Computer Age Management Services (NSE:CAMS) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Computer Age Management Service Limited q one FY twenty seven earnings conference call hosted by. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to mister Nikun Seth from M and A. You, and over to you, sir. Thank you, Sumit. Good morning, everyone. To q one FY 'twenty seven Earnings Conference Call of Computer Age Management Services Limited.

0:46 From the management, we have with us Mr. Anuj Kumar, MD and CEO Mr. Ram Charent, CFO and Mr. Anish Pavlani, Head Investor Relations. Before we proceed to the opening remarks, I would like to give a small disclaimer that this conference may contain certain forward looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date. These statements are not guarantees of future performance and involve risks and uncertainties. A detailed disclaimer has been published in the investor presentation. Now I would like to hand over the conference to Mr. Ranuj Kumar for his opening remarks. Thank you, and over to you, sir. Nagash, thank you very much. Good morning to everyone.

1:32 Appreciate everyone joining the earnings call for the first quarter FY 'twenty seven. I presume all of you would have read the press release and you would have downloaded a copy of the presentation. So I'll just quickly jump into the details. Just given the backdrop of the times we are in, I think it was a solid quarter from us. You've seen that EBITDA grew over 18% year on year. To get to INR 183 crore. This is our highest ever number. And despite the challenging market conditions, I think it did two things. One, despite the fact that AUM did not grow as much as it traditionally would have grown, We were able to post an 18% increase in EBITDA, 17% impact.

2:20 Also, the fact that this perhaps now almost puts in the background all the pricing adjustments of the last year because you know that we had dropped from similar levels to about 42% operating EBITDA and climbed back in the next four to five quarters back to 46%. So to that extent, 46.4% operating EBITDA looks like a very nice number. EBITDA margin expansion, two seventy basis points. So this, all of you know, from 43.7% a year back to 46.4%. We are now heading towards our highest was a shade above 47 So we are heading in that direction. And again, I would say pretty sound just given the times that the last two years, your expansion has not been as much as you would expect.

3:09 And the fact that the pricing adjustment, the onetime pricing adjustment is, well, a bit of the backdrop, but not very recent, but one year old. Operating revenue grew 11.5% to $3.95 crore. Within this, the two components are the MF revenue. The MF revenue actually absolute MF revenue grew under 10%. Asset based revenue grew about a little over 11%. But if you see the non MF businesses, they grew collectively over 28%. And I would say that I am personally pretty happy with the progress of non MF because you know that we've not done significantly margin dilutive stuff anywhere in the portfolio. We've taken bets. Those bets have paid off. I think a lot of the bets have paid off.

3:56 Pay has paid off significantly, alternatives despite all the competition and new players who entered in the last many years and continue to enter. We grew in the mid-20s. KRA, which is the third large non MF contributor, obviously, did not grow given the backdrop of the price adjustments that the industry has taken. But I think from the second quarter onwards, things will start looking good in that territory also. On a blended basis, 11.2% MF revenue growth, 28% plus non MF growth. We expect, therefore, that non MF growth will stay blended upwards of 20%. We are now in the kind of we've had half of the second quarter done, and we have some view of what will happen in the second quarter. So we believe that for the year, overall blended non MFR revenue will certainly be 20%. If you're lucky, it could come at 22%, 23%.

4:59 MF revenue, we would like it to grow at least 12%. Blended, we are expecting about a 13% overall revenue growth, about a 16% EBITDA growth. So it seems to be on that track. And from a broad basis, if you see the growth levers, what are the growth levers? Like I said, payments, we started the cards business, seems to be picking up very well. In AIF, the base has grown quite well. New logo acquisition has been sound. CAMS Wellsell has done well, continues to add HEFT, which you may have read in the presentation. Also the fact now that as far as Gift City is concerned, you would have read that have a principal approval to start a KRA operation. We are also in the process of applying for a payment service provider license.

5:48 And, we haven't applied yet because there's a process related to the application. But once we have a wholesome offering of base RTA, fund accounting, KRA for which we have in principle, and this KRA just does not apply to capital market entities in gift, it's a far broader application. And then for payments, you know that over a period of time, these outbound funds are big on attracting money. Would say it's just the beginning, about 0.5 old. But over a period of time, as I think a lot of there's a lot of press on portfolio rebalancing and trying overseas markets. A lot of people are writing about these things. That trend should deepen the SIP kind of concept and overseas investment through Gift City should deepen. All of that can drive the payments business also.

6:34 So those growth drivers are in place, and I think they're doing well. From a new logo perspective, you know that we've taken six AMCs live last year. We've taken one live this year, which is AlphaGrip. We have three large installations, which should be live from now up to the end of the year, which is Carnelian, ASK and Neo. And one of the smaller ones also, but those are the salient ones. So all of that should play out in the coming months. Move to the next. From a MF perspective, therefore, you would have seen that AUM grew just under 15% year on year to be about INR 56 lakh crore. Of course, the month of July has been a lot better. April, May, June were muted months.

7:24 In July, we've been much better. We've kind of grazed close to INR 60 lakh, but haven't got there yet. But we should get there. Market share stayed at about 67.2%. I think, again, from a foundational perspective, if you look at other growth metrics, so what happened to equity AUM grew ahead of market, industry at 16% and some change, we had 17.6%. Equity net sales grew ahead of industry growth, live SIP comps grew ahead of industry. So if I just took those three, which is gross equity AUM growth, equity net sales growth and live SRP account growth, I think that sums up the equity picture because you know 60%, 65% of the MF asset revenue comes from there. So those are, again, those are great foundational metrics, which have been playing out for the last maybe about a couple of years.

8:19 But happy to kind of share with you that all of that continues to do well. And even in tough times where the markets had bottomed out, peaked back again and then went all the way back again in April, May, June, The SIB collections continue to hold, which is a great peak into the resilience and nerve and strength of the Indian investor, the retail investor. So this number holds in Q1 at just short of INR 60,000 crore. And again, from an Industrial Collections growth perspective, Forest IP has out of the industry, similarly for the unique investor base. So I could not have compiled a better set of, what I would say, foundational mathematics, it's all in front of you, that all of this has started doing well. On the growth front, I must also point out, apart from gift, which is gift retail, very formative, very early, so I will not start using objectives to describe the growth. All I would say is we have started With the first 10,000 investors, we are nudging $7.50 crores of AUM.

9:21 But like I said, given the deal in the market one, one point five years back, it was about being in metal ETFs and ETFs. Today, it's about using Gift City intelligently to do some overseas investing. I think that part has started. I'm also very happy with the SIF segment where if we were talking to you in beginning of August last year, we did not have a single launch. We did not have a single launch. The first launch happened in early October. So it's just a ten month old story. 11 unique SIS have launched, three or four more will launch. And this segment has done well, just look at the numbers, about INR1000 crores. I mean, there's not much difference between net and gross sales in the first year. But if I just took it as a net sale metric, about INR 1,000 crore of net sale metric every month. So it's accumulated to about just in excess of INR 12,000 crore now, almost 15,000 investors. And when you look at the base of investors in India, and this is a slightly more wholesome product because you allowed leverage, you can short the market, etcetera, you know all of that stuff.

10:23 I think both Gift and SIF should open up as new asset classes, which will grow into meaningful franchises for us. Someday, I should be talking about them with the same energy and whirl when I talk about alternatives, but that may come after some years. But I would say just a great start to this story. I spoke about AlphaGrip and the three other AMCs which are about to launch in the coming part of the year. I should also name Oakland. Sorry. So ASK, Carnelian, Oakland and New, which are expected to they will definitely go live before December. So I think from a new AMC buying from insurance from the new logo perspective, we have some of the best names, the best names, which will start to work with us in addition to the six that went live last year. Move to the next. Beyond MF, think I spoke about this, so don't want to repeat 28% plus year on year revenue growth.

11:18 Non MF revenue just getting to about 15%. I'm hoping this will certainly be 16% by the end of the year, but we'll watch this closely. Pay, of course, did the best, grew just short of 70% year on year, largely riding on cards. And cards is a business that we want to grow but don't want to scale too much. And we'll be diligent about scaling because it's a high bank charges kind of business where your margin will remain limited. The retail recurring, that kind of business is a better business to do, but you started cards about a year back. Alternatives, I said, grew mid-20s, AUM overall across INR $3.12 lakh crore. We won 15 new mandates, several new logos, so that part did well.

12:05 KRA was a bit of an iffy story in the first quarter. It had to be like that. So I don't know whether your expectation was any different, but we knew that there was a rate revision starting April 1 about 29%, 30% rates down. The market was also slightly subdued, so it was slightly revenue down quarter. We expect that from the second quarter, things will look well better will certainly look better in KRA. So as KRA starts firing back, you will have pay alternatives in KRA, all three firing on the non MS side, MS, SIF and Gift City retail firing on the MS side. So that should be a good combination if all of this happens in the second quarter. Rep, Biva Central expanded user base, I still don't think it is meaningful revenue yet, but we are waiting for that day. Think retail acceptance continues to scale quite well.

12:57 And I do want to talk to you about consent flow, where I think we've stated a little in the past, but not too much, that we started building this capability in house, just given the fact that retail consumer consent across our businesses, whether it is MF, KRA, CRA and pension or insurance repository, is kind of a controlled consenting capability that we are driving ours at some time between CAMS and THINK. We built this out. Happy to let you know that we will have first signed contracts shortly. We've started working about seven or eight clients. Some inside the capital markets, some in distant markets. This is not just a capital markets or financial services story.

13:43 I will not make it a big deal right now. I will not make it a big deal. We have early wins. We are very happy. I think, hopefully, when we come back to you, I will have something meaningful to report and share with you in a quarter from now. But but just wanted to mention that you may see some some PR, some stuff on our website, etcetera. Don't be surprised. And you've been seeing this for the last two, three months. You may just see that in a more accurate manner. Don't ask me for revenue numbers because it's too early for us to start projecting numbers. It's just a good start to a new thing. On the new platform from a, you know, rearchitecture AI perspective, again, I think you you read stuff that we put out. So you're aware of the... We have done. But on the transaction acceptance, which is basically that big hairy gorilla that we have to take live because that is about transaction acceptance. It's all the the sum total of the external work that we do with the markets.

14:36 A lot of the other work in the platform happens internally, but there's the work we do with acceptance of transactions, coming in of monies, coming in of KYC and then a lot of other stuff with the exchanges, depositories, sellers, banks, all of that. That's now beginning to go live step by step in August September. We believe we would have sunset the entire transaction acceptance part of the platform by the end of the financial year. And then other things in terms of data warehouse, CAMSLANS, revamped KRA offering, stuff on e k five c and deep fakes, all of that is now live. I'd also mentioned in some of our meetings that, you know, physical transaction acceptance is now going through. We have a capability. I can convert the entire thing to AI led transaction acceptance 100% today if we wanted. We are not doing it today because there's a risk in kind of just blatantly doing it. So out of our eight transaction types, four are live. When I come back to you and talk to you in November, all will be live.

15:39 And within those, it's our choice on how fast we want to go. So we've converted about 10% of our gross payload into AI based acceptance. We just read the forms, go to our database, do cross referencing, and then just access the form. I still have a manual checker, but this 10% will scale to a 100% acceptance at the maker level in the next twelve months. We will deal with the checker at some point in time. But again, very happy with this bit of AI led automation that happened in the past. So I think one of the things we've said to you is that we will show definitive although we don't quote revenue by headcount or transactions by headcount as standard metrics, and we're not inventing them yet. But average headcount at the enterprise level, it's a simple thing for you to measure and not keep looking for the number. We'll give you that number, and that number is expected to have a 4% to 5% down impact in the financial year, which has already started from April 1 onwards. We are about 23% down already. So we'll demonstrate that, and I think over the next three or four years as this platform settles down, you will just keep seeing meaningful impacts in that area.

16:49 What else? Just go to the next. Okay. So what I'll do is I'll hand over to Ramjuran to take you briefly through the financials, and then we can come back and talk about whatever questions you Tom? Thanks, Anuj. Anuj has already gone through the highlights in terms of numbers, so I won't repeat the numbers. I'll just add a few points to my kind of part of the understanding on these numbers. You also had revenue growth of 11.5%. It was actually split into asset based revenue and non asset based revenue. The non asset based revenue, we have said, not dependent on the asset growth assets, and that's why we're showing it separately. There are four side components to it. So the decline in that quarter on quarter was predominantly because of OP reduction and some sort of transaction reduction. This is something that will not keep pace with the AEM growth. But however, from an asset based revenue perspective, we are back to where we generally guide, which is there is no yield decline as such in the current quarter. Obviously, mix paid some impact on this. But even otherwise, there has been no decline in yields quarter on quarter. The biggest question that we had over the course of last year was will your yields be stable. I think for the last two, three quarters, we have been demonstrating that the yields are within acceptable range.

17:58 And this year, there has actually been no depletion quarter on quarter. From an overall cost perspective, we mentioned in the last earnings call, but again, are reiterating that the numbers here, generally, appraisal impact, which is a salary increase for the employees, we have deferred by a quarter. So what should have been effective from April 1 will be effective from July 1. So you will see an additional cost impact coming in the current quarter, which is not in the earlier quarter, depending on how revenue ramps up, anywhere close to a percentage of overall revenue. But having said that, I think from overall cost perspective, at the beginning of the year, I think when people ask for an estimate, we said that if we keep the overall cost increase year on year basis to less than 10 percentage, that will be our target. I'm happy to say for the last quarter, on a year on year basis, the cost increase has been less than seven percentage, excluding depreciation, and the increase has been almost negligible on a quarter on quarter basis.

18:53 So this is expected to sustain, as Anuj was mentioning about going live with various rehab modules. We expect that this productivity will be sustained. In fact, on a headcount basis, we've had a net reduction in headcount on a quarter on quarter basis of more than 200. On a year on year basis, about 85. So the productivity improvements are continuing and will continue going forward, And this will keep kind of control over the costs that we are incurring. From a non MF, I think we saw the numbers. PA has been extremely strong in growth, 67% growth. AF has been very strong in terms of 25% growth. And KRA, because of the price impact that we are seeing, has shown and has not shown much of a growth. In fact, has gone down year on year. But if you normalize that for going forward increase in revenue, I think we are well on track for this 20% -plus growth in non mutual fund. In terms of cash and cash equivalent, you would have seen that we ended the quarter with a very comfortable INR $9.80 crores almost cash balance, and the Board has declared a INR 2.5 interim dividend for the Q1.

19:55 So all pointers are looking good. We are seeing asset growth come back to a large extent in the last in the current quarter, yields being stable, non mutual fund growth on track and cost control measures in place. So that is a summary of the financials. I'll now hand it back to the moderator, Sumit, for questions. Thank you very much. We will now begin the question and answer session. The first question is from the line of Devesh Agarwal from IIFL Capital. Please go ahead.

20:49 As he was disconnected, the next question is from the line of from Capital. I have three questions. First is on the growth front, sir, you mentioned that broad expectation is around 13% kind of a blended growth from the top line point of view. Just wanted to understand that in this, how what would be your expectation for AUM growth and yield yield compression? Because I I mean, I just wanted more color on the fact that given that we have several large clients where internally also the schemes are quite large in size. So what is the downside possibility?

21:42 I think we lost. Just a second. Sir, Swarnum is disconnected. Okay. So the next question is from the line of Devesh Agarwal from IFL Capital. Please go ahead. Good morning, sir, and congratulations on a good set of numbers. So my first question would be just to get a clarity. This year, how many EMTs are up for renewal? So this as we said last time, Devesh, there are a few midsized AMCs up for renewal. A couple have been concluded and two more are in discussion. So that's the score for the current year. And whatever the impact would have been for the ones which have concluded are already in 1Q pricing? Yes, they are already in 1Q pricing. As we said earlier, the impact because of this is expected to be very muted.

22:40 All right, sir. So secondly, if we see the KRA business, as you rightly pointed out, there was a pricing reset that went live from April 1 that led to the impact. But if you see the same for CDSL, impact was significantly lower. And the reason that they highlighted was that there were the fetch volumes were higher as well as there were some incremental revenues, which were allowed by SEBI. So did we not have this benefit as an industry for us? So, Devesh, yes, interesting point. You know that the pricing structure has changed and some of don't want to dig into too much technical detail, but some of the fetch, which used to be free, is now a lot priced. So we're getting into that. The opportunity is the same. As for them, it is the same for us.

23:30 From a blend perspective, our revenue is still about 70%, 75% MF and about 25%, 30% non MF, which is DP and Broking. My estimate is that for them, this mix will be very different. It will probably be just the reverse, the segment from which they derive core revenues. So we've seen the results and we are getting into it and we can have a conversation later. But but the pricing competence, obviously, it is not that, you know, this IOP phase one fetch applies only to them and not to us. It applies to both. Some of the mix would have been different. Markets have been muted. Account opening is not of the same level that it used to be, let's say, one one and a half years back. So you have to get into the depth of this and what the contrast is. We will explain it to you. But at first sight, the segments from which they derive fetch revenue and from which we derive fetch revenues, the segments are slightly different.

24:25 Understood, sir. Sir, on an overall basis, non MF business, what is the margin that we are delivering in 1Q and the expected margin for FY 'twenty seven? So if you recollect last quarter, we kind of came to around 17 percentage plus margin. But the first quarter, we have seen the KRA revenue drop a little, right? And KRA is a high contribution or contributor to the overall non MS margin. So we are at 13 percentage now, but I think this is probably one quarter impact as the carrier revenue recovers and the losses in the other parts of the depository and upon aggregator reduced. We are confident of getting it, if not to 20%, at least close to 20% by the end of the year. I would kind of say that it will not be kind of 20%, but you should expect probably 17% kind of a margin.

25:15 All right, sir. And sir, you did mention that SIS is now gaining traction. Could you just help us refresh what exactly is the economics in SIF for us? How does we charge? The economics in SIF are that you take a scheme, you slot it in an asset type, if it is equity led, which most of it is, then it's an equity scheme for us, and the same rates apply. The same rates apply that the AMC does. So to that extent, you can think of it as just, MFM scaling. We have some cost because it is supposed to be set up as a separate segregated schema. You would see on the website also that, you know, we don't show it and, mutual funds don't show it as part of your MF portfolio. It's shown as a separate portfolio.

26:08 So it's some cost. So think of it this way that at about $1,012,000 crore, we've already taken the cost of setting SF as a separate schema for all the 11 SIFs. That cost is now in the base. Any scale up will help us deframe that cost. The pricing will be identical to MFR. Understood. Perfect, sir. Thank you so much. All the way. Thanks, Ramesh. Thank you. The next question is from the line of Uday Pai from Investec. Please go ahead. Yeah. Thank you for the opportunity. Just wanted to get the sense on employee headcount. You mentioned that we have seen two, 3% reduction on a q o q basis. And for the full year, you are expecting four to 5% reduction. So this does this benefit our margin significantly in Q4?

27:02 Because the full impact of that will come in Q4. Already, you have done very well on Q1. Generally, it's a low margin quarter. So how do we think about employee cost on a quarter on quarter basis? And for the next year as well, is there any further benefits that you expect on the headcount? So I'll just give you a bit of perspective and then I'll get to the point. Base automation has continued to make sure that we run the enterprise at constant headcount. Okay? So in the last ten years, our enterprise headcount is more or less constant. In this year, we've stated, if you take FY '27, that we will drop enterprise headcount by about 5%. That's just, you know, taking away backfilling of frontline positions, all those tasks which are getting automated.

27:54 They were getting automated in the past too. But given the rearchitecture program, the speed of automation will be faster. So therefore, as progressively, we are able to drive this productivity, you will see some diminution in employee cost, some in infra cost because it's basically a seat in headcount takeout. Do keep in mind that a lot of this also means that we are hiring expensive AI resources and expensive automation resources, or certainly backfilling those because you can't do without backfilling. So don't do your math assuming that 500 people and 500 seats will completely go away. Yes, they will go away, but there'll be some offsetting influence of adding new talent. So the net, you will not see a 5% cost drop in those two heads. You may see, let's say, a 33.5% cost drop. That's perhaps what you should expect by the time the year. Sure, Very useful.

28:50 Thank you. The next question is from the line of Sanket Gauda from Avan Deshpak. Sir, my again, costs, the question is on implied cost because it seems to be the key driver of your EBITDA margin expansion trajectory going ahead. If I look at the data last year, full year that you had and if I exclude the one off labor core impact, then you were almost at $4.70 crores of employee cost last year. Given headcount number will keep on coming down as you go and more automation automation or or AI mode of doing the work.

29:41 Is it fair to say that even if you assume annual escalation and probably fill with the little more talented or high skilled employees, this number should grow at a low very low single digit rate for next few years in that sense and that will be the key driver of the EBITDA margin? So, Sanket, I think on the last call also we said the same thing. We'll be kind of endeavored to keep the employee cost growth to around five percentage, including the reappraisal number. Bear in mind that while there is a productivity increase in automation that happens, the other part of the business, which is your risk compliance, software development, etcetera, they will still require some investment on people, right? So it will not be just a one-sided reduction in one side and other side, no filling up happening. So I think it will be a balanced kind of an approach, but our target is to keep it around five percentage employee cost increase on a year on year basis.

30:36 Understood. Sir, the reason why I'm asking this is that you have employee cost lever and you have the lever from other businesses showing a better margin trajectory, which you already told, sir, that it will go from 17% to 20% probably in the current year and maybe it will further expand in the next year. So if I look it in combo, last year, you were at 45%. Is it fair to say that maybe you already told it, but fair to say that more assuming no meaningful pressure, the normalized margins will be at least 150 to 200 basis points compared to currently what we are reporting? So, Sanket, directionally, maybe yes. Directionally, maybe yes. Do remember that, a, as Ram pointed out, since we deferred increments by a quarter, you did not see the base impact in the first quarter. You will see the base impact in the second quarter.

31:34 But if I talk of the year, it makes no difference in which quarter I make the increments. It will show up in the year's trajectory. That's point number one. Secondly, also think of all investments in technology to be not just people. You are seeing you're reading the same articles I'm reading, that manufacturers of hardware and data center services are getting expensive because of hyperscalers getting a lot of demand from the AI led segment. So there is some cost expansion there. The puts and takes, therefore, are that when I take all of this together, we have stated in the past that you can expect about a 1% margin expansion from our side. Can we get to 1.5%? I would say, yes. I mean, let's just watch it closely.

32:19 We hope we get there. But directionally, you are right. We would still say that 1% we are very confident of, we may get to 1.5%. Understood, sir. And maybe on the employee count number, if you can call out that number in the current quarter compared to the last year? And second is on three three six three, we increased the stake. So so what is our current ownership, and and how do we see the the ownership to play out in think 360 eventually? So think 360, you know, the the transaction that happened in 2023, both the founders and us had the option to expand, so shareholding in the at the end of third and the end of the fourth year.

33:08 So the founders obviously will move at some time, like all founders. And what you're seeing is expansion in ownership is the first tranche of our call or their port getting executed. You will see the second tranche of this get executed about a year from now. I won't... I mean, I'm not sure about which month, but it'll certainly happen in about twelve months' time. So that's one thing that you will, see happen. We may still choose because, it's an award winning company with a lot of, you know, IP related work in segments where CAMS has not been present, we may continue running the company separately and may never sunset the name. That's a decision we still have to take, so we will... May not... Because they work in the NBFC and fintech segment, we will not like to merge it with CAMS at any point in time. I just want to run it separately. But that's on the ownership.

33:58 On the first part, which is So the employee you should look at our headcount currently to be just shy of 8,300 for the company. On a year on year basis, we are down around 85 in headcount. And on a quarter on quarter basis, we are around two twenty five down on headcount. Understood, sir. Perfect. That's it from me, sir. Thank you. Thank you. The next question is from the line of Madhukar from JPMorgan. Please go ahead. Hi, sir. Congratulations on good numbers. So first, on this employee cost expense, you gave a guidance of 5% growth. That is like for what time period? Is it like a medium term guidance?

34:48 So so that's that's the first thing. Second, on the KRA revenues, you know, one of the other companies in this business pointed out of an additional way that you can charge your customers. I was not clear whether you are also charging that additional fee, Or is it that sort of different players are adopting a different revenue model of your right now and which is a little unclear, so how this is changing? So I'm a little confused about that. So if you could clarify on both these things. Thanks. Sure. So let me answer the second question first.

35:35 When the price contraction in KRA was proposed, it was largely proposed so that expansion in demight accounts and mutual fund folios does not get constrained because of any single cost line, and it was the attempt of the industry to to bring it to more rational limits. You know that for things like Choti, SIP, etcetera, the price was So already this part had happened. At that time, there is one component of KRA where any participant, any market intermediary can come to us and check whether, let's say, it's my case, Anuj Kumar, is present in one of the KRAs or not. He's still not downloading the information. He's just asking that question. So these kind of things used to be free at one time. In the new dispensation, it was believed that since the care industry is taking a large haircut, you should be allowed to charge for these kind of things also. So just to make it clear, there are no asymmetries in the charging methodology for KRAs.

36:36 There are no asymmetries. Everybody charges uniformly and for the same utility. And largely, the prices will be same. I mean, it is not disallowed not to do any private deals with large consumers. So there will be five or 10 or 15 large deals in the industry. But other than that, it is more or less uniform pricing. So whatever the other guys told you applies to us also. Like we said at the beginning of this call that we also want to go back and check because we don't believe it's such a large impacted item at all. It's not a large impact item. This was the first quarter of invoicing. But just to give you a short answer, all of us are allowed to charge in the same way. On the first part of your question, Madhukar, you'd asked whether 5% expansion is for a different period. I'll let Ram take it. So this is basically a simple matter. I see for the last year, the cost was around INR 500 crores. So what we said is for the year, the time frame is a year. So end of the year, we will try to keep it and increase to be within INR 25 crores and 30 crores. So this is a steep order given that our increment impact would itself be more than that, but that's where the productivity increases and the rationalization comes. So to answer your question, it is end of the year, year on year, your cost increase should be around 5% for employees.

37:50 And for the more medium term guidance, like if I were to ask you for a period of FY 'twenty eight, FY 'twenty nine, do you think this is a sustainable number in on an overall sort of so for employee cost and even the other expenses, if you could give us some color whether you could continue to sustain this kind of efficiency levels going forward? Yeah. So we are confident of two things. One is that there will be further rationalization that happens in terms of, you know, driven by productivity and automation, especially after we are goes live. But the second part of the equation is what Anuj was mentioning, which is that it's not a standalone employee count or cost that is relevant from a bottom line perspective. It is also what we spend on other variable component, given that we are variabilizing some of our costs in terms of cloud, etcetera.

38:44 And I think overall, from a cost perspective, we have taken a target that our cost increase should not be should be less than 10 percentage for the year. And that's the target that we will have for the remaining years also. So to answer your question, yes, we will keep our cost increase down to less than 10% overall across all hedge of expense for the next two, three years, at least that's the endeavor that we have. Thank you. The next question is from the line of Lalitio from Equiria Securities. Please go ahead. Yeah. Hi, sir. Good morning. So just one question on this non asset based revenues. So like in the past, we have highlighted that almost like 50% of the 50% of that revenue comes from the transaction business.

39:32 So now if I look at the number of transactions on a Y o Y basis, that has gone... That has increased by 20%. But on a Y o Y level, the non asset based the non asset based MS revenues has declined. So what is causing this decline? Could we explain it in do you explain the same? So two things. One is that the total transactions are fine, but most of them are digital transactions. If you see the paper transactions, they're only less than 10% of the overall transactions. So what we charge for is a subset of the paper transactions. And so on a year on year basis, actually, if you see the contributing factors was there is also an NFO decline. The transaction was a small decline, but there was an NFO decline, and there are some application fees that we do. We had some arrangement with some of our customers like NSE, which has wound down. So that's the contributing to this. On a quarter on quarter basis, there has been a drop in transaction. It's also driven by some MS Central related revenues.

40:25 It's also driven by OP. So I urge you not to take the overall transaction count as a proxy for finding this revenue because a lot of it is actually digital transactions. We charge only part of the transactions and part of the paper transactions. Thank you, sir. Thank you. The next question is from the line of Abhijit from Kotak. Please go ahead. Yes. Hi. Good morning, everyone. So my first question was on the AI and automation related gains. So in terms of, like, how do you think about being able to sustain and retain these gains, you know, beyond, let's say, the next maybe a year or so? Because in the past, generally, the commentary on the industry has been that whenever you have AUM growth, EMC is always some calling saying that part of it is led by the markets, So in terms of absolute value addition, there's always a question mark. But in this particular case, all the investments and efforts have been made by the industry. And in terms of being able to retain some of those benefits, how do you see that playing out beyond the next one year itself?

41:38 The second question was specifically if there's been a like if I missed it, there's a yield outlook for the rest of the year? And the last question is on the payment side, like it's good to see the jump in revenue growth, but if you could give some color in terms of, let's say, any new segments which are contributing to these growth? And whether it's all transaction driven or there is like a onetime onboarding related revenues here as well? Yeah. Sure, Vishal. So I'll try to take your questions in sequence. As far as deployment of AI etcetera is concerned, don't overplay it in your mind. Like I said that we have scaled this company significantly on constant headcount in ten years. This is base automation. So automation as a story continues to play out.

42:31 The benefits are seen in the way we operate, and all of you have seen that. The AI led benefits are largely the new platform. Why are we building the new platform? Because we still operate off a platform which is two and a half decades old, and technologies were not available to things that we can do today. So it was a necessity. We are well into the process now. We will build a new platform. All the incremental benefits, therefore, so I will call them incremental benefits because base automation benefits anyway would have happened, is what you are seeing in not constant but a drop in headcount. And I think this process will last maybe the next three years, perhaps four years. I mean, it'll certainly be three years, where gradually, as we take things live item by item by item, we will drive productivity inside our system. I must also tell you that we will be driving larger productivity outside of CAMS, across the industry, where more and more transactions will become untouched, more and more remediation will be a single shot remediation, more and more rework or excessive communication, etcetera, will get eliminated. So this is accretive for the industry.

43:43 And I would venture out to say that it'll be more accretive for the industry than it'll be for CAMS. It'll take cost out, not just from our base, but from the base of the AMCs and distributors and exchanges, whoever you name, because everything in the end converges upon So that's one part. Is all of that going to show up in our base P and L? Some of it certainly will. But like I said, and all of you are reading this, that the story which is playing out in the cloud cost, data center, hardware, you know, arena is very different where things are becoming expensive, faster than we thought. And some of that will hit us. Net net, of course, it will be accretive, but some of that will certainly hit us. As far as the AMCs are concerned, what are they going to see? They are going to see a more productive phase for themselves, for the industries that they deal with and, of course, a more productive CAMS.

44:33 Will that be margin accretive for us? Like we said today, we are not claiming that a 1% annual margin expansion will go to 2% or 3%. We are not saying that. I said we may get to 1.5%, but let's wait till the end of the year. So the AMCs, will their fundamental behavior and their fundamental attitude to efficiency change? I don't think the answer is either way. I'm expecting constant behavior on both sides. And I would say this is a step by step accretive process. We are not announcing it like big bang, like the rest of the world is talking about what AI will do. We've not made a single statement. I will not make that statement even today. You should just assume that we will continue getting more efficient and some of that, after everything is taken, will show up in the base. So that was one of your questions. So what was it? Payment revenue. Payments, we have said that recurring payments inside of insurance, mutual funds, and NBFC was a core base one and a half years back.

45:29 We opted to get the... We had a PA license. Now we do PG work with largely credit cards. Some of the revenue expansion you are seeing is credit card transaction related. I said at the beginning that it's a low margin business. And you know that our preference to have a book dominated by low margin business is limited. So we will grow cards, but we will grow it step by step by step. We do not want to do margin dilutive stuff in the base. That's just against our nature. But that's a new thing which has happened. Education as a segment is open, but I will not attribute a lot of revenue increase to that. I think cards is certainly revenue accretive, not as much payments. And there was nothing onetime. We've said this in the past, Abhijit, that to build the book, we never take anything onetime and then drop it in the next quarter.

46:17 Go back to our entire listed history of, I don't know, 40 quarters, you will not find sorry, not 40, 24, 26 quarters, you'll not find a single instance. So there's nothing one time. Sorry? Yield. Yes. As far as the yield is concerned, I think we said this, and I said this in my commentary, so did Ram, that we've come out of the compression that we had reported in 4Q twenty twenty five, 1Q twenty twenty six. So that is now all in the base. A lot of the stuff which belongs to this year, whatever had to be done is in the base in the first quarter. What is residual for the next three or four quarters will not be significant. So that is what I would think you should take as broad guidance. Now the telescopic part of the contraction has nothing to do with any negotiation. It's anyways in the base. You will see that play out, but we've said historically that you should see 2.5 to 3% annually. My guess is that's perhaps the number you will end up seeing when we speak to you in May.

47:13 Thank you. The next question is from the line of Sunil Gandhi from AM Securities. Please go ahead. Hi. This is Sunil from Amtech. Thank you for taking my question. Just a couple of them. How do you see CapEx playing out late by '27 and FY 'twenty eight? And what are the components of CapEx expense? Also, just wanted some clarity. Do you capitalize AI related headcount expenses into CapEx? Or is it showing part of employee cost? Another one would be depreciation. So we've seen that depreciation is down on a quarter on quarter basis. So how do you see depreciation kind of playing out for the next three quarters? And I think you've alluded to EBITDA growth of 16%. So how do you see back to the quarter?

48:06 Thank you. Okay. So I'll just take the first question on CapEx outlook. So for the current year, I think the last quarter also we mentioned that we expect for the coming year, the on prem related CapEx, including tools and servers and storage and premises, etcetera, to be in the region of INR75 crores. This will progressively go down in the subsequent years once the cloud infrastructure gets up and running and we migrate to the cloud for the Riak project. From a Reag perspective, we expect to spend the overall project cost, as we have said, is around INR500 crores. We have so far spent INR123 crores on this, and part of it is CapEx, part of it is OpEx. On the overall INR 500 crores, we expect around INR $2.90 crores to be the CapEx number, out of which in the current quarter, we have capitalized around INR 40 crores, right? So because of going live of some of these projects, we kind of take it to CapEx and start amortizing. That's happened in the first quarter.

49:07 So in the rest of the year, we will expect that at least another INR 80 crores will get capitalized. And going forward, a similar number will get capitalized in the year and year after. So you should expect and this is a 10 amortization. So if you kind of average it out on a yearly basis, you should expect in the current year at least an increase in depreciation to the extent of INR 4 crores to 5 crores for the rest of the year because of the Riyadh capitalization. And next year onwards, this will be additive, this INR 8 crores plus another INR 4 crores to 5 crores. So it will have another 12 crores capitalization additional depreciation next year. And similarly, for the year after. After that, everything will be in the base. So this is the re r part of it. The other capitalization, what you see will go on as it is. The reason why you saw a decline in depreciation this year was basically the return on value actually has a steep decline in depreciation quarter on quarter because that's the way depreciation is charged. So we had a large CapEx outflow similar quarter last year, which kind of went off year one. So the year two depreciation is significantly lower and further capitalization for the quarter has been very, very muted from an on prem perspective. So if you see the net of debt, there has been a drop in depreciation, but this is not something that you will see every quarter. This is more to do with a very muted capitalization in the first quarter, which will pick up as we go along. So I would urge you not to extrapolate the decline in depreciation this quarter for the rest of the year and say we will have a INR 15 crore drop in depreciation. That will not happen. In fact, you will see an increase in depreciation because of the capitalization we do for the re app expenditure.

50:33 The policy that we follow has been very conservative in terms of capitalization development cost. The core mutual fund platform, the KRA platform, the payments platform, everything, all expenses that we do, whether it is AIA, not AIA related automation, maintenance, bug fixing, etcetera, is taken as a part of the employee cost. We have 100% subsidiary, Sterling Software, whose cost is taken as employee cost in the base. Only for the fresh rearchitecture project, the people who are actually involved in coding the new platform on the cloud, their cost alone is taken as a capital expenditure, and that is the two ninety crores that I spoke about earlier, out of the INR 500 crores cost that we're talking, right? On the EBITDA growth, think Anuj has spoken in detail about how we plan to get there. Is there any specific component of it that you have a question?

51:19 I'll be happy to answer. So my question was more to do with how do we see that growth for the year? So you will see, right? So you see that there is a if your EBITDA growth is around 45%, your PAT growth is around 31%. So we expect that our PAT margins will continue to be around 30%, 31% going forward also. The next question is from the line of Divvyan Sharju from TriNet Asset Managers. Hello, sir. Thank you for the opportunity. Like, my other questions are covered. Still, I want to know more about, like, in the recent quarters, the overall business level, revenue growth has been changed.

52:06 And in our distributors service space, the competition is also rising. So what are the key things as a business we are doing to accelerate revenue going forward? Sir, I'm still trying to understand your question. You're saying in the distributor servicing space, competition is going up. In the MF segment, distributor led services are not very revenue accretive. If you take out MF Central CAS and some of the APIs that we sell to them, and we may have done a few websites, etcetera, it isn't a very large segment. So I'm not clear what you mean by that. But just think of it this way that the MFs pay us most of the money, neither the individual consumers nor the distributors pay any large lumps of money for that to be meaningful.

52:57 Competition there, I would again kind of grope a little for the genesis of that statement. But competition perhaps remains what it used to be. Okay. And I'm not sure before anyone asked the same question. Like apart from our mutual fund space and the non mutual fund space, what is the EBITDA margin currently we have and what we expect in the coming year? Yes. So this first quarter, given the KRA revenue was a little lesser than what generally it is, the revenue the margin was around 13%. I think our outlook for the year, we said will be 16% to 17%, given that KRA will recover and the losses in a few other businesses will come down as the year progresses.

53:48 The next question is from the line of Rengo Varshini from Wealthfield. Hello, Rengavashini. Please go ahead. Yes. Am I audible? Yes. Yes. This is Ajith here, Rengavashini's colleague. Yes. The question is that, again, on the margin side. So the EBITDA margin is right now at around 47%. We are not preparing to reach there. And so the non Hemop business contribution of 14%.

54:36 See, as and when these businesses mature based on what Anuj has stated, is it safe to assume that they are going to be margin accretive in nature? So most of these businesses in the Non M F portfolio are platform based businesses, which means that once you build the platform, you've taken a large part of the cost of operation in the base. And once you start selling, you've taken the cost of sales. So beyond a point, revenue contributes significantly to profit. Some of our businesses like BMO Central and Account Aggregates, those two. And to an extent, MS Central are in that category where revenue is scaling, revenue is still not cross cost, most of the cost is fixed cost, variable cost, all incremental revenue is a smaller component. So as and when that happens, you will see profitability by individual business lines.

55:39 But like Ramit said, if you take all of non MF as a single lump, we are expecting that to grow in excess of 20% and for profitability to scale from our 16%, 17% last year to get closer to 20%. That's the broad statement on the portfolio. So out of this, which one of them are yet to become EBITDA breakeven? So from an individual business perspective, account aggregator, pension and CAMS repository are not yet EBITDA positive. Of this, we do expect CAMS rep at least on a final quarter basis to become EBITDA positive. Think Analytics is almost there.

56:26 So we have these businesses which are not yet EBITDA positive. So on the account aggregator side, are we seeing any kind of a difficulty in terms of adoption in the industry side? Is there any bottlenecks there? Well, I would say there is a bottleneck. It's just a brand new concept. Seems to be getting adopted on the fintech and lending side, on the capital market side, not as much. All right. Okay. Thank you very much and good luck for the quarters ahead. Thank you. Thank you. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments. So thank you to all the participants for your time you spend on following CAMS and attending this call. And in case of any questions, please feel free to reach out to Orion Capital in UFG or to Anish Sablani, Investor Relations in CAMS, and they'll be happy to take your questions. Thank you once again.

57:27 On behalf of Computer Age Management Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.