Prudent Corporate Advisory Services Ltd (PRUDENT) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (361 Capital): Ladies and gentlemen, good day and welcome to Prudent Corporate Advisory Services Q2 FY '27 earnings conference call hosted by 361 Capital. 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Suvarna Mukherji. Thank you and over to you Mr. Mukherji.
Suvarna Mukherji (361 Capital): Yeah. Thanks, Siddhant. Good morning, everyone. Welcome to the Q2 FY '27 results conference call of Prudent Corporate Advisory Services, hosted by 361. To give a brief update on the results and address investor questions, we have the management of Prudent Corporate Advisory Services Limited, represented by Mr. Sanjay Shah, Chairman and Managing Director, Mr. Shirish Patel, Chief Executive Officer, Mr. Chirag Shah, Non-Executive Director, Mr. Chirag Kothari, Chief Financial Officer, and Mr. Parth Parekh, Head, Investor Relations. Now, I would like to request the management to start with the opening comments, post which we can open the floor for Q&A. Thank you and over to you, sir.
Sanjay Shah (Prudent Corporate Advisory Services Ltd): Thank you, thank you, Suvarna. So, good morning, everyone. I extend a very warm welcome to all of you for joining our Q2 FY '27 earnings call. Thank you for taking time to be with us today. I hope you have the investor presentation handy as we'll be referring it to it during the course of our discussion. So, now straight let us go to slide 49, which highlights our AUM growth for the quarter. So, if you look at on slide 49 on the right-hand side, we have shown the trend in quarterly average AUM. The sharpest part of market correction has come in last week of October. So, after the September quarter has ended. As a result, quarterly AUM of Q2 FY '27 remained strong at 1.43 lakh crore. This was up by 8% sequentially and 21% year-on-year. If you look at on the left-hand side, we have compared the average AUM for first half of FY '27 with our current AUM. Historically, current AUM at this point in the year has been higher in the first half. This has usually provided a favorable base for growth in the second half. This year, sharp market correction has brought our current AUM at par with the, more or less at par with the closing AUM of 1.37 lakh crore. So, it is now slightly below our first half of average of 1.38 lakh crore. Now, let us move to slide 50, which shows the movement in our equity AUM on a year-on-year basis and on a quarter-on-quarter basis. Now, let me begin with the year-on-year trend on the left-hand side. Equity AUM has increased from 1.17 lakh crore in September 2025 to 1.37 lakh crore in September 2026. This is a growth of 16.2% or nearly 19,100 crore. Around 80% of this growth came from net sales supported by strong SIP flows. So, despite the weak market environment and mark-to-market impact on our equity AUM was positive at 2.9%. Over the same period, Nifty 50 has declined by 8.1% and Nifty 500 has declined by 2.9%. Major reason of our outperformance is due to consistent SIP inflows, which helped investor benefit from the market volatility, supported by thoughtful fund selection and portfolio construction by our distributors. Together, these factors reflect the distributor alpha over the market by our network, which continues to deliver better for the investors. On the right-hand side, we saw the quarter-on-quarter movement
Sanjay Shah (Prudent Corporate Advisory Services Ltd): go to slide 51. It highlights our SIP performance. So, as of September 2026, our monthly SIP books stood at 1272 crore, a growth of 17.2% over last 1 year. Our SIP collections are growing faster than the market. As a result, our share of SIP contribution has increased from 3.49% in September 2025 to 3.73% in September 2026. Our market share in equity-oriented AUM excluding ETF has also improved. It rose from 2.59% to 2.7% over the same period. This reflects strong net sales and the distributor's alpha generated by our MFD. Now, let us come to the most important part, which is the financial results. So, let us move to slide 54. It presents our consolidated financials. On the quarterly average AUM, as I already told you, our quarterly AUM grew by 7.9% sequentially. and mutual fund revenue grew faster at 9.4%. This faster revenue growth was primarily due to one additional revenue day compared with the previous quarter. MF yield otherwise has remained very, very stable at 88 or 89 basis points during the quarter. Our insurance revenue grew by a strong 35% sequentially. This was supported by fresh premium growth of 54% in general insurance and 37% in life insurance. On a YOY basis, life and GI fresh premium were up by 50, 45% and 62% respectively. Now moving to our other financial and non-financial products, the revenue of which has grew by 14% sequentially. This growth was primarily driven by our PMS vertical a distribution of PMS products. Average PMS AUM grew by 37% year-on-year, and now it stands around 2,020 crore. Given the strong performance across all our businesses, our revenue from operations grew by 11.8% sequentially. Operating profit also grew at a much faster pace of 15.4% sequentially on account of operating leverage and operating margin, which has been expanded by 80 basis points to 26.4%. Other income has declined during the quarter. Higher bond yield created a mark-to-market drag on the debt portfolio. The hybrid portfolio also saw a reversal of earlier mark-to-market gain. As a result, other income fell by around 82% sequentially from 20.8 crore in previous quarter to 3.8 crore in the current quarter, and because of that, our reported profit after tax was at 71.7 crore, which was down by 4.1% compared to the previous quarter. I would ask you to separate that from the operating performance because they tell very different story. If we set aside our other income, which is treasury line and not an operating one, profit before tax grew by 16% sequentially and 45% year-on-year. The operating business had its strongest quarters still. Taking the half-year as a whole, revenue from operation grew by 20% to 736 crore. Operating profit grew by 37.6% to 192 crore with operating margin at 26.1% against 22.7% last year. So, profit after tax for the half year grew 39.1% to 146.5 5 crore. Now, as we highlighted the last quarter, the MF regulatory changes, which came in effect in April 2026, are prompting more distributor partner to join the Prudent platform that can support them with technology, compliance and operations. This is reflected in our onboarding numbers. We added around 3,541 new distributors on our platform in the first half, that is nearly 30% higher than the first half of last year. We are also very strongly focused on scaling our SIF business. So far, 1,792 distributors across our MFD networks have obtained SIF certification and our SIP AUM SIF AUM is nearly 900 crore. Now, let me address one of the very important point which is related to proposed regulatory changes in the institutional distributions. Now, if you look at the current consultation paper, there's one change which I would like to just talk about that regulator is looking at entire industry from a two segment. One is the independent distribution agent which is IDA and second is independent distribution entity which is IDE. All individual agents will fall under IDA while every other category whether it is corporate agent or insurance broker they will fall under IDA, and Prudent falls under IDE. Now, major change is related to commission as far as this two segment is
Sanjay Shah (Prudent Corporate Advisory Services Ltd): Under the proposal, individual agent will earn more than organized distributor like IDE. Let me just give an example. In health insurance renewal, agent or IDA will earn 10% renewal commission, while IDE entities like Prudent will earn 5%. So, IDE earn almost 50% less than the agent for exactly the same business. I believe industry has made a lot of representation on this and we are getting the feedback that regulator is receptive to them. We have also sent our representation as well. What industry is asking is, at minimum, we should have a level playing field with the independent agents. We should be at par with them or somewhat higher. Let me explain why. At our end, we have invested significantly in claim support, technology, and customer servicing, and we have a large team working in this department. And whatever we earn, we need to share out of that earning with our POSP. So, I think we all can understand, right, that if we do not earn, we cannot share. In the proposed format, where we earn 5% and an individual agent earn 10%, it would be very, very difficult for us to sustain this business. That said, based on the discussions and the feedback we are getting from various associations, we do definitely expect a workable middle path to emerge. Let me still address the impact. Assuming the regulation came through exactly as proposed, which we believe is very unlikely, the current contribution of insurance business to our profit is roughly about 12%. So, that is something which probably might have the direct impact if the regulation comes as it is. Now, let us understand, even in this unlikely scenario, we see a potential offset and opportunity to accelerate our mutual fund business. If the proposal is implemented as drafted, it will affect the entire insurance distribution industry, including individual agents. With pressure on insurance income, many agents are likely to look for a second source of earnings. They can either grow their insurance volumes or add a complimentary business. We believe mutual funds could become a significant part of that second income stream. That creates an opportunity for Prudent. Agents who want to enter mutual fund distribution will need training, technology, and client servicing. Our pan-India branch network, tech platform, and a team of around 700 sales employees give us the scale to support them. There is also an opportunity to raise our own productivity. Today, part of our management and the regional leadership team devotes their significant time for the insurance business. If that bandwidth is redeployed to mutual funds, it can definitely support the stronger execution, higher productivity in a business where we already have scale. Now, let me try and address another part which is the recent regulatory changes by the regulator on the PMS front as a manufacturer. Post regulatory changes, we are in the process of applying for a PMS license. As you all are aware that we have 100% subsidiary called Prutech. We have just got the approval from ROC for change of name from Prutech to Prudent Asset Management Private Limited. And we are in the process of applying for the MFPMS license. The MF PMS framework is expected to become operational from April 2027. We believe we are well placed to have required license by then. Our focus for now is on the MF PMS. We see two opportunity in this space. First, we can provide PMS manager with the technology and back office support they need. This would be similar to the backbone we have provided to mutual fund distributors. It would allow PMS managers to focus more on acquiring their clients. Second, there is an opportunity to serve HNI clients who want actively managed mutual fund portfolios. Our MFPMS offering can help address this need. So, this is one part which we believe is going to be significantly large over a period of time. Second is we also see an opportunity in the bonds. We already hold an OBPP license. Here too, SEBI has issued a consultation paper on the clarity about the fixed income channel partner, which is just like your mutual fund distributors. They call it as FICP. So, the I think consultation paper is in the process to define the FICP framework and we are awaiting the final clarity on that before we launch it full fledged. Once the framework is announced, we can launch and use our MFD network to expand our online bond business. These opportunity give us new ways to serve our partners and clients. They also allow us to build our existing network and capabilities. Over time, PMS and bonds can become additional growth driver for the Prudent. So, with that, I would now like to open the floor for the questions.
Moderator (361 Capital): Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone
Moderator (361 Capital): put the telephone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Prayesh Jain from Motilal Oswal Financial Services Limited. Please go ahead.
Prayesh Jain (Motilal Oswal Financial Services Limited): Hi, sir. Sir, just on, you know, on the consultation paper again. The one, one aspect where, you know, there is a difference between IDE and IDP is the, you know, there in on the IDP side they have clearly said that the per the individual agents will not have any options. In the sense that if they are selling a health insurance product of a multiline player then they cannot sell off a another player. Right. So, if they have a while on the IDE side they have optionality, right? They can sell products of any insurance company which probably you have tied up with or the broker would have tied up with. So, I think there is one fundamental difference what the regulator is thinking between IDP and IDE. So, what are your thoughts there whether, you know, the regulator would kind of concede to this that you know, you will still have the option of multiple insurance companies and get a commission of IDP as well? That's the first one on the insurance side. And second is also on insurance where you said as it is, if it is implemented, then you would have an impact. So, do you think that this 12% contribution to earnings will will be completely lost or you think that the POSP model will not survive at all in this regulations per se? And third is, again, on the consultation paper wherein if you think about the the regulator is opening up all the other financial services distribution to all the categories under the same license or you have to apply for the license, but under the same entity you will be able to do it. Does that bring in more competition to your core business of mutual fund as well? Yeah. Those were my three questions. Thanks.
Sanjay Shah (Prudent Corporate Advisory Services Ltd): So, Shirish, you want to address all the three?
Shirish Patel (Prudent Corporate Advisory Services Ltd): So, first I would like to answer the last question, that is today the brokers are not allowed to do multiple businesses except insurance. If consultation paper is implemented as it is, the insurance brokers also would be allowed to sell other products. Now, I believe many of the brokers had their other group companies dealing in mutual fund or other business earlier also. Now, today if we talk about Gennex was the insurance broker and Prudent was doing the mutual fund business. Similarly, there are few big distributor, few, big brokers in insurance had their group companies, working in third party products. Obviously, earlier also these people were working in another entity. Now, they might work in the same entity. Of course, I think few more players may enter into the third-party distribution platform business. And, of course, having more and more people entering in the platform businesses, obviously, the competition will increase. But at the same time, awareness for platforms also increases. Now, last three, four years we already have seen many platform entered in the mutual fund industry. Of course, it's a competition, but I believe that more and more people have started joining the platform. So, it's both the ways. Competition will increase at the same time more and more people will participate through the platform. And if you offer a better competitive advantage to the the individual seller, so, obviously, I think you will be able to attract that share. So, that is my third question. Second point you talked about that the revenue differential between IDA and IDE. See, there is a huge [inaudible] revenue difference, then probably the POSP will not be able POSP business, the POSP model will not be able to survive. Here definitely, I think one opportunity and one drawback and let me handle both. Now,
Sanjay Shah (Prudent Corporate Advisory Services Ltd): Sir, your voice is a bit patchy. Sir, your voice is a bit [inaudible]. Shirish, voice is buzzing. Is it better now? Is it better now?
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