“Our research says the coming year will be better for Indian equities than the year that has gone by, and therefore we are at the back end of higher inflation and, thus, a rate hike cycle. Hence, we expect a better year from the market‘s point of view in the coming year,” says Anand Rathi Wealth CEO Rakesh Rawal. Edited excerpts:
In FY23, the company recorded an impressive revenue growth of 31% YoY. How challenging will it be to repeat, if not improve further, the performance in FY24?
We are glad that despite muted markets, we delivered more than the expectation we set at the beginning of the year. We had given initial guidance for revenue of Rs 495 crore and PAT of Rs 155 crore. During the year, we revised the guidance for revenue to Rs 525 crore and PAT to Rs 165 crore. We have beaten both with our revenue of Rs 538 crore and PAT of Rs 168 crore (on standalone basis).
However, note that this was without any support coming from the markets. Since we are a private wealth firm, the market performance also impacts our performance. Whatever we have been able to deliver was despite the market not supporting us.
Our research says the coming year will be better for Indian equities than the year that has gone by, and therefore we are at the back end of higher inflation and, thus, a rate hike cycle. Hence, we expect a better year from the market’s point of view in the coming year.
For FY24, we have given revenue guidance of Rs 661 crore, an 18% increase, and PAT guidance of Rs 205 crore, a 22% increase (consolidated basis). We are very confident that we will achieve these numbers. We believe in being conservative while giving guidance and overachieving it in actuals.
Although everyone agrees that we are in a structural uptrend in India as far as the wealth management business is concerned, do you see any near-term pressures due to macro factors?
As you said, it is a structural uptrend; what else can explain SIP per month going up from 1300 crores per month in Mar’13 to 14,000 crores in Apr’23? There will always be challenges in the short term, and one will have to navigate through such challenges. We believe that we are very well equipped to navigate these challenges, and we have displayed our capability of doing so to our clients for the short period that we have been listed on the stock exchange.
So we, therefore, continue to believe it is possible to continue to grow at the rate of 20-25% per annum despite short-term challenges.
How is the digital wealth business shaping up? What are the key growth triggers that you see in this segment?
We have two digital wealth businesses. 1) Digital Wealth (DW) and 2) Omni Financial Advisor (OFA)
DW platform is targeted towards the mass affluent category. This is an online proposition through which investment and rebalancing of a portfolio is done online without human interference. AUM of DW business has grown by 23% Y-o-Y to Rs. 1,051 crores, and the number of clients increased by 9% Y-o-Y to around 4,250 as of March 31, 2023.
OFA vertical is a strategic extension for capturing the wealth management landscape. It is a technology platform for mutual fund distributors (MFDs) to serve clients and grow their businesses. Platform assets of OFA have increased by 12% Y-o-Y to Rs. 92,000 crores + as of March 31, 2023.
The incremental increase in new demat accounts is slowing down. Where are we headed?
We have seen an increase in new clients to 8352 families in 2022-23 compared to 7082 families last year 2021-22. We had 1270 net acquisitions last year. In fact, our equity mutual fund allocation has also increased to 47% this year from 46% last year.
The equity mutual fund industry witnessed an inflow of Rs. 146,000 crores, and at Anand Rathi Wealth, we were able to add around Rs. 3,000 crores in 2022-23.
The number of active users on NSE declined for the ninth consecutive month to 32.6 million in March. Is that a worrying sign for capital markets in India?
As I mentioned, we have not seen such trends among our wealth management clients. In the mutual fund industry, the monthly SIP contribution has grown from Rs. 11,800 crores in Apr’22 to Rs. 14,276 crores in Mar’23. If we look at the cumulative SIP contribution for FY 22-23, it is at Rs. 1,56,000 crores compared to Rs. 1,24,566 crores for FY 21-22, marking an impressive growth of 25% on a Y-o-Y basis. Our company has also seen growth as well as an increase in equity allocation and new client addition. I’m guessing the trend of a fall in the number of broking and trading accounts and the number of active users dropping to 32.6 million in March may be due to the industry’s cyclical nature. It’s been seen in the past also that when the markets go through a bad patch, the number of new trading accounts and active traders drops.