In an interaction with Rakesh Rawal, CEO - Anand Rathi Wealth Limited

We believe that the MF industry would benefit from increased penetration and continue to see similar growth going forward, expresses Rakesh Rawal, CEO - Anand Rathi Wealth Limited          

What is your outlook on the Indian mutual fund industry for FY23? 

The mutual fund industry has seen significant growth over the last five years. The overall AUM has grown 18 per cent per annum YoY from Rs 17.5 lakh crore in FY 2016-17 to Rs 38 lakh crore in FY 2021-22. Flows in the form of SIP have more than doubled from monthly Rs 5,000 crore in March 2017 to Rs 12,500 crore in March 2022. 

The MF industry has been able to add value to investors. The open-ended equity funds have generated roughly 2 per cent per annum alpha over Nifty 50 over the last five years. Looking at (i) increasing incomes, (ii) increased awareness leading to changes in investor preference (which is moving from physical assets to financial assets and that too, professionally-managed instruments), as well as (iii) value addition created by the MF industry, we believe that the MF industry would benefit from increased penetration and continue to see similar growth, going forward.              

Anand Rathi Wealth's consolidated revenue for Q4FY22 was Rs 115 crore, recording a healthy growth YoY of 49 per cent. In addition, consolidated PAT for Q4FY22 was Rs 35 crore, registering an increase of around 239 per cent on a YoY basis. What factors are responsible for such robust financial numbers?   

During the pandemic year, the revenues were down, especially the trail revenue, because of the market condition. During that year, we undertook a lot of cost rationalisation leading to non-HR costs being reduced by 25 per cent. In the year that followed, a significant benefit of the cost rationalisation continued, and the revenues improved significantly on account of markets as well as the business doing well. Our trail revenue has seen a 71 per cent YoY, which led to this. All these factors led to a very robust profit increase. 

Your new-age business - Digital Wealth, has recorded consistently high growth in AUM over the last six quarters. What is your vision for this business segment in the next 2-3 years?  

We have started the Digital Wealth business primarily for mass affluent clients having investments between Rs 5 lakh and Rs 50 lakh. The Digital Wealth services are currently rendered either to the client directly or through accredited partners. There is a great potential to grow this business, and we believe that this business will also start contributing to the growth as well as profitability of the company in the next few years. 

Can you highlight the new product categories that you have added in FY22? What are your plans for new product launches in FY23?  

We are governed by an ethos of interacting with the client and understanding the client's financial objectives. Once we understand the client's objective, we proceed with the strategy fixation with them. Currently, the strategy for achieving a 12-14 per cent return is achievable with products like equity mutual funds (EMFs), market-linked debentures (MLDs), and Debt Funds. The need to introduce new products will arise if the client's objectives change or if new products can help us achieve the client's objectives more efficiently. There doesn't seem to be a need to add to our product basket at this point in time. However, we are watchful to see if something can be added to increase the efficiency of the process. 

At the moment, what are your top three strategic objectives?  

Currently, our top three strategic objectives are: 

• Growth of AUM in the range of 20-25 per cent led by higher penetration and client acquisition. 
• Growth in revenue and profits, which is a robust range of 20 per cent - 25 per cent. 
• Regret attrition of RMs in the range of 2-3 per cent leads to negligible client attrition. 

What is your earnings outlook for the upcoming year for the Wealth business? 

Growth guidance for private wealth business: