Prateek Jain, CFO,
Nippon Life India Asset Management.
Overall, the AUM market share is up about 26 bps at over 7.3%. What kind of growth can we look forward to going forward in FY23? What would be the levers of growth?
Overall our mutual fund AUM market share has gone to 7.38% as against 7.12% last year, a growth of 26 bps. I would not be able to tell you the exact numbers that would be expected in future but 8/10 of our schemes are in the top quartiles in terms of equity and 10/14 schemes in fixed income are again in the top two quartiles. On that basis, we expect to see higher growth in the coming quarters.
In FY22, Nippon Life AMC added 70 lakh folios, which is a very high number. Going forward, can this momentum be sustained?
This has been a transformational year both for the industry as well us. A lot was talked about direct investing last year and we have been always been maintaining that all this direct investment which has been happening will translate into people investing into mutual funds as well and that has proven correct because once the lockdown got over and people went back to work, more and more started investing their money through mutual funds.
This year, we saw an unprecedented growth adding almost 3.2 crore folio in the industry. We also added almost 70 lakh folios. Probably one in every three persons invest with Nippon India Mutual Fund. This is on the back of our retail strength that we have created over the years, the moat that we have created in terms of our physical as well as digital presence has led to this kind of growth.
Going forward, with the improved performance of our schemes, we will be able to garner a larger traction in terms of the new investors. As far as the industry is concerned, we are still underpenetrated with only 18% AUM to GDP ratio whereas in matured markets, AUM to GDP ratio is almost like 80%. We have a long runway to go and if you see in the last 10 odd years, the industry has moved from Rs 6.6 lakh crore odd in 2012 to almost Rs 38 lakh crore. In the next 10 years, we can see a 5x kind of AUM growth in the coming decade.
The share of equity in the AUM has risen by about 100 bps to 42% on year. Will we see the equity component go down and will more allocation be given to debt and gold in the coming quarters?
Two years back when the Covid lockdown had happened, that time also it was said that the growth in the industry is not secular but with an exception of one quarter where the industry AUM dipped, the industry growth has been very secular and if SIP is one of the barometers, then the SIP also was close to about rs 7,000 crore odd at that point of time. Today it is about Rs 12,000 crore odd.
We have seen a consistent increase in investors systematically investing into mutual funds and with the increased digital penetration, more and more new investors will get added and equity assets through retail participation will keep increasing.
In Jan 2022. the company completed the NFO Nifty Auto ETF, Silver ETF. What kind of themes can we expect? What is the expected size of the NFOs that we can anticipate in FY23?
By design, we do not want to create large NFOs and this is mostly for completing our bouquet and we need to provide a unique proposition to our investors. So we keep providing unique innovative product suite for our investors and we will build it over a period of time through SIPs and asset allocation plans.
What about the guidance for the non MF business in FY23?
This is one area probably we have not fared as well as we would have expected. This year again, while the total revenue growth in terms of these businesses would be about 20% odd, but given the smaller size that is not so relevant. But from our perspective, both in terms of alternatives, ETF and the other advisory opportunities, these businesses remain very close to our business strategies and as a part of diversification we will keep working on them.
In the next few years, the share of revenue should be close to about 25% from these strategies as against the mutual fund business. Mutual fund, which is our core business, will contribute about 75% revenue and these businesses will contribute about 25%.
What about key digital initiatives, what are you working with and can we expect any kind of tie ups with fintechs?
The idea is to collaborate with as many digital partners as possible. We have seen 63% increase in the transaction volume through our digital channels. We have state-of-the-art digital assets with us and in terms of partnership, all the key aggregators and market players have a direct API connected with them and this year also we have seen almost 58% of our purchases happening digitally.