoming and heartwarming. And of course, I firmly believe as also is the expectation of the industry in terms of reaching INR 100 trillion AUM over the next 4 to 5 years. This growth not just signifies but also gives confidence in terms of the potential more than doubling of this particular asset class and hence, the growth of the asset management companies and also their agents such as KFintech to part take in that growth along the way. Same is the case with the alternatives, substantial growth near about -- I think the last quarter itself, the overall capital that had been committed and drawn down had been a little low. I think that's largely in the context of the rising U.S. yields as well as inflationary pressures. That notwithstanding the overall alternatives industry has grown very, very rapidly, nearly 6x over the last 3 years alone from near about INR 800 crores to now close to about INR 3 trillion. I think this has been a phenomenal run, and I think it's still the beginning of the growth that we are about to see. What is also important for us, given we are the only intermediary in the country who cuts across every asset class, the growth of demat accounts and the IPO is something that we also track very, very closely. There has been a significant rise in the preceding 6 months and the demat accounts have increased near about 26.4% year-on-year. And that obviously, the expansion of retail investor base as well for a business model like that of ours and the continued expansion of the individual investors always helps more money to move away from savings into investments, more money away from real estate and bullion such illiquid investments into what is more liquid and long-term well-generating asset such as financial services. Overall, mutual fund investor, our AUM, I've already called out in terms of our growth, we have grown 20.5% year-on-year in terms of AUM even as the industry has grown at 20.3%, slightly lesser in the case of equity, which effectively means a fair amount more money has gone into the debt money market and the assets, so to speak. SIP market share, we have grown 18.5% year-on-year, and that is a very, very important metric we track to. Not just do we track, but we also do everything we can to improve the inflows into the SIP market through technological innovation. So with that, I would quickly hand it over to Vivek to cover the financial highlights of the company, and then we will leave the floor for questions.

Thank you, Sreekanth. On the overall financial performance, the revenue from operations on a year-on-year basis for the half year has gone up by 12%. But same period -- same quarter last year versus this year, it has gone up by 16%. Sequentially, quarter-on-quarter, the revenue from operations has gone up by 15.1%. Overall, we are now at -- we did about INR 390 crores of revenue in the first half of the current year, backed by the stellar performance across various business lines that Sreekanth explained. Now the overall EBITDA margins, if you see, EBITDA itself has gone up about 23% year-on-year. And if you look at same period last year versus this year, same quarter, it has gone up by about 31.8%. Sequentially, it has -- EBITDA has grown by 33%. And now in this quarter, we have got an EBITDA margin of 44.8%. And for the half year, current financial year, it is 42%. So there is a jump across revenue and EBITDA margin, both as a result not only of the increased revenue, but also in terms of containing cost. So both in terms of employee costs and other expenses, we have been able to maintain trajectory with investment in IT and automation. It has not gone through the roof, and we have been able to maintain it to increase the EBITDA margin. Therefore, overall PAT, if you see, has gone up about 22.7% year-on-year. Same quarter last year to this year, it has gone up by 28% and quarter-on-quarter, it has gone up at 41.5%. PAT margin has also improved in this quarter to 29.4%. For the half year, it is 26.8%. And sequentially also, it has gone up. Overall, the performance, I would say, is good for the half year ended FY '24 for the quarter and sequentially quarter-on-quarter, we are now having a cash and cash equivalent balance of INR 374 crores as we speak. And the diluted EPS has also gone up to INR 6.11 versus INR 5.05 same period last year. And that is all something where we continue to remain invested in building future, going to new geographies and launching new products. As far as the segmentation is concerned, domestic mutual fund continues to remain at around 70%, 71% of total revenue. Issuer Solutions revenue is about 13% of the total revenue from fee services. International and other solutions are 10.5% of the overall revenue and GBS has come down to about 5% of the revenue. So this growth, coupled, as I was explaining, the employee benefit expenses, if you see, are just about 1.6% increase year-on-year, resulting in a better EBITDA margin and PAT margin. So that covers the financials. We are happy to take questions now.

[Operator Instructions] We have first question from the line of [ Pawan ] an investor.

Sir, may I know what is your dividend policy, sir?

So the dividend policy is stated that it comprises of a decision of the Board considering various factors such as investment for future in IT, geographical expansion, investing in developing new markets and new businesses. And in the process, whatever surplus funds are there, the Board will take a call in terms of when to declare dividend. Declaring dividend is easy in terms of paying back, but creating future moats in a growing company is equally important. So Board will take a call in times to come in terms of when to declare dividend. There is a dividend stated policy in the same lines as I mentioned to you, which is approved by the Board.

[Operator Instructions] We have a question from the line of Aejas Lakhani from Unifi Capital.

Congratulations on a good set of numbers. Sreekanth, could you just spell out that some of the wins that you've had in the international geographies, you mentioned that Singapore clients will also go on stream. Malaysia is also in the process. So I just want to get the sense that are these all under that onetime charge before they move to the recurring basket?

Yes, short answer, yes. These are a combination of transfer agency and fund accounting clients. The Singapore client that had gone live is for transfer agency work for mutual fund with the master feeder mechanism that happens in Singapore. The clients in Malaysia that we are -- the one we signed and 2 more LOIs that we have received for large fund -- large asset managers in Malaysia are effectively on the RTA work again, right? And the one in Thailand, as I've already mentioned, the Bank of Ayudhya is for fund accounting administration. All of these clients, there will be an initial transition phase followed by go-live. From a pure revenue standpoint, the transition itself will be charged as a onetime -- and the run component will be on certain basis point charge basis, right? The fund that has gone live in Singapore already, as I said, the transition is complete, and we've completed in a record time in about 7 weeks, and we are live as of October 2.

That's wonderful to hear. The next one is, if you could just quantify that you've been making significant tech investments ahead of the curve, like you've spoken about even in your initial remarks. So what is the quantum of investments you have made for the year? How should we look at it for the rest of the year? And how should we think about this number in the year ahead?

So I would classify the investments into 2 buckets, I mean, broadly just to make it easier and palatable. So one is the pure infrastructure and hardware component of it all, right? As a company that's growing and the data that doubles near about every 14 to 15 months of late, it is a significant amount of hardware consumption that is required for us to do it. So corresponding to that and commensurate to that, it was our movement of data center away from an in-house managed into a Tier 4 platinum standard data center that we moved about 2 years back. We continue to expand infra costs in the form of servers and routers and the end user computing at a decent scale. And as we move a lot of our data and application layer into the cloud, we intend to bring down the CapEx requirements over a period of time as much of it will be cloud provision. That, of course, will have a countervailing effect in terms of OpEx going up even as we pay more to the cloud service provision. So to that extent, we've got a budget the previous year to the tune of about INR 80 crores. And this year, we have slightly expanded that. We -- and that covers a component of hardware as well as a significant amount of products and platforms that we develop. Only if there is a substantive product development, which has a significant economic value over a long period of time, do we capitalize some component of it. So all of it put together, roughly, I think INR 60 crores was for the previous year, and we'd like to believe that we'll spend similar amount this year as well. And the share -- and probably if I may just add one important factor from that in terms of what is the outcome. Of course, in addition to rendering better solutions and services to the existing and the new client -- but the pure revenue that we could generate on the value-added solutions and services backing on the top of these products and platforms has risen from 5% to 7% over the last 24 months of the total company value.

Got it. That's clear. And these elevated costs or these higher costs will remain for FY '25? Or will they start to moderate out in '25, given that you've been spending a lot and bulk of it would be over?

Yes. Short answer is yes. We expect a moderation of infra spend in '25. We are hoping to close out much of the application rewrite to be on cloud by end of fiscal '24 into early '25. and by which time much of the work would have moved away from on-prem to the cloud, at which point in time, we would not be needing too much more infrastructure in the form of servers, if I may. But the end user computing, some requirements will be there as, for example, the laptops, et cetera, will tend to get aged every 3 years or so. But that would definitely come down. I'd like to believe by a factor of anywhere between 25% to 33% of the total spend.

Got it. And just 2 more questions. One is, you spoke about the Issuer Solutions business as well. Just wanted to understand the elasticity of pricing here. We do earn between INR 8 to INR 9 or INR 10 per folio, just as a theoretical number broadly what we do. So is there a scope that we can increase the pricing element there? Or is it a function of several things, which still ensures that we are in that band only?

So price increase in corporate registry clients happens, unlike in the case of mutual funds, if I may. And that's something that we orchestrate every year, right, in the sense that it is not easy to take all 5,500-odd clients and then do a price increase. So per year, of course, and this is all based on when the contract comes up for renewal. As and when the contracts are coming up for renewal, we are pushing for a price increase. In some cases, it is genuinely warranted. For example, if there is a folio increase for a particular client and that cost increase over a period of time, there is a genuine necessity for us to increase the price and then we orchestrate the same. So what you might not have seen is a single year increase, and that's what you would see if you were to trigger a price increase across all the clients at one go. But given it doesn't work like that, typically, about 7% to 8% of our clients, we look to have a price increase after negotiation about 5% to 6% eventually turn out to be a price increase scenario. At the overall level, you may not see a tangible increase, but every year, there is a price increase because of the folios that happens.

Got it. That's clear. And could you speak a little bit about your acquisitions. They've been doing quite well in terms of your cross-sells, even a little bit about account aggregators. So currently, as you have acquired these smaller entities, you have retained those teams and are letting them do their job. So could you just speak about now that they are fully integrated, what is the elements that you all talk about? Is it very strategic? How does the cross-sell between clients happen? A little more on that.

Sure thing. Thank you. That's a great question. And our M&A strategy is conceptualized with a view to drive 1 of 3 factors. The first one is to drive demographic reach and geographical expansion. One of the other parameters is to drive and add new product and portfolio solutioning into our arsenal offerings that we do. Three, to drive depth into an existing business. If I may, the third one is, I wouldn't say less important, but then is of less focus, if I may, in the sense that when you talk about it, what you're talking about is consolidation, buying a few other companies who are in the same space, that will add up to your revenue. So as a philosophy, we are not very interested in just increasing our book by buying revenue. We are looking to increase our business and grow and add a lot of value to our clients by the first and the second parameter, that is the product and the platform expansion and the geographical spread. This anchors back to our overarching goal of being a global fund administrator of repute and scale. In order to do so, we need to have geographical presence. In order to do so, I need to have the enough number of products and platforms in our arsenal, which are relevant, not just in India, but globally in whichever geographies that we belong to and then want to expand into. So in that context, expansion such as an acquisition such as Hexagram, for example, right, which we have acquired 100% 2 years back was done only with a singular focus of achieving those 2 objectives, right, because the company was large or it was profitable, so on and so forth, right? But we have bought that because we believe that it will add the right kind of talent that is required and the platforming that is required to be able to provide holistic services and chase a much larger addressable market, right? And then we also have been reasonably successful in converging many of these organizations we have acquired from slow or moderate growing companies to fast-growing companies and negative EBITDA companies into positive EBITDA companies in just a matter of 12 to 15 months. So that has been our strategy, and then it's been working well. We also firmly believe in a technological cohesive. So when we acquire a company, very, very dispassionately, we evaluate and understand should we have a complementary platform, do we shut ours down or do we keep the one that we have acquired. And that kind of a focus is very important tactically because that helps us in optimizing our tech platforming and the vision in terms of the architecture that you would want to keep for a long period of time. We continue to look for more opportunities as we speak. And of course, we have some amount of cash on the books. And there are -- at any point in time, we continue to monitor and basically evaluate 3 to 4 target acquisitions. Hopefully, in time to come, we have something substantive and meaningful to announce.

That's very helpful. And just one follow-up. You mentioned the move to Tier 4 cities from a tech infrastructure. So that is the Bhubaneswar setup that you were referring to, right?

That's correct. So Bhubaneswar, of course, we started about 1.5 years back largely to have a tech campus, which we have now expanded into the operation campus as well. We are in the process of setting up a pretty decent sized captive unit in GIFT City because we manage international operations. GIFT City enables us or allows us to have a captive center. in GIFT City. So today, for example, my international business has near about 800 to 900 people worth of work that gets delivered. So we'd like to believe that [ Gujarat ] would be the next such center. We have also identified a campus in Vijayawada where we will be expanding our tech headcount there as well. So as a strategy, we believe that Tier 2 offers not just a compelling entry price point, but more importantly, the retention that is required, the stickiness and the commitment and in general, the value that we're able to get from some of these cities honestly, has been far superior to that of Tier 1 cities. So we continue to expand our footprint, and we have put ourselves certain goals. We believe over the next 3 years, we would love to move at least 25% of our total count into Tier 2 cities.

[Operator Instructions] We'll take our next question from the line of Dipanjan Ghosh from Citi.

Just a few questions. First, if you can split your revenue on the international and other investor solutions between international and maybe the domestic wealth and AIF business. While you give the split, it seems that there has been a sharp uptake in revenues from the domestic and non-investor solutions business. And since the funds have broadly moved or incremental fund additions have broadly moved in line with previous historical trends. I just wanted to get some sense of has there been any upward revision on the realizations in that part of the business? Second, on your yields in the domestic business, it was stable quarter-on-quarter. But could you give some color on what would have been the movement, assuming the overall equity mix, let's say, would have remained flattish quarter-on-quarter? And last, your other expense, while you gave some guidelines on the tech cost, if you can give some color or guidance on your FY '25 or '26 trajectory on the other expense side?

Yes, sure. Can I take this?

Yes, please.

So this is Vivek. On the international and other investor solutions, if you see the large part of the business in international is Global Fund Solutions. And that is something which comprises of the Southeast Asia business and what we are doing in terms of Singapore and now getting into Thailand. And that part of the business is large enough. Other piece is the alternate investor, the AIF and PWM and PMS services that we do. In terms of the numbers, that business itself, both these businesses comprising is almost 90% of the entire international and other Investor Solutions business. Amongst themselves, it's about half-half in terms of the share of revenue. The alternate -- the business revenue has actually doubled as compared to almost double, 93% growth over same period last year versus this year. So it has grown from INR 7 crores to about INR 14 crores. So that's a big piece which is growing and catching up on the Southeast Asia revenue. And as the Southeast Asia revenue itself grows, the other buckets, which are pension business and the Hexagram and [ Revis ] piece integrated into it are still -- the other businesses are still smaller. These are the 2 businesses which are growing. Does it help answer your question?

Sure. just -- well, it is a number of 93% and I appreciate that. This quarter-on-quarter, my understanding is there has been significant jump in this alternate revenue. Just want to get some sense, I mean, is it like new funds got onboarded at higher realizations or some old funds there has been change in slabs or the fixed slabs or something. I mean I just wanted to get some color on that.

[indiscernible]

Yes, Sreekanth, go ahead.

So it's a combination of all of them, as you rightly said, it is no one thing. I think it's -- we have won a substantive number of alternatives mandates over the past 12 months. And as you are aware, the process of the launch of a fund itself takes time just because we won a mandate doesn't necessarily translate to revenue because the fund then has to get operational. They have to have capital commitments and the drawdowns need to happen and our commercial models are to obviously get a drawdown level, right? So to that extent, I think the wins that we've had in the previous year at various points in time, different people have gone live, different funds have gone live, and that has been contributing to our growth in the past 2, 3 quarters. And we continue to have at least another 70 more funds who are yet to go live and draw down, so which effectively means as they start to do going live into the next quarter or so, we hope to see the revenue to continue to increase at a similar pace even as the AUM of the existing funds also will grow. So it's effectively a combination of funds and the mandate that we won in the previous year having gone live now. The funds that we already had and who had gone live earlier, paid AUM going up. That is the second contributing factor. And three, we have been adding a significant amount of value-added solutions to the fund. So it's not just the AUM-based basis points, but also the digital onboarding platform, which is -- which was the first time in the country that was introduced by us in terms of at a scale, which has the ability to onboard residents, nonresidents, individuals, non-individuals who have you, and that's been contributing to the revenue. Last but not the least, earlier on, our contracts used to be -- some of the contracts used to be a fixed fee per scheme per month kind of a model, which we have successfully managed to convert all of them into a basis point model. So I would put a combination of reasons for the, again, striking growth that you have noticed over the past few quarters.

Got it, could you kind of highlight on what proportion of your incremental business is basis point link since you mentioned that you have been able to transition a lot of them? Or let's say, going into the future, how...

Everything. There is no fixed fee contracting we are doing. So we completely junk the process of fixed fee contracting. So it is only basis points, excepting if it is on the fringe close-ended fund with just a handful of investors, at which point in time, it doesn't justify for us to have a basis point, probably accepting those few schemes which fall into that contours, everything else is basis points.

Got it. On my next 2 questions, if you can.

Yes, Dipanjan, on your IT expense, see, we spend around 20% to 22% of our revenue on IT spends. And as we continue to innovate new products, while the chassis is ready, you still need to invest to grow new and configure for new geographies and new businesses. I don't expect that this overall spend will grow beyond 20% of revenue. Within that, there is a small part which goes to CapEx, about 30% of it goes to CapEx. The rest of it is usually charged out to the P&L. And we see that as we grow, this percentage will keep coming down as the revenue grows. Does that answer your question?

Yes. That's fine. And lastly, on the yields on the domestic kind of business, they were flat quarter-on-quarter. But there's a mix change in favor of equities. So let's say, hypothetically, there was no mix change in favor of equities. What would have been the yield trajectory broadly? I mean I assume it should have gone down, but if you can just quantify or give some color on that?

Yes. So on the contrary, I think the mix, as I've stated earlier, our overall AUM grew 20.5% ahead of the industry, right? But our equity grew behind the industry curve overall a little bit. I think that was largely because of certain amount of passive growth that we have seen and a fewer NFOs of KFin service clients. So to that extent, our yield actually would have gone up if the mix was more in favorable as against what it is today, right? And I think the mix, of course, the overall blended yield at an RCA level itself is a combination of where the growth comes from, that is which asset management company where it is coming from as well as which asset class, right? So it's a combination of both. as well as, of course, the pricing conversation. So I think it is fair to say that we've -- as much as we've been partaking in the journey of our client growth, providing the necessary support that is required where in terms of certain price discounting, we kept the yield pretty flat and something that we hope to keep for the foreseeable future.

And if I can just squeeze in one more question. When there's a new NFO launch by, let's say, one of your fund houses, do you get any onetime revenue out of that? Or is there a particular cost that you incurred? Can you give some color on the unit economics of NFO for you guys?

Sure. I mean there is a certain amount of NFO pricing, but it is not very material in the context of the overall business, if I may. I would -- the unit economics of that, obviously, there is a significant amount of cost that we incur because what happens is in a very short period of time of the NFO, let's say, 5 to 7 days or 8 days, there -- we expect a significant volume growth, both physical as well as virtual. So we have to obviously staff up to meet that spike for that interim period. And the time we have available these days, especially with the regulatory changes is precious little in terms of getting all the activities done, which means that there is a certain amount of cost that goes up. Compensating a portion of that cost will be a certain amount of pricing we charge at an application level, largely that is the modus operandi in terms of commercial. And as I said, while there is a certain amount of revenue, I wouldn't put a dollar on it. It's not very material in the context of the overall fee-based revenue that we earn.

[Operator Instructions] We have a next question from the line of Devesh Agarwal from IIFL Securities.

Congratulations on good set of numbers. First question is again on the international and other investor solutions, although you did mention that there was a good jump in the alternatives. What I want to understand better that we are seeing an increase in the revenues after 6 quarters of revenues being between that INR 15 crores to INR 18 crores bracket. So is there any one-off component -- one-off in terms of whether the platform fees are kind of pushing up these revenues? And what would be the sustainability of this revenues?

I'm sorry, let me rephrase the question and see if I got it right. So you're asking if the revenue for on domestic mutual fund business, is it sustainable? Is that the question?

So I'm asking in international and other Investor Solutions, the INR 22 crore revenue that we have for the quarter. I'm assuming that will include some platform fee, which is more like a onetime fee. So what I wanted to understand, would we see the -- this revenue line item will have volatility going ahead that there would be quarters where we see a spike because of you selling more of platform-based, what you say, offerings to the clients? Or rather, I would say, I want to understand what is the component of annuity and onetime fee within this INR 22 crores?